OUT-LAW ANALYSIS 8 min. read
The FCA asks firms to provide evidence of whether outcomes are fair. Charlotte Allen/iStock
06 Nov 2026, 11:39 am
Three years into the consumer duty, fair value has stopped being purely a pricing question. It is now a question of evidence, and of who answers for it.
The FCA's recent paper on fair value in consumer finance is careful to say that it creates no new requirements. Firms should not take much comfort from that. Read alongside the FCA's enforcement agenda, where there are open consumer duty investigations, the paper describes the standards to which firms will be held. This makes it much harder now for any firm to argue it did not know what was expected of it.
Below we examine what the obligations actually require and where the exposure sits, as well as looking at how compliance monitoring, thematic reviews and the ‘three lines of defence’ may need to change to produce the evidence the FCA now expects.
“No new requirements" is not the same as no new risk. Good and poor practice publications are not handbook rules, but the requirements in PRIN 2A.4 to assess and monitor whether products and services provide fair value are. PRIN 2A.2.8R requires firms to avoid causing foreseeable harm. PRIN 2A.9.8R requires outcome monitoring. These are all binding rules, and the paper is a detailed public statement of how the FCA reads them and expects firms to comply.
In any future supervisory or enforcement dialogue, a firm whose practice matches the FCA's "areas for improvement" will struggle to argue the standard was unclear. The October paper becomes part of the record of what a reasonable firm should have known.
The enforcement picture makes the point sharply that the evidence is the defence, and its absence materially weakens it. In the July 2026 edition of ‘Enforcement Watch’, the FCA reported 11 open investigations into potential breaches of the consumer duty, with fair value prominent among them. In some cases, the question was whether firms properly assessed price against overall benefits. One investigation, into an adviser firm, turns on whether fair value assessments were carried out or documented at all.
The lesson for consumer finance is clear. A firm that cannot provide evidence of its assessment is in a weaker position whatever the underlying merits of its pricing. The burden of proof sits, in practice, with the firm. These principles can apply to other products and services.
The paper exposes a tension between compliance with conduct rules in CONC and the overarching requirements of the duty. A fee can satisfy CONC and still form part of a total price that is unreasonable for the customer who pays it. Firms need two answers for every fee: is it cost-justified; and is the resulting total price fair value for those who incur it? These are different questions with different evidence.
The uncomfortable reality for any firm identifying a breach is that the redress exposure can pose a bigger risk than any potential FCA fine.
Historically, compliance monitoring plans were built to test whether processes were followed. Post-implementation of the duty, the FCA is asking firms to evidence whether outcomes were fair.
That gap is the operational heart of the paper. A plan that checks the fair value assessment was signed off on time, but never tests whether its conclusion survives the data, will not find the failings the FCA describes.
We recommend firms review their monitoring plans against five steps:
The paper repeatedly criticises management information (MI) that lacks detail. A credible fair value dashboard for a consumer finance firm would track by segment the relevant indicator, why it matters and examples of triggers that might require further investigation, escalation or intervention. Each firm must set thresholds it can justify, evidence what it did and when they were breached.
A thematic review programme should follow the harm, not the calendar. The FCA's findings suggest a clear order: start where customers are most exposed, then work outward to communications, benchmarking and governance.
Repeat fee payers come first because that is where foreseeable harm, redress exposure and the FCA's data focus all meet. Control testing should follow since a review that finds harm but not why controls missed it is only half done. Firms conducting an accountability review in Q4 2027 should be able to take account of the final senior managers and certification regime (SM&CR) phase 2 rules, which the FCA expects to publish in the first half of 2027.
While the order is important, so is the design and execution. Each review should end with a named owner for every action and a date to retest. And the programme must flex: a monitoring trigger should be able to pull a review forward without waiting for its slot.
The ‘three lines’ model only works for fair value if each line does its own job, and only its own job. The FCA's findings read like a catalogue of what happens when they don't.
The first line owns the answer. The business sets the price, so it must own the assessment and the supporting evidence. Where the first line treats fair value as something compliance signs off, nobody in the business feels responsible for the outcome. That is how assessments end up resting on narrative.
The second line owns the challenge. Compliance and risk set the framework, test conclusions and run the thematic programme. The most common failure is quiet: second line, short of first-line capability, drafts the assessment itself. It then cannot independently challenge what it wrote. If your compliance team writes your fair value assessments, your second line is marking its own homework.
The third line owns the assurance. Internal audit should test whether the whole system works, including whether the MI is reliable and whether second-line challenge actually changed anything. An audit that confirms assessments exist and were approved on time is testing process, not outcomes. It would not have found any of the failings in the FCA's paper.
The board sits above all three. Its job is not to receive the assessment but to interrogate it, and to be able to show it did.
Ask most consumer finance boards who owns fair value and the answer is usually "the business", or "the consumer duty champion". Both answers are a warning sign.
In a typical consumer finance firm, the price customers actually pay is shaped by several people. Product or commercial teams set headline pricing. Collections set and apply default fees. Finance calculates the cost base that justifies them. Customer operations run the controls. Compliance reviews the assessment.
Each can point to a piece. Few statements of responsibilities give any one senior manager clear ownership of the total price and its outcomes. That is precisely the gap the FCA's findings expose: incomplete total price, untested controls, no one tying the evidence together.
The timing matters. The FCA confirmed phase 1 of its SMCR reforms in PS26/6 in April. Last month, it published a consultation paper proposing to abolish the certification regime, simplify prescribed responsibilities and end ongoing statement of responsibilities and management responsibilities map updates. The consultation closes on 22 January 2027.
It would be a mistake to read this as a softening. The FCA is explicit that individual accountability remains the core of the regime. As the paperwork falls away, the question in any investigation becomes simpler and harder: what reasonable steps did the responsible senior manager take? The evidence should include fair value MI, challenge recorded in board minutes, and action taken in response.
The duty does not stop at the top table. The sixth individual conduct rule requires staff within its scope to act to deliver good outcomes for retail customers. Take a customer known to be struggling who is charged a fourth late fee in three months. That could raise questions under the rule if the member of staff simply applies the fee without taking reasonable steps, within their role, to address or escalate the risk of harm. It is not automatically an individual breach, and any failings in the firm’s systems are a separate accountability question.
Tests that a board can apply to itself include:
A board that cannot point to a decision it changed because of fair value evidence should ask whether it is overseeing value or merely receiving reports about it.
A board that can answer regulator questions with evidence, not narrative, will be better placed to respond to scrutiny. If the FCA asked tomorrow, these are the questions that would matter.
That is the practical test that the recent paper illustrates. Fair value is no longer a document a firm produces once a year. It is a claim the firm must be able to defend, at any time, with data, by a named individual. The firms that pass will be those that start treating it as an accountability question now.
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