Much has been written about the FCA’s consultation on a Consumer Duty. The second Consultation Paper issued in December 2021 is a hefty 243 pages so there is much to write about.

However, as I pored through its content (and did some keyword searches), I noticed that there is no mention about failed firms, or insolvency, or resolution. So what does the proposed Consumer Duty mean for a firm that is failing or likely to enter an insolvency process?

When an FCA regulated firm fails it retains its authorised status. The Consumer Principle, as proposed by the consultation, states that a ‘firm must act to deliver good outcomes for retail clients’. Setting aside for now what defines a ‘good outcome’, where a regulated firm is impacted by financial stress, it would be sensible for company directors to seek advice, at an early stage, from restructuring professionals who will be able to assess available options for the firm and how those options can achieve both a good outcome for retail clients, and the best outcome for creditors as a whole.

In many circumstances I can see this being a difficult balancing act, and a challenge to keep all stakeholders happy. Indeed, in its objection to Amigo Loans’ proposed Scheme of Arrangement last year the FCA has already publicly bared its teeth and made it clear that it wants fair and good outcomes for customers when a firm is failing.

Although not explicit, the Consumer Duty, alongside the FCA’s ‘Guidance for insolvency practitioners on how to approach regulated firms’, puts greater onus on experienced restructuring professionals being instructed to consider customers’ outcomes in the event of an insolvency. I suspect that there will be frequent occasions where not everyone gets what they consider to be a good outcome, but where in reality the firm, having sought advice, has achieved the best outcome it can from an imperfect situation.