UK: FCA guidance on fair value in consumer finance

The FCA has published guidance on good and poor practice on fair value under the Consumer Duty. It covers fair value assessments, fees and charges, and customer outcomes. Lenders, debt firms, credit reference agencies and consumer hire providers should read it.

Why should I read this?

On 29 October 2026, the FCA published its webpage “Fair value in consumer finance”. It sets out findings from the FCA’s supervisory work on fair value. It covers how firms assess, evidence and monitor fair value under the Consumer Duty, along with fees and charges and the risk of harm from repeat charges.

The FCA reviewed fair value assessments from firms in four sectors:

consumer credit lending

debt advice

credit reference agencies and credit information services

debt purchasing, collection and administration

The FCA reviewed fees and charges on unsecured loans, credit cards, retail revolving credit, retail finance and high-cost credit. It looked at consumer hire and third-party ownership agreements for boilers, solar panels and air-source heat pumps.

The webpage creates no new rules. It is relevant to all consumer finance firms subject to the Consumer Duty. Firms in other sectors may find it useful for their own fair value work. Many firms are getting fair value right. The most common weakness was poor evidence for their conclusions.

Alison Walters, the FCA’s Director of Consumer Finance, has published an accompanying blog, “What does 'fair value' look like in practice?” Her message to firms is simple: “show your working”.

What should consumer finance firms do about fair value?

Show your working

Set out your approach to fair value assessments in writing. Bring your evidence together in one place. Explain how the price compares with the benefits customers can expect.

Check you capture the full price

Include contingent charges, such as arrears fees. Include non-financial costs, such as customers’ time and effort. Check that your assessment reflects your current charges. If you rely on your own costs to justify default fees, explain your method.

Look beyond the average customer

Assess value for each customer group and pricing group. Include annual percentage rate bands and customers with characteristics of vulnerability. Find out who pays repeat fees and how those fees build up.

Set a clear monitoring framework and act on it

Define the outcomes you will track and the data you will use. Name an owner for each. Decide how often you will monitor and when you will escalate. Test whether controls such as grace periods and fee limits work.

Review your fee disclosures

Show fees early, clearly and in one place. Test whether customers understand them.

Use the information you already hold

Smaller firms need not use complex models. They can use complaints, arrears and customer feedback data they already hold. However, they must still support their conclusions with evidence. Proportionality does not mean a lower standard.

What else do I need to know about fair value in consumer finance?

The regulatory framework

Under the Consumer Duty, a product gives fair value if its price is reasonable compared with its benefits. The findings relate to the price and value outcome in the Principles for Businesses sourcebook (PRIN) at PRIN 2A.4 and chapter 7 of the FCA’s final guidance FG22/5 “Final non-Handbook Guidance for firms on the Consumer Duty”. They are relevant to the consumer understanding outcome and the cross-cutting obligations.

The cost of meeting the FCA’s examples

The FCA says its examples create no new requirements. Meeting them will still take time and money. Smaller firms may find it hard to collect detailed data on each customer group. Firms should plan their work in proportion to their size and risk.

Overview

The FCA found examples of firms taking a structured and proportionate approach to fair value. It found recurring weaknesses in how firms assess, evidence and monitor value.

Good practice

Areas for improvement

Firms considered financial and non-financial costs, such as customers’ time and effort
They supported their conclusions with management information and customer outcomes evidence
They assessed outcomes for different customer groups, including vulnerable customers
They monitored outcomes and acted on fair value concerns
They explained fees clearly and tested customer understanding
They used grace periods, fee limits, waivers and refunds to reduce harm

Some firms did not include all fees and charges in the total price
Some did not explain how their evidence supported their conclusions
Some relied on assumptions, narrative statements or thin data
Some gave little thought to non-financial costs, value over time or different customer groups
Some did not explain fees clearly, prominently or at the right time
Some did not monitor repeat or cumulative charges
Some could not show that their controls worked, particularly for customers in financial difficulty

The FCA groups its findings into seven themes:

structure and evidence supporting fair value assessments

assessing total price, costs and benefits

assessing fair value for different customer groups

monitoring fair value and customer outcomes

using benchmarking to assess fair value

communicating fees and charges

controls to reduce the risk of foreseeable harm from fees and charges

Structure and evidence supporting fair value assessments

The FCA wants assessments that explain how the evidence supports the conclusion. Keep one written assessment for each product and record who reviewed and challenged it.

Good practice	Areas for improvement
Some firms, including smaller firms, applied the rules to their own products Some mapped value at each stage of the customer journey, including complaints and bereavement A few smaller firms used the five areas of focus in the FCA’s May 2023 review of fair value frameworks	Some firms had no written approach to fair value assessments Some relied on narrative statements with little supporting data Some spread their evidence over several documents Some used outdated information Some gave little thought to how value changes over time, for example on renewal or arrears

Assessing total price, costs and benefits

Fair value depends on everything a customer pays over the life of the product. List every fee, including contingent and arrears charges, and check the list against your current tariff.

Good practice	Areas for improvement
One credit card provider put a value on cashback, foreign exchange savings and other benefits and compared those benefits with the fees, interest and other costs customers paid Some firms linked their breakdown of expected costs to customer benefits	Some firms justified prices mainly by reference to their own costs Some left out contingent charges, such as arrears fees One assessment included a fee the firm no longer charged. It left out a fee customers could still pay Some firms relied on the fact that customers paid them nothing directly Some consumer hire providers did not assess whether long-term agreements would keep providing value

Under the Consumer Credit sourcebook (CONC) at CONC 7.7.5R, default fees must not exceed the firm’s reasonable costs. The FCA saw wide variation in how firms calculated those costs. Firms should check that the total price stays reasonable for customers who pay these fees.

Assessing fair value for different customer groups

A product can give fair value on average but poor value to some customers. Split your target market into groups and test value for each group, starting with vulnerable customers.

Good practice

Areas for improvement

Some firms grouped customers by credit risk, product usage, distribution channel and vulnerability
Some assessed value for each annual percentage rate band and risk-based pricing group
Some analysed fee data separately for customers with characteristics of vulnerability
Some separated customers who chose a product from those who used it out of necessity
One firm was simplifying a closed book in which customers paid different prices for similar products

Some firms treated their whole target market as one group
Many firms did not identify which customers were more likely to pay repeat fees
Some firms used risk-based pricing but did not assess value for each pricing group

Monitoring fair value and customer outcomes

Monitoring should tell you whether your fair value conclusion still holds. Set clear indicators and trigger points, and record what action you took in response.

Good practice	Areas for improvement
Some firms set clear indicators of good and poor outcomes, with triggers for escalation One credit card provider used a dashboard to identify customers paying repeat fees Another found customers paying more in monthly fees than they earned in cashback. It contacted them about other options One smaller firm held monthly governance reviews of higher-risk customer cases	Some firms said they would monitor outcomes but had no clear framework Some looked only at total fee income or arrears for the whole portfolio Some complaints analysis recorded only the main reason for each complaint Some analysis left out complaints that were not upheld. This risked missing concerns about fees Collecting data does not, by itself, show good outcomes

Using benchmarking to assess fair value

Market comparisons are useful evidence but do not prove fair value on their own. Record why you chose each comparator and explain any price above the market.

Good practice	Areas for improvement
Some firms used benchmarking as one source of evidence among several Some explained how they chose their comparator products Some tested whether extra benefits justified prices above the market	Some firms did not explain why their comparators were suitable Some could not justify prices well above the market Some compared only headline prices Benchmarking does not replace a firm’s own assessment

Communicating fees and charges

Customers cannot judge value if they do not understand what they will pay. Put all fee information in one place and test whether customers understand it.

Good practice	Areas for improvement
Some firms made fee information easy to find and wrote it in plain English and gave it to customers before they made a decision One firm tested whether customers understood its charges Another contacted customers paying certain charges to check their understanding. It then improved its communications Some firms reviewed calls, emails and chats for jargon and unclear explanations	Some firms disclosed material fees late in the application process Some spread fee information over several web pages or documents Some contract terms were broad or open-ended Some consumer hire promotions used “pay as you save” claims. They did not make clear that savings depended on equipment performance and future energy prices

Controls to reduce foreseeable harm from fees and charges

Repeat fees cause most harm to customers already in financial difficulty. Identify repeat fee payers early and check that your grace periods, fee limits and waivers work.

Good practice	Areas for improvement
Some firms sent reminders and gave customers time to pay before charging a fee Some limited the number of fees in a set period One firm set fee limits for each product and for each customer Some waived or refunded fees for customers in financial difficulty or forbearance Some did the same for customers with characteristics of vulnerability	Some controls did not reliably identify customers paying repeat fees This was a particular risk for customers moving in and out of arrears Some firms could not show that their controls were set at the right level One pawnbroker could not show how it assessed risks to repeat customers Having a control does not, by itself, show that it works

The FCA analysed its Product Sales Data for the four quarters from Q3 2025 to Q2 2026. Penalty charges applied to about 3% of consumer credit agreements. This amounted to almost 28 million charges. Late payment charges were the most common.

Our view

The FCA’s focus has evolved from fair value frameworks to the evidence behind them. The same message runs through its recent review of contracts for difference firms, see our previous client briefing, “UK: FCA CFD firms review: fair value and overnight funding charges under scrutiny”.

We expect supervisors to test fair value assessments against these examples. The FCA can use its Product Sales Data to identify outlier firms. Firms with high or repeat fees should prepare for questions.

The findings matter beyond consumer finance. Asset managers, wealth managers and platforms are subject to the same price and value rules. They should check their own assessments for the same weaknesses.

Naomi Seward, Partner in our Financial Services team, comments:

“Fair value is not a document to complete once a year and file away. The firms that come through supervisory scrutiny well will be those whose boards truly understand who pays their fees, how often, and whether those customers get a fair deal. Take a hard look at your repeat fee payers and vulnerable customers now, because that is where problems tend to show first.”

Next steps

The webpage is not a consultation and sets no deadline. The FCA has given feedback to the firms it reviewed. It continues to engage with firms that raised significant concerns. It will keep monitoring fair value through supervision and its Product Sales Data and CCR009 returns. It will act if it finds significant risks of harm.

How Eversheds Sutherland can help

We advise consumer finance firms on the Consumer Duty. We can help you:

benchmark your fair value framework against the FCA’s findings;

review fair value assessments, customer groups and benchmarking;

review default and arrears fees against CONC 7.7.5R;

review fee disclosures and financial promotions;

improve outcomes monitoring and controls on repeat charges.

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