The UK’s new Consumer Duty has introduced a tougher benchmark for how financial services communicate with customers. One of its key pillars is Consumer Understanding, outlined in Section 8 of the FCA’s finalised guidance (FG22/5). It asks a crucial question:
Do your customers genuinely understand what they’re agreeing to?
The FCA’s intention is clear:
"Firms should support consumer understanding by presenting information in a way that helps consumers make effective, timely and properly informed decisions" (FG22/5, 8.1)
The guidance outlines several specific expectations:
Clarity and relevance (8.4 to 8.6): Communications should use plain and intelligible language. Firms must avoid jargon, remove ambiguity, and focus on what really matters to the consumer. The content should be adapted to suit the target audience’s needs, knowledge and circumstances.
Layered and engaging presentation (8.7 to 8.9): Rather than overwhelming customers with large blocks of text, information should be presented in layers. This can include summaries, visual elements, and interactive features to help customers engage with the content meaningfully.
Right time, right context (8.10 to 8.11): Important information must be provided before a consumer makes a decision. It should be timely and delivered in a way that fits naturally into the customer journey, giving the consumer time to absorb it.
Support for complex matters (8.12 to 8.14): Firms need to identify where additional support may be required, particularly for complex products or where the target audience may include vulnerable customers. This includes offering explanations, tools, or opportunities for questions.
In short, it’s no longer enough to deliver a dense document and collect a signature. Firms must show that they have genuinely helped the customer understand — and have evidence to prove it.
This isn’t just a theoretical shift, it addresses real-world issues:
91% of people consent to terms they haven’t read.
Most contracts are written at a postgraduate reading level, far beyond the average consumer’s comprehension.
Courts are increasingly questioning whether a signature alone is proof of informed consent.
If your business still relies on traditional PDFs, long disclosures or standard e-signature flows, you may already be out of step with regulatory expectations.
Meeting the FCA’s Consumer Understanding outcome doesn’t mean tearing up your processes. But it does mean rethinking how information is delivered.
Here are some practical ways to align with the guidance:
Use plain English: Simplify language throughout your communications, especially where legal or financial terms are involved.
Layer your content: Start with a short summary of the key points, then allow customers to dive deeper into the details if they want to.
Make important content stand out: Highlight key risks, rights, and obligations so customers can't miss them.
Create space for questions: Build in ways for customers to ask questions and get responses. This helps address confusion early and builds trust.
Engage actively, not passively: Don’t rely on a checkbox. Use interactive prompts or confirmations to test comprehension.
Capture and retain proof: Keep a record of what was shown, what was clicked, what was asked, and how the customer confirmed their understanding.
These steps can sound time-consuming or technically complex. But they don’t have to be.
Here’s how it works:
Video summaries: Clients see a short, plain-English video that explains the key points of the agreement before reading it.
Plain-language tooltips: Definitions for legal or technical terms appear right where the client encounters them.
Highlighted key terms: Crucial clauses are surfaced clearly across the video, document, and prompts.
Interactive Q&A: Customers can ask questions as they go, and your team can respond. Every interaction is logged.
Spoken confirmation: Instead of a checkbox, the client gives a verbal confirmation of their understanding, creating a stronger audit trail.
Full digital record: Every step is tracked — what was seen, what was asked, what was confirmed.
With
The FCA is asking firms to go beyond disclosures and focus on real comprehension. That might sound like a big shift but it’s also a major opportunity.
By improving how you communicate and prove understanding, you not only meet the Consumer Duty, you earn your customers’ trust.