Consumer Duty (PS22/9 + PRIN 2A)
Financial Conduct Authority (FCA)
Research Complete
Hallucination findings published
AI Labs white paper available
Rich-narrative analysis of how AI models fail on this regulation, written for
AI model providers. Includes per-finding context and remediation framing.
This paper presents findings from a structured evaluation of two frontier AI models — Claude Opus 4.7 with web search and Claude Sonnet 4.6 with web search — against the Financial Conduct Authority's Consumer Duty rules, as set out in PS22/9 and PRIN 2A. Across fifteen...
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AI Failures: Hallucination and Blind Spots Shape
(15 Response Hallucination + 39 Citation Hallucination + 0 Blind Spots = 54 Failure Mode Findings)
Citation Hallucination Modes (39 failures)
Fabricated
1
Pretextual
31
Contradictory
7
AI Blind Spots (0 failures)
Web Retrieval
0
Training Knowledge
0
Hallucination findings
15 findings across
2 AI Models.
Each finding pairs an AI answer against the authenticated regulator-text excerpt that contradicts it.
Does the Consumer Duty require firms to prevent all foreseeable harm, and what is the effect of a retail customer knowingly accepting a risk?
Claude Opus 4.7 (web search on) answered
Where a retail customer understands the risk and the firm has acted in good faith, supported understanding, avoided foreseeable harm caused by its own conduct, and otherwise complied with the Duty, the customer accepting a risk does not breach the Duty.
Regulator text says
Where a firm reasonably believes a retail customer understands and accepts such risks, it will not breach the rule if it fails to prevent them.
Does the Consumer Duty apply to micro-enterprises and small charities, and on what basis are charities treated as 'retail customers' under PRIN 2A?
Claude Opus 4.7 (web search on) answered
For banking (BCOBS) the Duty extends to 'micro-enterprises' and to charities with annual income under £1 million
Regulator text says
From search results citing PRIN 2A: 'retail customer' includes consumers (individual persons), micro-enterprises, and charities with annual turnover less than £1 million.
Does the Consumer Duty require firms to quantify non-monetary benefits as part of a fair value assessment, and what methodology does the FCA expect?
Claude Opus 4.7 (web search on) answered
Quantification is encouraged where feasible but qualitative assessment is acceptable where quantification is impractical, provided the reasoning is robust.
Regulator text says
The FCA does not expect firms to quantify non-monetary costs and benefits as part of its fair value assessment process, but firms should undertake some form of qualitative assessment.
Has the FCA withdrawn pre-Consumer Duty Dear CEO letters, and approximately how many have been removed?
Claude Opus 4.7 (web search on) answered
Around 90+ Dear CEO/portfolio letters were retired in April 2025, with a further tranche of multi-firm and thematic reports retired in August 2025.
Regulator text says
FS25/2 (March 2025): FCA removed more than 90 pre-Consumer Duty Dear CEO letters and cleared over 100 old multi-firm reports.
What has the FCA said publicly about firms' Consumer Duty compliance in the first year of implementation? What specific concerns have senior FCA officials raised?
Claude Opus 4.7 (web search on) answered
Sheldon Mills (FCA Executive Director of Consumers and Competition) delivered speeches on 20 February 2024 ('Consumer Duty: the art of the possible in a year') and 31 July 2024 (one-year-on event). His themes/concerns have included: (i) closed products... (ii) fair value assessments... (iii) consumer understanding... (iv) data and outcomes monitoring.
Regulator text says
[Not accessible — TYPE_3 void. Speech by Sheldon Mills at FCA Consumer Duty 1-year event, July 2024.]
Were there significant differences between the Consumer Duty as proposed in CP21/36 and the final rules in PS22/9? What specific provisions were changed?
Claude Opus 4.7 (web search on) answered
PS22/9 made several changes from the CP21/36 draft... Key changes/clarifications included: (i) split implementation timeline... (ii) clarifications on scope/distribution chains... (iii) refinement of the foreseeable harm cross-cutting rule wording... (vi) confirmation that a Private Right of Action would NOT be introduced.
Regulator text says
[Not recoverable verbatim — TRAINING_GAP on specific differences between CP21/36 draft and PS22/9 final]
Does the Consumer Duty apply to reinsurance, group insurance policy distribution, and large-risk commercial contracts?
Claude Opus 4.7 (web search on) answered
Group insurance: the Duty can apply via the distribution chain when group policy beneficiaries are retail customers; the FCA addressed this in further consultation (CP23/something on group insurance practices) and confirmed that firms manufacturing/distributing policies where individual retail beneficiaries are protected fall within scope.
Regulator text says
Consumer Duty does not apply to reinsurance, contracts of large risk sold to commercial customers where risk is located outside the UK, nor to activities connected to the distribution of group insurance policies or the extension of these policies to new members.
Which pre-Consumer Duty Dear CEO letters remain in force, and has the FCA withdrawn letters that previously set consumer protection expectations?
Claude Opus 4.7 (web search on) answered
in April 2025 it retired around 90+ Dear CEO/portfolio letters, and in August 2025 retired 100+ multi-firm and thematic reports, marking them historical.
Regulator text says
From FS25/2 (March 2025): FCA reviewed all Dear CEO letters pre-dating the 2022-25 strategy and withdrew 90+ such letters. These are no longer live supervisory expectations.
Was the Consumer Duty created through primary legislation or FCA rulemaking? What is the legal basis for Principle 12 and PRIN 2A, and did FSMA 2023 have any role in creating it?
Claude Sonnet 4.6 (web search on) answered
The Consumer Duty was introduced by FCA rules, not by an Act of Parliament. The legal basis is the FCA's statutory rule-making power under the Financial Services and Markets Act 2000 (FSMA 2000).
Regulator text says
FSMA 2023 did not create the Consumer Duty.
Does the Consumer Duty apply to micro-enterprises or small charities — are they 'retail customers' under PRIN 2A, and what thresholds apply?
Claude Sonnet 4.6 (web search on) answered
For deposit-taking, payment services and e-money activities, the Consumer Duty applies to products provided to 'consumers, micro-enterprises and small charities'. So in those contexts micro-enterprises and small charities are explicitly captured within the definition of 'retail customer'.
Regulator text says
From search results citing PRIN 2A: 'retail customer' includes consumers (individual persons), micro-enterprises, and charities with annual turnover less than £1 million. Definition varies by sourcebook.
Are firms required to conduct consumer testing under the Consumer Duty, and is any such obligation a binding rule or guidance under PRIN 2A?
Claude Sonnet 4.6 (web search on) answered
PRIN 2A.5.10R (a binding rule, marked 'R' in the Handbook) requires firms to test the effectiveness of their communications 'where appropriate'. The FCA's non-Handbook guidance (FG22/5) indicates that testing is effectively expected... making it, in practice, close to mandatory for many firms
Regulator text says
FG22/5 contains guidance (not rules) recommending firms 'should' consider consumer testing of communications. PRIN 2A.5 (rule) requires firms to act to deliver good consumer understanding outcome — no specific methodology prescribed.
Does the Consumer Duty require firms to quantify non-monetary benefits in their fair value assessment, and what level of analysis does the FCA expect?
Claude Sonnet 4.6 (web search on) answered
the FCA does not mandate a single financial methodology for non-monetary items, but it does expect firms to go beyond qualitative description and provide substantiated comparisons.
Regulator text says
From FCA guidance: 'The FCA does not expect firms to quantify non-monetary costs and benefits as part of its fair value assessment process, but firms should undertake some form of qualitative assessment.'
Has the FCA withdrawn pre-Consumer Duty Dear CEO letters following implementation, and if so how many were removed and under what document?
Claude Sonnet 4.6 (web search on) answered
I cannot provide a verified specific number of withdrawn letters from the available search results... the search results do not identify a definitive public list of how many specific pre-Consumer Duty Dear CEO letters have been formally withdrawn
Regulator text says
FS25/2 (March 2025): FCA removed more than 90 pre-Consumer Duty Dear CEO letters and cleared over 100 old multi-firm reports. Harmonising definitions of 'retail customer' and 'SME' across Handbook.
Were there significant differences between the Consumer Duty as proposed in CP21/36 and the final rules in PS22/9, and what specific provisions were changed?
Claude Sonnet 4.6 (web search on) answered
(1) Outcomes monitoring scope: CP21/36 required firms to identify where outcomes were 'worse' for one group versus another; the final rules broadened this to require identification of where any group of retail customers experiences 'different outcomes'... (3) Product governance alignment: the final rules clarified that firms already complying with PROD 3 (the MiFID product governance framework) are treated as compliant with the Consumer Duty products and services outcome
Regulator text says
[Not recoverable verbatim — TRAINING_GAP on specific differences between CP21/36 draft and PS22/9 final]
Which FCA Dear CEO letters remain in force after Consumer Duty implementation, and how many pre-Consumer Duty letters did the FCA formally withdraw?
Claude Sonnet 4.6 (web search on) answered
there is no publicly available consolidated list in the search results specifying exactly which pre-Consumer Duty letters have been formally withdrawn and how many remain in force as at 2025... I cannot provide a verified count or a complete current list from the available search results.
Regulator text says
From FS25/2 (March 2025): FCA reviewed all Dear CEO letters pre-dating the 2022-25 strategy and withdrew 90+ such letters. These are no longer live supervisory expectations.
AI Blind Spots
No AI Blind Spots documented for this regulation yet.
Related rules
Where this rule sits in the regulatory graph. Discovered during Phase A.2
research; resolves to a regulation page where one is published.
Implements / sits under
The international standards or parent rules this regulation implements or sits under.
Parallel rules
Comparable rules at the same level — peer national / international regulators on the same subject.
Affected audiences
These findings affect the following audiences. Click through for the case studies that aggregate findings across all regulations in this jurisdiction.
Practitioners
Sectors × Departments