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The FCA’s FS25/2 rule review sets out plans to simplify regulatory requirements following the introduction of the Consumer Duty. It aims to give firms more flexibility in how they comply, reduce unnecessary rules, and streamline outdated communications such as legacy Dear CEO letters. Areas under review include mortgage rules, consumer credit disclosures, product governance, and the application of UK rules to overseas customers. The FCA is also seeking to clarify key definitions, modernise customer communications, and reduce administrative burdens, all while keeping consumer outcomes at the core.

Key areas of review and planned actions:

• Mortgage rules: Consulting on changes to simplify disclosures and support easier refinancing and innovation.
• Consumer credit disclosures: Reviewing outdated advertising and APR disclosure rules to align with the Duty.
• Insurance requirements: Proposing more flexible product review cycles and scrapping fixed training hour mandates.
• Product governance: Clarifying expectations under the Duty and allowing more proportionate application of rules.
• International application of UK rules: Re-examining the need for firms to apply FCA rules to non-UK customers.
• Definitions of customer categories: Reviewing how terms like “retail customer” and “SME” are defined across sectors.
• Legacy communications: Withdrawing Dear CEO and portfolio letters issued before the 2022–25 strategy.

The potential benefits are clear. Reduced prescription could create space for innovation, such as replacing rigid mortgage disclosure formats with more streamlined, digital-first journeys, or shifting from set training hours in insurance to competency-based models. This approach may also support more tailored communications for vulnerable customers and encourage smarter, more proportionate approaches to product governance, such as giving insurance firms greater discretion over how frequently they review product value.

However, the trade-offs cannot be ignored. Smaller firms may lose the regulatory certainty detailed rules provide and risk being left without a clear framework. Ambiguity around expectations for instance, on how frequently product value should be assessed, could result in inconsistent practices or under-compliance. For firms operating across borders, divergence from international norms may introduce further complexity and operational risk.