Harm prevention under the Consumer Duty — the customer-acceptance defence

2. Harm prevention under the Consumer Duty — the customer-acceptance defence

• Question (paraphrased to protect IP): Does the Consumer Duty require firms to prevent all foreseeable harm to retail customers? What is the position where a customer understands and accepts a risk?
• Source regulation: Consumer Duty (PS22/9 + PRIN 2A), Financial Conduct Authority (Regulator portal: https://www.fca.org.uk)
• What AI assistants typically say: AI assistants describe a position in which a firm avoids breach when a customer accepts a risk, provided the firm has acted in good faith, supported the customer's understanding, and avoided harm caused by its own conduct. The AI frames this as a multi-condition test before the customer's acceptance becomes relevant.
• What the regulator actually says: The FCA rule provides: "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." The operative trigger is the firm's reasonable belief — not an objective test of the customer's actual understanding, and not contingent on additional conditions.
• Why the AI went wrong: The AI dropped the "reasonably believes" qualifier — which is the element that defines the firm's standard of assessment — and replaced it with three additional conditions that do not appear in this specific rule. The result is a more burdensome and legally inaccurate formulation that would cause a Compliance team to over-engineer its processes relative to what the rule actually requires.
• Cited source(s):
• https://handbook.fca.org.uk/handbook/PRIN/2A/2.html — Pretextual
• https://www.fca.org.uk/publication/finalised-guidance/fg22-5.pdf — Pretextual