The Financial Conduct Authority's Consumer Duty came into force with effect from the end of July 2023, according to an analysis of consumer credit law published by the research foundation Nesta1. The duty sits alongside older consumer protection legislation, including the Consumer Rights Act 2015, which Nesta describes as having consolidated, rationalised and expanded a hotchpotch of previous legislation in order to create a single set of rules applicable to all consumer contracts where goods or services are supplied, including sale, hire and HP1.
The report, prepared for Nesta by Richard Humphreys of DWF Law LLP, examines how that framework applies to third-party ownership (TPO) arrangements for heat pumps, where a finance company rather than the householder owns the equipment. It states that the FCA is primarily responsible for the oversight of funders providing regulated credit, whether loans or TPO, while Ofgem is primarily responsible for the oversight of installers and maintainers1.
On repossession, the report says that under the Consumer Credit Act and the FCA's Consumer Duty, funders cannot repossess protected goods without a court order or the customer's consent, and must use repossession only as an absolute last resort after offering extensive forbearance1. It adds that if the consumer has paid more than one third of the total payable under the agreement, the asset becomes protected and may not be repossessed unless one of the conditions set out in the report applies1. Firms are also told not to take steps to repossess goods other than as a last resort, having explored all other possible options1.
The report states that the assets contained within a household heat pump system, indeed any form of heating system, would in the view of the authors be regarded by finance companies as soft assets having no real residual value1. On remote switching off, it says that under the Consumer Credit Act, funders would have to issue a formal default notice and give consumers time to apply for a time order before they could legally restrict the use of the asset1. Where a provider becomes insolvent, an insolvent firm cannot unilaterally terminate agreements and remove assets; instead, the payment stream is typically sold to another FCA-authorised firm1.
The report also notes that the FCA issued guidance in 2018 confirming that the inclusion of a power in a contract allowing a firm to unilaterally change the terms is not regarded as inherently unfair1. It records that agreements may last 10 to 20 years and may not adapt well to changes in household circumstances1.
"The Consumer Duty was only introduced with effect from the end of July 2023."
Why it matters for households
The Consumer Duty sets the conduct standard that applies to firms providing regulated credit, which is the route through which leased or hire purchase heating systems are financed. For a household considering a heat pump it does not own outright, the protections described in the report bear on what can happen if payments fall behind, whether the system can be switched off remotely, and what happens to the agreement if the provider fails or the home is sold. The report states that TPO agreements can typically be settled early, paid off using the proceeds of a house sale, or transferred to the new buyer subject to credit checks1. It also notes that many TPO models do not use a standard metric like APR, making it harder for consumers to understand the true cost over time or compare with loans or outright purchase1.
The rules interact with grant funding. As currently constituted, the UK Government Boiler Upgrade Scheme eligibility criteria include a requirement that the ownership of the heat pump must vest in the householder at the time at which the relevant grant, currently £7,500, is payable1. Regulation 9(1)(a) of the Boiler Upgrade Scheme (England and Wales) Regulations 2022 requires, with one minor exception, all parts of a heat pump to be new for it to be eligible for the scheme1. Even with the £7,500 grant, the report says the remaining upfront cost is still a major hurdle for many households1.
What happens next
In spring 2025, the Department for Energy Security and Net Zero published a consultation with proposals for changes to the Boiler Upgrade Scheme, including whether to allow property owners access to TPO products alongside the scheme1. In November 2025, DESNZ published its decision to undertake further work on third-party ownership of BUS-funded heating systems to resolve complex interactions with the current regulatory landscape before determining eligibility for the scheme1. Nesta recommends that DESNZ should amend the BUS Rules to allow heat pumps funded by TPO agreements to be eligible for the £7,500 grant1. No date has been reported for a decision on eligibility.