Find out about what we can do to tackle unfair contract terms in financial services contracts and what you should focus on.
We have powers to challenge unfair terms in financial services consumer contracts.
We may seek an undertaking from a firm that it will amend or remove an unfair contract term from its future consumer contracts. We can also apply to a court for an injunction to prevent a firm from using or enforcing the term against its existing customers.
We have these powers as an enforcer under the Consumer Rights Act 2015 (CRA) and as a qualifying body under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).
We coordinate our work with the Competition and Markets Authority (CMA), which has a leadership role in enforcing both the CRA and the UTCCRs.
The Consumer Rights Act 2015 and the Unfair Terms in Consumer Contracts Regulations 1999
The UTCCRs protect consumers against unfair terms in standard contracts between firms and consumers. They implement the Unfair Terms in Consumer Contracts Directive (93/13/EC) and apply to contracts entered into from 1 July 1995 to 30 September 2015.
On 1 October 2015, the UTCCRs were revoked and replaced by the CRA. The CRA applies to consumer contracts entered into on or after this date.
The unfair terms provisions of the CRA protect consumers against unfair terms in contracts and notices, including terms that have been individually negotiated.
Additional powers to take action
In parallel with our powers under the CRA and UTCCRs, we have powers under the Financial Services and Markets Act 2000 (FSMA). If we can achieve the same level of consumer protection, we may act under FSMA instead of under the CRA or UTCCRs.
Firms also have an obligation to act fairly, through our Principles for Businesses:
Principle 6 requires a firm to ‘pay due regard to the interests of its customers and treat them fairly’.
Principle 7 requires a firm to ‘pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading’.
the Principles apply both to the way contract terms are drafted and also to how contract terms are used by firms in practice.
Unfair Contract Terms Regulatory Guide (UNFCOG)
The Unfair Contract Terms Regulatory Guide (UNFCOG) is the part of our Handbook which contains information on how we exercise our powers under the CRA in relation to unfair terms and consumer notices. (Firms should refer to the previous version of this Guide for an explanation of the FCA’s policy regarding the UTCCRs which will continue to apply to contracts entered into before 1 October 2015).
What firms should focus on
These are the key messages we encourage firms to focus on:
- Take into account consumers' legitimate interests in relation to contracts over which they have had no influence but to which they will nonetheless be bound.
- Fairness is not contrary to the prudent management of the business but part of it.
- Relying on narrow technical arguments to justify a contract term that, in fact, may be unfair, risks future challenge.
- The fact that a term does not resemble any of the terms listed in Schedule 2 of the CRA/UTCCRs may not, in itself, remove the risk of unfairness. Firms need to assess whether a term is fair under the CRA/UTCCRs as a whole and in the context of the particular product or service.
- Take into account developments in legislation and relevant case law concerning Council Directive 93/13/ECC on unfair terms in consumer contracts (including relevant UK and European case law).
- The CMA published guidance on the unfair terms provisions of the CRA on 31 July 2015. We encourage firms to read this guidance.