What firms should focus on

Read our key messages for firms and examples of good and poor practice.

There are 5 key messages to focus on:

  1. Firms should take into account consumers' legitimate interests in relation to contracts.
  2. Fairness is not contrary to the prudent management of the business, but part of it.
  3. Focusing on narrow technical arguments to justify a contract term that, in fact, may be unfair, risks future challenge.
  4. Schedule 2 to the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) and the Consumer Rights Act 2015 (CRA) each contain an indicative and non-exhaustive list of types of terms in consumer contracts that may be regarded as unfair. The fact that a term does not resemble any of the indicatively unfair terms listed in Schedule 2 may not, in itself, remove the risk of unfairness.  Firms need to assess whether a term is fair under the UTCCRs/CRA as a whole and in the context of the particular product or service.
  5. Firms should take into account developments in legislation and relevant case law concerning Council Directive 93/13/EEC on unfair terms in consumer contracts (including relevant UK and European case law).

Our unfair contract terms library page gives details of our publications on unfair contract terms.

In addition, we encourage firms to read the CMA’s published guidance on the unfair terms provisions of the CRA.

Examples of good practice:

  • Frequent reviews of all consumer contracts for fairness.
  • Reviewing standard consumer contracts to ensure they comply with the CRA.
  • Assessing contracts as part of regular reviews of all product documentation.
  • Assessing contracts as part of regular product reviews throughout the product lifecycle to ensure the firm can demonstrate it is treating customers fairly.
  • Reviewing contracts after having received complaints, cancellations or evidence that terms may be unfair.
  • Monitoring updates and emails from the FCA.
  • Reviewing undertakings obtained by the FCA about terms in consumer contracts.
  • Reviewing other FCA publications on unfair terms, eg thematic work and speeches.
  • Monitoring updates about the fair treatment of customers.
  • Monitoring the CMA website for updates on the fairness of terms in consumer contracts.
  • Reviewing undertakings obtained by the CMA against terms in own consumer contracts.
  • Using management information on complaints received about unfair terms to identify potentially unfair or unclear contract terms and making appropriate changes.
  • Monitoring alerts and industry guidance from trade bodies.
  • Checking for new legislation and guidance and reviewing it as soon as it comes out.
  • Improving staff training to ensure staff meet the standards set out in product literature, including contracts.
  • Checking the work conducted by contracted external compliance consultants.

Examples of poor practice:

  • Internally-focused reviews of consumer contracts of 'what looks fair', without consideration of external legal or regulatory information.
  • Being passive and relying on external publications through monthly emails.
  • Reviewing external publications and updates only during the annual review of consumer contracts.
  • Not assessing contracts for fairness, frequently resulting in contracts containing out-of-date material.
  • Relying on external compliance firms without checking or questioning their work.