Information on enforcement on transparency of consumer facing documents - June 2022

The FCA enforces section 68, Consumer Rights Act 2015 regarding the 'transparency' of consumer-facing documents. I'd like to know the following things. Since the Act came into force (1) What has the FCA published about its enforcement work?

(2a) What enforcement work has the FCA done

(2b) What have been the results/outcomes of this work

(2c) Which specific documents have been made more transparent as a result of the work, and

(2d) What general and specific advice has the FCA given to firms?

(3) How many consumer complaints about unclear documents has the FCA received? Please also

(4) explain to me how a consumer faced with a non-transparent document should take the matter to court or make a complaint to the FCA;

(5) Explain the FCA's approach to handling such a complaint; and

(6) Send me anything else you can tell me about the FCA's enforcement work on this area of law.

On 16 November 2021, you clarified that in relation to questions (1), (2a) and (6) of your request, by ‘enforcement work’ you mean any work in relation to investigations, undertakings, or fines.

In relation to (6) you further clarified that by ‘anything else’ you mean any information or activity relating to section 68 of the Consumer Rights Act 2015 that’s not covered by the previous questions.

Please note, whilst you have sought information on enforcement in relation to section 68 of the Consumer Rights Act 2015 (the CRA) regarding the 'transparency' of consumer-facing documents, please note that in parallel with our powers under the CRA, we have powers to take action under the Financial Services and Markets Act 2000 (FSMA). If we consider that we can achieve the same level of consumer protection in relation to a term we have concerns about, we may act under FSMA instead of under the CRA.

In relation to questions (1), (2a) and (6) of your request, we have interpreted ‘investigation’ as any action resulting from a referral received about the clarity of contract terms or notices from internal and external sources.

Question 1

The ‘Unfair Contract Terms and Consumer Notices Regulatory Guide’ (UNFCOG) provisions of the FCA Handbook (found here) sets out our policy on how we use powers under the CRA in relation to unfair and unclear terms and consumer notices. Using these powers, we may seek an undertaking (published commitment) from a firm that it will amend or remove an unfair contract term from its future consumer contracts. Undertakings not only set out changes made by specific firms and information for consumers but also contain important messages for other firms. 

In UNFCOG 1.3.4(2), we state that, in deciding whether to ask a firm to undertake to stop including a term in new contracts and/or to stop relying on it in concluded contracts, we will consider the full circumstances of each case, this may include:

• whether we are satisfied that the contract term may properly be regarded as unfair within the meaning of the CRA

• the extent and nature of the detriment to consumers resulting from the term or the potential harm which could result from the term

• whether the firm has fully cooperated with the FCA in resolving our concerns about the fairness of the particular contract term

We have published 5 undertakings regarding the transparency of terms:

• https://www.fca.org.uk/publication/undertakings/undertaking-london-general-insurance-company-limited.pdf

• https://www.fca.org.uk/publication/undertakings/capital-financial-management-limited.pdf

• https://www.fca.org.uk/publication/undertakings/eta-services-ltd.pdf

• https://www.fca.org.uk/publication/undertakings/ppro-financial-limited.pdf

• https://www.fca.org.uk/publication/undertakings/co-operative-bank-plc-trading-as-platform.pdf

The Unfair Contract Terms Library webpage also contains other publications regarding contract terms such as our recent publication on Buy Now Pay Later firms.

Question 2a

We explain on our unfair contract terms webpage what powers the FCA has to ensure that firms’ consumer contracts are compliant with the requirements of the CRA. Our response to question 1 regarding our published work, is also relevant to responding to this question. 

We are prohibited from disclosing further details of work with specific firms not listed in our unfair contract terms library because such information was received by the FCA in the course of carrying out its public function under the Financial Services and Markets Act 2000. Such information constitutes ‘confidential information’, as defined in section 328 of FSMA, and is therefore exempt from disclosure under section 44(1) (Prohibitions on disclosure) of FOIA. For more information on why this exemption applies, please see Annex A below.

Question 2b

As with our response to question 2a, we are exempted under section 44 of FOIA, from providing you with this information, in that it constitutes ‘confidential information’ as defined by section 348 of FMSA. For more information on why this exemption applies, please see Annex A below.

Notwithstanding, to be helpful, we can provide broad themes of outcomes that may result from our work: 

• firms making changes to their contract terms or notices as a result of our engagement, this may also include providing an undertaking.
• us carrying out proactive work in relation to contract terms in several firms in a sector.
• messaging for firms about the clarity of contract terms in a particular sector being included in the ‘Portfolio strategy letter’ for firms in a particular sector. For example, the letter to CMC firms can be accessed here.

Question 2c

As per our response to questions 2a and 2b, we are exempted under section 44 of FOIA, from providing you with this information as it constitutes ‘confidential information’ as defined by section 348 of FMSA. For more information on why this exemption applies, please see Annex A below.

Question 2d

The FCA does not provide advice to firms on the transparency of terms and conditions. It is the responsibility of all firms to ensure they comply with the transparency (and fairness) requirements of the CRA, and we highlight relevant information on our webpages here and here. Ultimately only a court can determine the fairness and transparency of a term.

Question 3

From 1 October 2015 to 28 February 2022, in relation to section 68 of the CRA we received 159 cases directly from consumers regarding the 'transparency' of consumer contracts and notices. 

Question 4

The FCA do not investigate individual complaints, but the financial firms we regulate must have a procedure in place for resolving disputes with their customers. If a consumer is dissatisfied and wishes to complain about a firm, they should follow these complaint steps.

In addition, consumers that have concerns about the clarity or fairness of a term in their financial services contract, can also provide information to the FCA in 2 ways:

• by completing a webform on our website. For this, consumers will need to provide details about the contract they are concerned about, including:
• The name of the firm providing the contract.
• The product that the contract concerns.
• When the consumer entered the contract.
• An explanation of the consumer’s concerns as to why the contract might be unfair under the CRA.
• An explanation of how the consumer has been affected by the potentially unfair terms.
• Details of any discussions the consumer has had with the firm about the issue.
• Copies of the contract and any other documentation that the consumer received when entering into the agreement.
• Copies of any relevant correspondence that the consumer has had with the firm.
• by reporting their concerns to the FCA’s contact centre who will pass it onto the relevant team accordingly.

Other organisations: Consumers may also wish to contact the Citizens Advice Consumer Helpline for further support.

Question 5

As mentioned in the above question (in the link provided about how to complain), the FCA does not resolve individual disputes and so will direct consumers to the Financial Ombudsman Service and will also provide the contact details for Citizens Advice in case consumers wish to seek advice on their matter.

For information that is sent to our consumer contact centre we review it to determine which area of the FCA the matter should be directed to.  To do this we consider the issue and if it concerns issues of transparency (and fairness) under the CRA or if there are wider conduct issues where our other rules and principles may be considered. 

Completed webform responses are sent directly to a dedicated team focussed on unfair/unclear terms legislation.       

The information that we receive from consumers is used to identify potentially unfair terms and ensure that firms consumer contracts across financial services are compliant with the requirements of the CRA.

Question 6

As mentioned in question 1, the FCA has an unfair terms library on its website which contains all FCA publications on unfair terms, actions taken and materials on unfair terms, including UNFCOG, FCA finalised guidance, policy statements and discussion papers. 

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 FCA has a memorandum of understanding with the CMA regarding the enforcement of consumer protection legislation