FSA rhetoric is clear: don’t rest on laurels over contracts
Regulator has clearly stated it still regularly sees examples of terms that are unclear or unfair.
The FSA’s Business Plan for 2012/2013 does not mention unfair contract terms. However it would be a mistake to think that this topic is not on the regulator’s radar.
Earlier this year the FSA published finalised guidance on unfair contract terms in an attempt to improve standards in consumer contracts.
The purpose behind the guidance was that, despite the amount of information it has published on its website about the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations), the FSA still regularly sees examples of terms which it believes are unclear or unfair.
The regulator has followed up on the guidance with a seminar on unfair contract terms and has posted on its website a speech by Clive Gordon, head of the conduct risk department, who gave the following clear messages:
• It is a firm’s responsibility to ensure that its contracts are compliant with the regulations and to treat customers fairly so that they get a fair deal.
• The FSA expects to see improvements in firms’ contract terms to ensure that consumers receive a fair deal.
• If a firm is not prepared to engage with the regulations then the FSA is prepared to go to court to seek an injunction to prevent the firm from relying on an unfair term.
• In light of the guidance there can be no more excuses from firms that they have misunderstood how the regulations work.
One issue that firms often forget is that unfair terms, unclear terms or contradictory terms often indicate to the FSA a wider problem of poor systems and controls in relation to consumer contracts.
Factors such as how contracts are signed off at the product development stage and to what extent contracts remain in compliance with developments in law and regulation throughout the lifetime of a product also indicate the robustness of systems and controls.
Simon Lovegrove is a lawyer with the financial services team at Norton Rose