UK FCA blog on expectations for fair and transparent contract terms

The UK Financial Conduct Authority (FCA) has published a blog by Sarah Montgomery, head of department for cross-cutting policy and strategy, outlining its approach to ensuring fairness and transparency in consumer contracts. The FCA reminds firms that consumer contract terms must comply with the fairness and transparency requirements of the Consumer Rights Act 2015 (CRA). Where the FCA raises concerns, it expects firms to: (i) amend or delete the relevant terms; (ii) stop relying on the relevant terms in existing contracts; (iii) pay redress where use of the relevant terms has caused consumer harm; and (iv) in some cases, give the FCA a voluntary undertaking under the CRA. Where necessary, the FCA can apply for a court injunction to prevent the use or enforcement of unfair terms by a firm against its customers and seek a court order requiring the firm to pay redress.

The FCA highlights some of its recent interventions, including in relation to a crypto firm charging excessive storage fees, a financial adviser's excessive charge for handling a complaint, unclear travel insurance terms about what counted as a 12-hour delay and improving the terms of a new credit product before its launch. The blog sets out examples of what the FCA expects from firms in practice. Firms should regularly review consumer contracts to ensure that they are fair, clear and transparent in both their drafting and their application. This includes using plain language, avoiding surprises by making important terms easy to spot, testing whether consumers understand key terms, improving staff training and using complaints data to identify potentially unfair or unclear terms.

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