Firms are failing to treat their customers fairly because they have unfair terms in their contacts with consumers, the FSA says.
A review conducted by the regulator found advisers and providers fail to assess fairness of terms, rely too heavily on external compliance firms, review irregularly and publish out-of-date material in their contracts.
It says unfair terms can result in poor outcomes for advisers as well as their clients, and reminds firms its December TCF deadline is fast approaching.
Dan Waters, the FSA director of retail policy and themes, says: “The results of this review are disappointing.
“A contract sets out the relationship between a firm and its consumers, so if a contract contains unfair terms it can provide evidence that a firm is failing to treat its customers fairly - and this is especially important in the context of our TCF deadline.
“In particular, we expect firms to be proactive in reviewing their contracts and to have adequate systems and controls in place to ensure their contract terms are drafted fairly.
“We encourage firms to engage with the wide range of information we have made available, including the examples of good and poor practice highlighted in this report, to ensure that their consumer contracts are fair.”
The FSA's review found that while most of the firms surveyed said they had some systems and controls in place to review the fairness of their consumer contracts, these are not always producing the outcome of fair contract terms.
It says over half of the contracts reviewed contained at least one variation term - which allow firms to impose changes without prior or express customer agreement - which the FSA regarded as being “drafted unfairly”.
In an example of an out-of-date contact term, the FSA found one firm had a contract containing a reference to millennium bug concerns from 2000.
IFA Harry Katz, of Norwest Consultants, says firms are aware fair contract terms comes under TCF, but adds some feel in limbo because of FSA changes to the IDD and Menu.
“Why is the FSA saying this,” he says. “This isn’t something new. Firms know this is TCF.”
The FSA has also published a separate summary of what it deems unfair contract terms for small firms. Click here.
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