The FSA is urging adviser firms to revisit any client contracts containing ‘I have read and understood' declarations to ensure they are fair on consumers.
In an update to small firms, the regulator says the law requires consumers to be given an opportunity to examine all the terms in a contract, but says some do not offer this.
It follows action taken against national IFA The On-Line Partnership in January last year.
The FSA argued the firm's use of the statement ‘I confirm that I have received, read and understood this agreement and agree to the terms set out within' was unfair on clients because it did not give them an opportunity to read and ask questions about the contract before signing it.
The On-Line Partnership has since agreed to change its terms to: ‘This is our standard client agreement upon which we intend to rely. For your own benefit and protection you should read these terms carefully before signing them. If you do not understand any point please ask for further information.'
All firms should now consider whether their ‘read and understood' declarations are fair on clients, the FSA says, suggesting any such amendments are made at the first available opportunity, such as on the next re-print.
It says declarations where a firm does not give the consumer an opportunity to read and ask questions about a contract before signing it, as well as those used by firms to reject complaints, will likely be regarded as unfair.
"Firms should draft contracts in plain and intelligible language and must also give consumers a proper opportunity to read all the terms of the contract," the FSA states.
"Consumers should check the details of the contracts they enter into. But a contract term requiring consumers to declare that they have read and understood the terms of the contract is likely to be unfair because it binds customers to terms which, in practice, they may not have any real awareness of."
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