The move highlights its concerns that contract terms allowing firms to unilaterally vary them may be unfair to consumers and disrupt the balance of power.
That said, the FCA does acknowledge the flexibility of such terms can benefit both firms and consumers, and can be deemed fair if drafted appropriately and in line with FCA expectations.
Ahead of the guidance being finalised, firms should consider:
- Reviewing existing consumer contracts, considering whether the terms are fair and transparent.
- Whether their internal culture puts fairness at the heart of the business, with an appropriate balance between the interests of the firm and its clients.
- Reviewing the processes around drafting, reviewing and varying contract terms to ensure they are robust and fit for purpose.
- Whether any horizon scanning activities will pick up legal changes concerning unfair contract terms that need to be taken into account.
- Whether the fair treatment of clients is appropriately embedded in product governance processes and if responsibility for ensuring consumer contracts are fair and transparent has been allocated to an appropriate senior manager.
Judith Wright is associate director at TCC