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Firms failing fair contract test, says FSA

FSA research has revealed that around half of adviser firms are failing treating customers fairly rules in the way that they draft contract terms for clients.

The regulator reviewed 60 contracts and found that 32 failed on TCF.

It says the research found that most firms say they have systems and controls in place to review the fairness of contracts but they are not always compliant with TCF. It has published a report reminding firms that they need to comply with the unfair terms in consumer contracts regulations 1999 and TCF principles.

Director of retail policy and themes Dan Waters says the results of the review are disappointing. He says: “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. This is especially important in the context of our December TCF deadline.

“In particular, we expect firms to be proactive in reviewing their contracts and to have adequate systems and controls to ensure their contract terms are drafted fairly.”

Manager of unfair contract terms team Katherine Webster says the regulator has published a large amount of information to help adviser firms ensure that their contract terms are fair.

She says: “We appreciate that small firms might find it difficult to wade through leng-thy reports, so we have also developed a separate short summary for smaller firms to help them understand the key messages and findings of the report. If firms feel there is more they need to know, they should get in touch with us.”

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