Overview
As set out in our Initial Observations on the Central Bank of Ireland's Consumer Protection Code Consultation Paper the Central Bank of Ireland ("Central Bank") has proposed a revised structure for the Consumer Protection Code ("CPC") under CP158 - Consultation Paper on the Consumer Protection Code ("CP158") comprising:
- The Central Bank Reform Act 2010 (Section 17A) (Standards for Business) Regulations, ("Standards for Business Regulations");
- The Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Conduct of Business Regulations) ("Conduct of Business Regulations");
- The Supporting Guidance on Securing Customers' Interests ("Guidance"); and
- The Supporting Guidance on Protecting Consumers in Vulnerable Circumstances; (together the "Revised Code").
Our previous insights provided an overview of the Standards for Business under the Revised Code which all regulated financial service providers ("RFSPs") must comply with in their dealings with customers and the specific obligations of RFSPs in complying with their obligation to Secure Customers' Interests.
This insight will focus on one of the Central Bank's principal policy proposals under CP158, being "Informing Effectively", which has been included as a Standard for Business for RFSPs.
Scope
Informing Effectively is a Standard for Business that applies to all RFSPs under the Standards for Business Regulations, other than those providing MiFID services and crowdfunding services (for which there are equivalent regimes in EU legislation) and credit unions ("Excluded Firms"). This includes both current and potential customers.
Additional informing effectively obligations are imposed on RFSPs dealing with consumers under the Conduct of Business Regulations. Under the Revised Code, a consumer includes individuals, groups of individuals (such as partnerships) and small corporates in Ireland, (which have turnover of up to €5 million).
Informing Effectively – Standards for Business Regulations
In introducing this new Standard for Business, the Central Bank is seeking to shift the focus of RFSPs from meeting disclosure requirements in a "tick box" manner, to instead requiring firms to take an outcomes-focussed approach by ensuring the manner in which they communicate with customers facilitates understanding and empowers customers to make decisions in their own interests.
The Supporting Standards for Business provide that "informing effectively" includes:
- ensuring that the information is provided to a customer in such a way that the material features of the product or service in question can reasonably be understood by the customer;.
- ensuring that all information that it provides to a customer is clear, accurate, up to date, and written in plain language;
- avoiding the unnecessary use of technical terms;
- providing information to a customer on a timely basis; and
- bringing key information to the attention of the customer.
RFSPs will be familiar with broadly similar obligations to those outlined above under the existing CPC and other sector-specific legislation. It therefore brings into question what, if any, additional obligations will actually be placed on RFSPs pursuant to this Standard for Business.
It seems to us that the key change introduced by this Standard for Business is for firms to consider not only if they are providing all required information to the customer in accordance with their disclosure / provision of information obligations, but to also ensure that the information and the manner in which it is provided is clear, meaningful, easy to navigate and digestible. The overall objective of the Standard for Business is to ensure effective and timely understanding of financial products so as to enable customer autonomy to make decisions that are in their best financial interests.
Informing Effectively – Conduct of Business Regulations
To further support RFSPs in meeting their obligations to inform effectively, Part 5 of the Conduct of Business Regulations sets out more detailed requirements for firms to comply with when dealing with consumers.
The majority of Part 5 of the Conduct of Business Regulations is broadly aligned with the existing provision of information obligations of RFSPs under the CPC on matters such as warning statements, presentation of information, use of regulatory disclosure statements, information on charges etc.
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