Financial customers to get more ‘clarity’
Central Bank says consumer protection updates seek to provide ‘predictability’
The Central Bank’s director of financial regulation Gerry Cross has said any updates to the Consumer Protection Code will provide “enhanced clarity and predictability” for Irish consumers.
The code is a set of rules and principles that all regulated financial services firms must adhere to when providing financial products and services to consumers.
The Central Bank first launched a review of the code in 2022.
Mr Cross pointed to a number of key developments in recent years that proved “decisive” when organisations were called upon to act in the best interests of customers, including the tracker mortgage scandal and “differential pricing practices” by home and motor insurance firms.
He also highlighted the response to business interruption insurance during the pandemic which led to a need for companies to interpret contractual ambiguities in favour of their customers, as well as migration of accounts following the departure of Ulster Bank and KBC from the market.
“These events and others show that the obligation to act in customers’ best interests has become a more significant, more salient feature in the life of financial firms and their customers,” Mr Cross said.
He added that those events form a part of the consumer protection landscape where there has been a “good deal of activity” but a lack of guidance.
However, Mr Cross added that an increased requirement on firms to act in the best interests of consumers did not entirely remove responsibility from customers.
“It is for firms to run their business in a way that secures their customers interests but it is for customers to make their choices and decide what risks they wish to take within that overall context,” Mr Cross said. “Firms achieving sustainable profitability while delivering good outcomes for their customers is the underpinning foundation of the code.”
It also plans to modernise the code for an era of “rapid technological change”, Mr Cross said.
This includes the move towards the digitalisation of services, products and distribution channels.
He also pointed to climate change and demands for sustainable finance, as well as an understanding of customer vulnerability today.
The new proposals also call on firms to design products with customer needs and preferences in mind, with features and risks properly explained.
Firms should also not generate “inappropriate gains or advantages by leveraging consumer susceptibilities”, the Central Bank said.
It is also proposing new rules around the provision of unregulated activities by regulated firms.
“We are strongly supportive of these new proposals as it can be very difficult for some consumers to tell the difference between an unregulated firm or product and a regulated one and the repercussions of dealing with an unregulated firm or product can be very serious for a consumer and indeed, could be to their financial detriment,” Compliance Institute chief executive Michael Kavanagh said.
The Central Bank plans to develop a user-friendly guide to the code and will introduce online tools to help firms access the new proposals.