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Department of Business, Innovation and Skills – Terms & Conditions and Consumer Protection Fining Powers

Response to the consultation

ABCUL supports and appreciates the rationale behind improving terms and conditions so they are clearer, simpler and more engaged with by the customer. Credit unions are socially-driven, co-operative organisations which are owned by their member-customers and exist only for their benefit. Credit unions have a legal object to educate their members in the management of their financial affairs and confusing or misleading terms & conditions would only frustrate this goal.

However, credit unions as deposit-takers are dual-regulated by the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) and are therefore already subject to a number of sector-specific regulatory obligations concerning many of the areas which the call for evidence seeks to remedy. Where existing obligations conflict with these suggested remedies they may have the unintended effect of confusing consumers rather than helping them.

For example, having key terms presented ‘bold and upfront’ may conflict with prescribed information such as Key Facts Illustrations (KFI’s) requirements which apply to mortgages, and ‘summary box’ requirements which the FCA are considering whether to apply to credit union savings accounts. These requirements are tailored to the financial services sector and we believe that a further generic requirement would not be beneficial. In fact two sets of slightly different summary information would potentially be detrimental to the objective of clear and concise disclosure.

Another example of where existing FCA rules address areas of concern raised by BIS is the potentially misleading use of ‘teaser rates’ which the paper highlights is common in the broadband sector. Although bonus and variable rates are also widely used in the financial services sector, the FCA requires that all promotions are ‘fair, clear and not misleading’, and in the case of savings accounts, customers must be informed of any disadvantageous rate change or bonus rate expiry affecting their savings account via a durable medium. In addition there are also widely adopted industry led practices such as the Annual Equivalent Rate code, allowing consumers to easily compare the annual cost or gain of different products.  Likewise in respect of interest rates on borrowing, the Annual Percentage Rate (APR) sets out the true cost of borrowing taking into account fees, charges and smoothing the effect of time-bound teaser rates.

As regards the use of online tick boxes, we do not foresee any problems with the suggestion that tick boxes should always affirm the positive and we agree that a mixture of opt-outs and opt-ins can be confusing for the customer.

In general, we feel further examination of relevant existing regulation is required when considering any requirements which would apply to specific sectors. To avoid unnecessarily burdening credit unions which are small businesses operating in an already heavily regulated sector, we believe that FCA regulated firms should be exempted where new requirements significantly overlap with existing FCA regulation.

We would be happy to discuss this further should you wish to.

The PDF version of this response is available to download on the right-hand side.