Treating Customers Fairly – Is One Set of T&Cs Enough?

Treating Customers Fairly is Principle 6 of the FCA’s Principles for Business. It now applies to authorised payment institutions and electronic money institutions and requires firms to: ‘pay due regard to the interests of their customers and treat them fairly’ (FCA, Principle 6).

Treating Customers Fairly – What Does it Mean?

The FCA has avoided defining what is meant by ‘treating customers fairly (TCF), given the wide range of activities and business models of regulated firms, authorised persons and electronic money institutions.

Instead, it has identified six consumer outcomes that explain what it wants TCF to achieve for consumers. Let’s look at just two of them.

  • Outcome 1 requires that ‘consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture’.
  • Outcome 3 requires that ‘consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale’.

Why One Set of T&Cs Doesn’t Cut the Mustard

Many authorised payment institutions and electronic money institutions have one set of terms and conditions for both their business and consumer customers. The problem with this is that terms and conditions that cover both consumers and businesses tend to be long and unwieldy. Some of the reasons for this are as follows.

  • Terms for businesses, which are usually separate legal persons such as companies or LLPS, need to make provision for them appointing individuals to act on their behalf, whereas consumers need no such provisions.
  • The Payment Services Regulations 2017 can be disapplied to large corporate customers but cannot be disapplied to SMEs and consumers. One example, is in relation to the time a customer has to complain about an unauthorised payment. These different provisions for large corporates are irrelevant to consumers.
  • The tone and language used in terms and conditions for businesses tend to be more formal than those aimed at consumers.

A consumer is defined as someone ‘acting for purposes outside their trade, business or profession. By definition, a consumer will not be regularly reading terms and conditions relating to financial services. Asking consumers to read terms that contain formal language, as well as wording, provisions and opt-outs that do not apply to them, risks putting unnecessary barriers in their way.

It would be difficult to conclude that having one set of terms and conditions for both businesses and consumers meets the FCA’s Principle 6 – ‘treating customers fairly’ adequately. Arguably, you are not providing the consumer with clear information and keeping them appropriately informed before, during and after the point of sale. It might also be difficult to illustrate that the fair treatment of customers is central to your firm’s culture if you are not providing consumers with their own clear terms.

Let’s Talk

If you would like to discuss this further or chat about updating your terms and conditions, contact us.

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