You are here: Home - Saving & Banking - News -

City watchdog consults on unfair mid-contract changes

0
Written by: Paloma Kubiak
17/05/2018
The Financial Conduct Authority has proposed guidelines firms should follow when drafting and reviewing contracts - particularly when varying terms - to ensure consumers are treated fairly.

Under the Consumer Rights Act 2015, the terms of firms’ contracts must be fair and transparent. Where the FCA considers changes to clauses in a contract to be unfair or lacking in transparency, it can take action.

While this area isn’t new, today’s proposals are a step in clarifying and standardising previous guidance, and they also reflect current legislation and case law.

The FCA has set out the following guidance for financial services firms in relation to the fairness of variation in terms, usually found in contracts with a long or indeterminate duration, including current accounts, personal pensions, mortgage or credit card agreements:

  • The validity of the reason(s) for varying a term
  • The transparency of the variation term
  • Provision for notice in the variation term
  • Give consumers the freedom to exit a contract if they don’t want to accept the variation.

Consultation documents stated: “We want to make our view clear on the appropriate way to assess the fairness of variation terms.

“We acknowledge the benefit of fair variation terms to firms and consumers, because they allow contracts to be changed in their lifetime, making them more available to consumers.

“For example, the scope to change variable rate contracts allows firms to offer competitively-priced products that go beyond ones that track base rate, therefore offering greater choice to consumers.

“This is because firms know they may vary the interest rates they charge to reflect changes in circumstances, particularly changes in firms’ own costs of funding. However, appropriate drafting is required as an unfair variation term is not binding on the consumer and also risks causing consumer harm through unfair use.”

The consultation is open until 7 September.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
MortgageInterest
Hundreds of thousands of interest-only mortgages to mature in next 18 months

Around 200,000 interest-only mortgages are due to mature between now and 2020, figures from UK Finance show.

Close