THE CONSUMER PROTECTION CODE 2012

Transcription

1 THE CONSUMER PROTECTION CODE 2012 November 2011

2 What is the Code? Statutory Code issued by the Central Bank List of rules that regulated entities must comply with in their dealings with consumers Code covers: Credit institutions, Insurance companies, IIA firms, Insurance intermediaries, Mortgage intermediaries, Payment institutions, EMoney institutions, Credit Unions when acting as insurance intermediaries, Retail credit and home reversion firms. Original Code was introduced in 2006

3 PURPOSE OF THE CODE: To Strengthen Protection for Consumers By: Introducing clear conduct of business rules for all regulated entities Increasing standards of service to consumers Ensuring that consumers are provided with financial products that are suitable for them Ensuring greater transparency for the consumer.

4 OBJECTIVE OF THE REVIEW: To Further Enhance Protections for Consumers By: Reflecting current and emerging environment and context for consumers Using the knowledge and experience we gained from consumerfocused inspections Taking account of market intelligence received (consumer helpline, FSO findings etc.) Providing clarity on the impact of EU legislation and other developments Two consultations and 92 submissions

5 Consumer Protection Code & Feedback to CP54

6 STRUCTURE OF THE 2012 CODE CHAPTERS 1. Scope of the Code 2. General principles 3. General Requirements 4. Provision of information 5. KTC & Suitability 6. Postsale information requirements 7. Rebates and claims processing 8. Arrears handling 9. Advertising 10. Errors and complaints resolution 11. Records and compliance

7 CHAPTER 1 SCOPE OF THE CODE Maximum Harmonisation Directives MiFID, PSD, CCD, EMD National provisions cannot be introduced Exception: where additional rule proposed outside directive and the scope clarifies where the Code is applied to PSD, CCD and EMD activities Credit: Code does not apply to The provision of credit other than to personal consumers i.e. disapplied for SMEs The provision of credit less than 200

8 CHAPTER 2: Only one change from the 2006 Code: Principle 2.4 now also requires compliance checking and staff training that are necessary for compliance with the Code.

9 CHAPTER 3: GENERAL REQUIREMENTS (1) Vulnerable consumers to be provided with reasonable arrangements. Conflicts of Interest: Product producers must not require an intermediary to introduce a certain level of business in order to retain an appointment and, where commission is paid, must be able to demonstrate that this arrangement does not impair the intermediary s duty to act in the consumer s best interests. Remuneration arrangements with employees in respect of sales must not be structured so as to impair duty to act in consumer s best interests. Unsolicited personal visits are banned.

10 CHAPTER 3: GENERAL REQUIREMENTS (2) For joint accounts, warn consumers of consequences and clarify limitations Lenders must give consumers the right to pay a charge separately and not have it incorporated into the loan

11 PROVISION OF INFORMATION (1) All information provided to consumers must be clear, accurate, up to date and written in plain English Font size in printed material must be clearly legible Disclose the general nature and source of a Conflict of Interest to the Consumer Intermediaries must disclose in Terms of Business whether services are provided on basis of fair analysis or limited analysis of the market Tied agents must specify the name of each product/service for which it is tied

12 CHAPTER 4: PROVISION OF INFORMATION (2) Before offering, arranging or recommending a product firms must make information available to the consumer on the main features and restrictions. Reasons Why for refusal of credit (nonccd i.e. mainly mortgages) Lenders must publish on their website (if any) the interest rates for mortgages which they currently offer Investments: Standalone factsheet Lifetime Mortgages and Home Reversion Agreements: More prescriptive information and expanded warnings

13 CHAPTER 5: KTC & SUITABILITY 24 REQUIREMENTS (1): More prescriptive information to be gathered under KTC presents an opportunity to identify specific consumer characteristics e.g. a consumer s need for access to funds/limited understanding of financial products etc. More extensive suitability assessment based on consumer information Written suitability statement must include any oral explanations given and must be issued to the consumer

14 CHAPTER 5: KTC & SUITABILITY 24 REQUIREMENTS (2): If consumer unwilling to provide information, suitability cannot be determined and service/product cannot be offered Information gathered under the KTC process cannot be used for other purposes e.g. identifying marketing opportunities (Feedback document item 4.1) Firms must be satisfied as to authenticity of the assess the reasonableness of the information submitted in support of a mortgage application

15 CHAPTER 5: KTC & SUITABILITY (3) More Robust affordability checking Suitability assessments must be carried out Stress testing impact of interest rate increase (minimum 2%) and provide this information to consumer Interest only Mortgages: Ability to repay the principal (and for introductory interestonly mortgages ability to meet increased repayments)

16 CHAPTER 6: POSTSALE INFORMATION 19 REQUIREMENTS Advance notice of maturity of a fixed term deposit Advance notice of interest rate changes on loans mainly mortgages Additional Information, time and warning where consumer is considering switching from tracker rate

17 CHAPTER 7: REBATES AND CLAIMS PROCESSING 21 REQUIREMENTS Must provide PIAB leaflet to all PI Claimants Must provide advance notice of restitution work and costs in cases of direct settlement and must certify the work All claim settlement offers must be fair Claimants must be allowed at least 10 days to consider an offer

18 CHAPTER 8: ARREARS 14 REQUIREMENTS New Rules for Handling Arrears Procedures and information on website Must seek to agree an approach to assist consumer and must make early contact to find out why arrears have arisen Proactive contact proportionate but not excessive Unsolicited contacts limited to 3 per month Reminder if PPI was put in place Reasons Why letter if revised repayment arrangement is rejected

19 CHAPTER 9: ADVERTISING 52 REQUIREMENTS Information / Advertisements must be clear, accurate, up to date and written in plain English and must not be misleading Key information must be prominent Small print / footnotes can only be used to supplement key information Details relating to product benefits must be accompanied by risk information Specific requirements for investment products, including tracker bonds

20 CHAPTER 10: 6 ERRORS RESOLUTION REQUIREMENTS Must fully resolve errors within six months If fully resolved within 40 days no reporting, otherwise must report error to Central Bank Must make all reasonable efforts to refund (with app. Interest) and must not benefit from any refunds that cannot be repaid Keep detailed log and records of all errors

21 CHAPTER 10: 6 COMPLAINTS RESOLUTION REQUIREMENTS Must seek to resolve complaints Must acknowledge within five days and provide updates at least every 20 days If not fully resolved within 40 days clarify timeframe when complaint will be resolved and explain consumer s right to escalate to the Ombudsman Keep detailed log and records of all complaints Analyse patterns of complaints and escalate to compliance/risk functions and senior management

22 NEXT STEPS Publication Date: 19 October 2011 Implementation Date: 1 January 2012 Queries in relation to the Code to: code@centralbank.ie Copies of the Code and the Feedback Document can be downloaded from:

23 Thank you