On 17 May 2018, the FCA published a Guidance Consultation on the fairness of variation terms in financial services contracts following the introduction of the Consumer Rights Act 2015 (CRA) and in light of a number of rulings on variation terms in the Court of Justice of the EU.

The proposed guidance outlines factors financial services firms should consider under the CRA when drafting and reviewing variation terms in their consumer contracts.

Although the Consultation focusses on the fairness of variation provisions, the FCA is clear that firms should be undertaking frequent reviews of all consumer contracts for fairness. The FCA notes that the senior managers' regime specifies principles of accountability. In line with these, the FCA explains that it expects firms to allocate responsibility for ensuring that consumer contracts are fair and transparent under unfair terms law to an appropriate individual in a suitable role at the firm. The senior managers regime came into force on 7 March 2016 for deposit­taking firms and is due to come into force for dual­regulated insurers from December 2018. The expectation is that commencement of the regime for solo­regulated firms will take place in mid­to­late 2019.

The Consultation closes on 7 September 2018 at which point the FCA will digest the responses. We then expect to see a feedback statement in the autumn with the final version of the guidance issued before the end of 2018.  Although there may be some adjustments to the detail, as much of this is a restatement of earlier guidance, it is unlikely that the final version will look substantially different.

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Key contacts

Amanda Hulme

Amanda Hulme

Partner, Head of Financial Regulation
London

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Rosanna Bryant

Rosanna Bryant

Partner, Financial Regulation
Leeds, UK

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Sophie Cochrane

Sophie Cochrane

Managing Associate, Financial Regulation Group
London, UK

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