The Financial Conduct Authority (FCA) has published finalised guidance (FG18/7) on the fairness of variation terms in financial services consumer contracts under the Consumer Rights Act 2015 (CRA) and a summary of feedback to its previous consultation on the issue, GC18/2. In the finalised guidance, the FCA gives its view on the factors that firms should consider when thinking about fairness issues under the CRA when drafting and reviewing unilateral variation terms in their consumer contracts. The FCA also sets out the its understanding of the provisions contained in the CRA and recent UK and EU case law regarding unilateral variation terms. In particular, for contracts of indeterminate duration, the FCA takes note of EU case law which is clear that giving notice and cancellation rights to the consumer do not alone achieve fairness. Other factors are relevant in assessing fairness, including transparency.
The FCA stresses that it expects firms to consider FG18/7 when they review their existing contracts and when they draft new ones. It also reminds firms that they should ensure that variation terms in their contracts are transparent and not unfair and that Principles 6 and 7 of the FCA’s Principles of Businesses are significant when drafting and operating consumer contracts.