The Central Bank has published a consultation paper on proposed changes to the Consumer Protection Code (the Code). It is seeking views on the proposed amendments and consultation questions by 10 January 2011 with a view to publishing the revised Code in mid-2011.
The Code sets out requirements that regulated entities must comply with when dealing with consumers. The purpose of the Code is to ensure the same level of protection for consumers regardless of the type of financial services provider they choose. It requires regulated entities to act in consumers' best interests by ensuring that they know and understand the consumer's needs, sell them products and services that are suitable and provide them with appropriate information to enable them to make an informed choice. The Code also requires firms to have in place an effective complaints handling procedure and sets out a timeframe within which regulated entities must deal with complaints from consumers.
Some of the key changes proposed include:
- More prescriptive "know the consumer" requirements. Firms will be required to gather and record information specifically on the customers' personal circumstances, needs and objectives, financial situation and attitude to risk;
- More rigorous requirements for assessing whether a product or service is suitable for a consumer and meets the consumer's needs and objectives;
- A definition of "vulnerable consumer" is proposed and firms must apply a greater level of care to a consumer if a vulnerability is identified;
- New requirements for assessing affordability, including income verification and stress testing repayments. Provisions similar to those proposed for the handling of mortgage arrears are being proposed for handling personal debt; and
- More prescriptive requirements on handling of errors, including requirements that errors must be fully rectified in six months, regulated entities must test internal control systems on a regular basis, where an error is not resolved within 30 days the error must be reported to the Central Bank and a log of all errors must be maintained within firms.