On 17 May 2018, the FCA published a guidance consultation, GC18/2, on fairness of variation terms in financial services consumer contracts under the Consumer Rights Act 2015 (CRA).

The proposed guidance relates to all financial services consumer contracts entered into since 1 July 1995. Part 2 of the CRA (the unfair terms aspects) came into force on 1 October 2015 and now implements the Unfair Contract Terms Directive. The CRA revoked the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs). For contracts entered into before 1 October 2015, the FCA has provided references to the relevant provisions in the UTCCRs.

The proposed new guidance, which is set out in annex 2 to the document, reflects current legislation and case law and outlines a number of non-exhaustive areas the FCA believes firms should have regard to when drafting and reviewing variation terms. These include and are not limited to the following:

  • the validity of the reason(s) for using the variation term;
  • the transparency of the variation term;
  • provision for notice in the variation term;
  • provision for the freedom to exit the contract should a consumer not wish to accept the variation.

The proposed new guidance outlines factors for firms to consider when seeking to draft variation terms, and also considers a number of reasons that the FCA has observed firms commonly include when drafting variation terms allowing them to alter their consumer contracts.

Annex 1 to the document contains existing material available on the FCA website not included in the consultation and also includes examples of what the FCA sees as good and poor practice in the way that firms review unfair terms issues. In March 2015 the FCA withdrew some unfair contract terms material from its website and further material was withdrawn in May 2016.

Comments are requested by 7 September 2018.

The FCA has also updated its webpages on unfair contract terms (see the links on this webpage) to reflect its powers under the CRA, including the webpage containing examples of unfair terms.