The FSA has published a statement regarding the use of commission clawback terms in Terms of Business Agreements.
Previously the FSA has received some complaints from consumers about the fairness of terms in Terms of Business Agreements regarding the amount of commission that can be reclaimed by a firm. The FSA believes that these terms may have been unfair under the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations).
The FSA found two terms in the terms of business letters of two separate independent financial advisers (IFAs) that it thought may be unfair under the Regulations. Both terms allowed the firm to reclaim an amount from the consumer if they stopped paying premiums and the IFA has to refund commission to the product provider. The FSA thought the relevant terms may have been unfair under the Regulations as they did not clarify the amount that could be reclaimed from the consumer or the time frame in which the firm could reclaim this amount. The FSA felt that this may be unfair to consumers as it gave too much discretion to the firms to decide what amount could be reclaimed and when to reclaim it. Both firms have agreed to amend their terms and the FSA has published two undertakings which provide more detail in relation to this.
View Statement regarding the use of commission clawback terms in Terms of Business Agreements, 18 January 2010
View Undertaking - Beacon Financial Limited, 18 January 2010
View Undertaking - A.P. Financial Services UK Limited, 18 January 2010