The UK’s Financial Conduct Authority has e-mailed currency transfer service providers about their legal obligations, when they’re advertising exchange rates. The e-mail seems to have been sent in response to Parliamentary criticism that, even in “Game, set and match” circumstances, where the Advertising Standards Authority has upheld a complaint about a breach of the Consumer Protection from Unfair Trading Regulations, the FCA sometimes chooses not to act, saying (in John Mann MP’s words) “It is nothing whatever to do with us“.

John Mann MP criticised the FCA during a Parliamentary debate on a “no confidence in the FCA” motion, on 1 February 2016 (see our contemporary blog post, here). During that debate, Mann described the issues in this way: “When people buy a property or car abroad, payment will be needed in the national currency where the purchase is legally taking place. This means people will need to access the Forex markets. Generally, they cannot do that themselves and need to use a broker … Some of the biggest specialist brokers are methodically misleading consumers with currency converters in their adverts and on their websites, which supply a rate that will not actually be offered. [A complaint was made] to the FCA, which refused to act. [It was also taken] to the Advertising Standards Authority, which … judged … that the action was non-compliant with the Consumer Protection from Unfair Trading Regulations 2008 … This means that the companies have been non-compliant with the Committee of Advertising Practice code and, by definition, that is a condition of their authorisation by the FCA under the payment services directive 2009. Game, set and match, we might think. However, provided with all the evidence by the ASA that the companies are in breach of its rules and advised that it must act, the FCA says, “It is nothing whatever to do with us.” It has knowingly failed [consumers] who are being unfairly kept out of business, and … who are going for a rate that has been advertised in a misleading fashion and that they will never get. There is a lack of consumer choice and those entrepreneurial businesses that could be competitive cannot expand, but the regulator—this is in the last three months—has refused to even look at the cases

To be fair, some of these things were (and still are) “nothing whatever to do with” the FCA. For example:

  1. If a business only offers cash-based foreign exchange services, it probably doesn’t engage in any FCA-regulated activities, and the Payment Services Regulations won’t apply;
  2. Although it is an offence to knowingly or recklessly engage in commercial practices that are likely to materially distort the economic behaviour of the average consumer, and it can be an offence to engage in commercial practices using misleading acts or omissions, these offences can only be prosecuted by local weights and measures authorities, and the Competition and Markets Authority – not the FCA; and
  3. Whilst consumers can sometimes claim compensation, or ask for a contract to be unwound, if they bought something in reliance on misleading advertising, these rights only rarely exist in the financial services space and, even when they do, it’s up to the consumer to enforce them – the FCA has no part to play.

But that doesn’t necessarily mean the FCA can and should relax. And it doesn’t mean there’s really nothing the FCA can do. So, in a carefully worded e-mail, addressed to all firms carrying out currency transfer services (which are regulated), the FCA has taken the opportunity to:

  1. express “concern about potentially misleading marketing [of] currency transfer services“, especially where “currency converter tools may give consumers the impression that the rates shown (based on the interbank rate) are available to them, rather than the materially inferior rate which they may actually receive”; and “Other forms of marketing … also refer to the interbank rate in a … misleading way, so that consumers may be given the impression that superior rates based on the interbank rate are available to them”;
  2. remind firms about their obligations under the Consumer Protection from Unfair Trading Regulations 2008, the Price Indications (Bureaux de Change) (No 2) Regulations 1992, and the UK Advertising Codes (even though the FCA has no direct power to enforce these Regulations or Codes);
  3. tell firms that they “should review their marketing materials to ensure they are not misleading in … any … respect “; and
  4. make it clear that “If … firms are not acting in accordance with our expectations, we may take action

You’ve been warned.

(For those who are interested in these things, the Department for Business Innovation & Skills has produced some “guidance for foreign exchange providers: compliance with consumer protection legislation“, which is available here.)