On 19 December 2018, the FCA published finalised guidance, FG18/7, on the fairness of variation terms in financial services consumer contracts under the Consumer Rights Act 2015.

The FCA had consulted on the draft guidance in its May 2018 guidance consultation, GC18/2, and has published a summary of feedback received. It says that it has made some revisions to the guidance in the light of feedback received.

The guidance outlines a number of non-exhaustive factors 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 FCA expects firms to consider the guidance when they review their existing contracts and then they draft new ones. Firms should ensure that variation terms in their contracts are transparent and not unfair.