Introduction
In August 2006, the Financial Regulator published the Protection Consumer Code which applies to entities regulated by this authority.
Applicability
The Consumer Protection Code applies to the entities regulated by the Financial Regulator and entities with an equivalent authorisation in a different Member State. The General principles apply to customers in the State and the other chapters to consumers in the State. In any case it includes credit institutions, insurance undertakings, investment business firms (excluding MiFID services), insurance intermediaries, mortgage intermediaries and credit unions. The Code does not apply to regulated entities when:
- Providing services to persons outside the State
- Providing MiFID services
- Providing the services of a "moneylender"
- Carrying on the business of reinsurance mediation
- Carrying on the business of a "bureau de change" or "money transmission"
- If such firm is a credit union, when providing services for which it does not require to be authorised or registered with the Financial regulator
General principles
Chapter 1 of the Consumer Protection Code establishes the general principles that regulated entities must follow which focus on the main areas:
- Honesty and best interests of the customers
- Professionalism and diligence
- Disclosure of relevant information
- Avoiding conflicts of interest
- Avoiding undue pressure or undue influence on the customer
- Compliance with the Code.
Common rules for all regulated entities
General:
- the name of the product or service must be clear
- the instructions and conditions from the consumer must be processed properly and recorded
- prohibition of sales linked to "contingent" purchases or extra charges for optional products or services not wished.
- All warnings required must be prominent
Access: Consideration must be taken of the provisions of the relevant anti-money laundering guidance notes.
Terms of business: Regulated entities must draw up their terms of business which must include certain minimum information and provide each consumer with a copy.
Provision of information to the consumer: This paragraph deals with the quality and frequency of the information to the consumer, the information in the event where the entity ceases to exist, the documents conferring ownership rights, and other specific issues such as records of telephone conversations, receipts, electronic media etc.
Preservation of consumer's rights: The Code establishes a prohibition to exclude or restrict legal liability or duty of care that the entities are required to take under the legislation or the Code, any duty to act with skill, care and diligence and the liability for failure to exercise the degree of care, skill and diligence expected.
Knowing the consumer: This paragraph mainly requires that a regulated entity must gather and record sufficient and appropriate information from the consumer to be able to recommend a product or service and other obligations related to this issue.
Suitability: The entity must ensure the suitability of the product for the consumer and prepare a written statement setting out the reasons a copy of which should be given to the consumer.
Unsolicited contact (coldcalling): This paragraph establishes the specific cases and conditions where unsolicited contact by way of a personal visit or telephone call is allowed.
Disclosure requirements: Regulated entities (under Irish and EU law) must include a regulatory disclosure statement in the form provided on their business stationery, in all advertisements and on all electronic communications with the consumer
Charges: It is established that consumers must be provided with details of all charges prior to the service and information on increases or new charges.
Errors: There is an obligation to speedily, efficiently and fairly correct an error in any charge or price. If the error has been in a material charging or pricing, the Financial Regulator should be informed of its proposals for correcting any such error. Consumers must be notified as well when the error impacted negatively on the cost of the service of the value of the product provided.
Handling complaints: A regulated entity must have a written procedure for the proper handling of complaints. Some minimum requirements for this procedure are established in this chapter.
Consumer records: Regulated entities must maintain up-to-date consumer records with some minimum information. Records should be kept for 6 years.
Fees, commissions and other rewards: A regulated entity may only pay a fee, other reward or remuneration to the persons established in the Code (i.e. a regulated entity, a certified person)
Conflicts of interest: conflicts of interests should be avoided. However, when they cannot reasonably be avoided, the Code establishes specific rules to proceed with the service (i.e. written consent of the consumer). Soft commission agreements should only be entered into in writing and must not conflict with the best interests of the consumer. If the consumer may be affected by the agreement, he/she should be made aware of it.
Chinese walls: A regulated entity must ensure that there are effective Chinese walls in place between the different business areas of the regulated entity, and between the regulated entity and its connected parties in relation to information which could potentially give rise to a conflict of interest or be open to abuse.
Compliance with the Code: Adequate systems must be put in place to ensure compliance with the Code. Where the Financial Regulator requires information form the regulated entity, it should be provided and it should be full, fair and accurate.
Banking products and services
Statements: Credit institutions must, at least annually, issue statements of transactions on all accounts with a balance in excess of 20 euro, unless otherwise agreed with the consumer in writing. The statement must meet the requirements established in the Code
Branch restructuring/withdrawal of services: Branch restructuring and withdrawal of services must be informed to the affected customers (3 months in advance) and the Financial Regulator in writing. Moreover, it must be published in the local press.
Changes in interest rates: Credit institutions must ensure that the date from which the changes apply is clearly notified. The information on information services must also be updated.
Accounts: the credit institution has certain duties of information about penalties, interest rates and maturity of fixed term deposit and must as well ensure that funds lodged by a consumer to its account directly or via a deposit agent, are credited to that account on that day.
Joint accounts: The consumers must be warned of the consequences of a full access and use of fund of a joint account and ascertain the limitations that they wish to impose.
Deposit agents: deposit agents have two limitations: they must not retain in their possession an account passbook of a consumer and they must not operate from the same premises as a deposit broker. Some information duties are placed on the deposit agents in the event of the termination of the deposit agency.
Loans
Unsolicited credit facilities: there is a general prohibition to offer unsolicited pre-approved credit facilities.
Arrears and guarantees: guarantees on loans must outline the obligations of the guarantor and contain the prescribed warning. Procedures must be put in place for the handling of arrears case.
Payment protection insurance: The Code establishes certain provisions regulating the initial repayment estimate, the use of a combined application form. There is a requirement to include in the application form a text box indicating that the payment protection insurance is optional.
Non-mortgage personal lending: Information and a specific notice must be given to the consumer as regards the effects of missing any of the scheduled repayments.
Mortgages: A series of obligations are placed on regulated entities concerning information on costs of a mortgage consolidating other loans or credit facilities, information on the status of the account when the account is in arrears, the maintenance of a register of mortgage intermediaries, amongst others.
Lifetime mortgages: The main issue in this paragraph is the obligation to inform and warn the consumer of the consequences and costs of a lifetime mortgage.
Insurance products and services
Quotations, proposals and policy documentation: Duties of information about the quotation (amount, length of time, warranties or endorsements, discounts or loadings) must be disclosed to the consumer. A regulated entity must as well explain the consequences of failure to make full disclosure of medical details and must explain to the consumer the meaning of disability, and the restrictions, conditions and exclusions of the policies.
Disclosure: regulated entities have disclosure obligation for specific situation such as a refusal to quote for motor insurance, travel to another Member State, retirement of an insurance intermediary and life policies.
Claims processing: A regulated entity must verify the validity of the claim and have in place a written procedure. Some requirements specified in the Code would apply to the procedure and where the conditions are met, the entity must may all claims to the claimant within 10 business days.
Premium handling: Insurance intermediaries have certain obligations such as lodging the money of a premium or premium rebate in a segregated bank account and operate separate client premium accounts for life and non-life business. Client premium accounts must never be overdrawn and only the specified debits and credits may be passed through a client premium account.
Premium rebates: a regulated entity must transfer a premium rebate to a consumer within 5 business days of the rebate becoming due. Insurance intermediaries have specific conditions and obligations in this respect.
Investment products
A regulated entity must issue statements of investment product transactions for each investment product at least on an annual basis. Consumers must be provided with pre-sale product information specific to that consumer. Record must be kept in an accessible form of the date of receipt and transmission of certain instructions and decisions.
Tracker bonds: A regulated entity must provide certain information in the brochure and application form and provide a consumer with a "Key Features Document" and other documentation.
Advertising
General requirements: There are a number of requirements as regards advertising that mainly concern the truth, clarity and accuracy of the information
Lending: Certain information concerning interest rate, cost of credit and warnings must be shown in advertisements of loans.
Savings and investments: Certain information must be disclosed in advertising of savings and investments in cases such as where an interest rate for a savings or deposit account is displayed, when the past performance of the product or service is advertised, simulated performance of the advertised product or service, advertisements which contain a reference of the impact of taxation, where the product can fluctuate in price or value, amongst other.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
