Following an extensive engagement programme with Regulated Financial Service Providers ("RFSPs"), relevant stakeholders and customers alike, the much anticipated Consultation Paper (CP 158) on the Consumer Protection Code ("Code") ("Consultation Paper") was issued by the Central Bank of Ireland ("Central Bank") on Thursday, 7 March 2024. In this Insight we set out:

  1. a broad overview of the Central Bank's key messages in the Consultation Paper;
  2. the structure of the revised Code; and
  3. the specific issues which the revision of the Code is set to address.

RFSPs should note that the Consultation Paper is open for feedback until 7 June 2024. Additionally, the Central Bank has indicated that it will publish its feedback statement along with the revised Code in early 2025 and has proposed a 12 month implementation period, from the final date of publication of the revised Code.

We will continue to consider the implications of the proposed changes to the Code and will publish further, more in depth cross sectoral as well as sector specific analysis in the coming weeks.

For any queries on this or any aspect of the Code, please do not hesitate to contact to any member of Matheson's Financial Institutions Group or your usual Matheson contact.

KEY MESSAGES

The Consultation Paper states that the Central Bank's goal is to deliver an updated and modernised Code that reflects the transformations in financial services in recent years and particularly in how they are delivered to consumers today.

The Central Bank hopes that the revised Code will also reflect the outcomes of a number of recent consumer events including the tracker mortgage failures, business interruption insurance events, the differential pricing regulation amongst others, while also enhancing the clarity and predictability for RFSPs on their consumer protection obligations.

The Central Bank stresses that the current General Principles and Requirements of the Code will remain at the core of the revised Code.

The Central Bank was anxious to address what it terms "structural fragmentation" which had arisen through the development of a number of "add on" codes in recent years. It seeks to achieve this through the incorporation of these codes in the revised Code. This in turn, it hopes, will enhance the coherence, consistency and accessibility of the framework.

The Central Bank explains that it seeks to balance the need of RFSPs to pursue their commercial objectives with the obligation to place their customers' (and potential customers') interests at the heart of their culture, strategy, business model and decision-making.

The Central Bank notes that the implementation of the revised Code may result in what it terms"incremental cost impacts" for RFSPs but in defending these costs, it sets set out a cost-benefit assessment in which it maintains that the benefits strongly outweigh said costs.

The scope of the revised Code will remain the same, protecting individuals and small businesses. However of interest is the proposal, in the context of the Code, to widen the current threshold for small business from an annual turnover of €3m up to €5m.

Finally, the Central Bank confirms a statement which it made previously regarding the intention to consider further updates to the revised Code in light of ongoing legal and regulatory developments. Given the timeline for implementation indicated, it is unlikely that these revisions will be imminent, however it is still an important message for RFSPs to be aware of.

STRUCTURE OF THE CODE

The revised Code will be reflected in two new Central Bank Regulations.

Regulation 1:

  • The First Regulation sets out Standards for Business, including standards relating to governance, resources and risk management and RFSPs' conduct standards. These will build upon and update the existing General Principles of the Code and are the final regulatory component of the Individual Accountability Framework ("IAF");
  • The Standards for Business are complemented by the Supporting Standards for Business, addressed within the Regulation, which provide further detail on RFSPs' obligations;
  • The Standards for Business will apply to all RFSPs, other than those providing MiFID services and crowdfunding services (for which there are equivalent regimes in EU legislation), and credit union savings and lending activities; and
  • The Central Bank states that the Standards for Business align with the application of individual conduct standards under the IAF

Regulation 2:

  • The Second Regulation has the existing General Requirements at its core;
  • It comprises both cross-sectoral and sector-specific Conduct of Business requirements which will reflect existing, enhanced and new requirements;
    • Cross sectoral requirements relating to digitalisation, informing effectively, customers facing vulnerability, advertising and complaints resolution; and
    • Sector Specific Requirements relating to consumer banking, credit and arrears, insurance, investments and crowdfunding.
  • A number of existing but standalone Central Bank codes and rules will be amalgamated to address structural fragmentation; and
  • The General Requirements will apply to all RFSPs, other than reinsurance undertakings, RFSPs providing MiFID services, and credit union savings and lending activities. The Central Bank intends to engage with credit unions on the extension of the scope of the Code to all credit union activities when the revised Code is close to final.

Additional supports:

The Central Bank is proposing two supporting Guidance documents which offer additional guidance to RFSPs on

  • securing customers' interests; and
  • protecting consumers in vulnerable circumstances, and general guidance.

Finally, the intention is to also provide a number of digital tools, explainers and guides for both consumers and RFSPs. These are expected to be available once the Code is finalised.

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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.