FCA cites £800 complaint charge among unfair contract terms it has challenged

A financial adviser that tried to bill a customer £800 for the time spent dealing with their complaint has rewritten its contracts after the Financial Conduct Authority objected to the charge, the regulator said on Friday. The fee was in the adviser's terms and conditions. The FCA judged it unfair because it could put people off making legitimate complaints, and found it at odds with the Consumer Duty and its own rules.

The case was one of several the FCA described in a post explaining how its Consumer Contracts team uses the Consumer Rights Act 2015. That law requires terms in contracts with consumers to be fair and transparent. A term that fails the test cannot be enforced, and customers may also be due redress. The FCA did not name any of the firms involved.

In another case, a travel insurer rewrote wording about what counted as a 12-hour delay and paid £18,000 in redress to customers whose claims had been wrongly turned down because of it. A lender changed the terms of a new credit product to explain costs and cancellation rights more clearly after the FCA raised concerns while the product was going through authorisation, before it reached customers.

Changes the regulator expects

The regulator finds problem terms through its supervision of firms, through social media and through referrals from consumers and other organisations. When it raises a concern, it expects the firm to change or remove the term and stop relying on it in existing contracts, and to pay redress where customers have lost out. Some firms are asked to give a formal voluntary undertaking under the Act. Where necessary, the FCA can go to court for an injunction to stop the term being used or enforced, and for an order to pay redress.

It also wants firms to write contracts in plain language, put fees, cancellation rights, exclusions and complaints procedures where customers will see them, and test whether people actually understand the key terms rather than assuming they do.

Signs a term may be unfair

The FCA's guidance for consumers lists several features that can make a term unfair or unclear. These include terms that:

• let the firm change the contract without telling the customer or saying why
• bind the customer to terms they could not see
• limit the customer's legal rights unfairly
• impose an unreasonably large charge for not keeping to the contract
• renew automatically with no right to cancel
• can be read in more than one way
• describe the product, service or costs in wording that is unclear or not prominent

A term that resembles one of these is not necessarily unfair, the regulator adds, because it depends on the contract as a whole.

Reporting a term

Concerns can be sent through the online form on the FCA website with details of the term, a copy of the contract and any letters or emails exchanged with the firm. Reports can also go by post to the Consumer Contracts Team, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN, and the FCA will return original documents sent without copies. It can only look at contracts between a customer and a business that were entered into after 1 July 1995.

The FCA says it considers every report but will not tell the person who sent it what action, if any, it takes. For someone unhappy with a financial product or service itself, the regulator points to its separate guidance on how to complain.