Consumer contracts: the FCA's quiet second front on fairness
The FCA has signalled it will use its Consumer Rights Act powers, not just financial services rules, to challenge unfair terms in consumer contracts, with redress attached. For boards, this reopens contract hygiene as a Consumer Duty and litigation risk at the same time.
The FCA has put firms on notice that unfair contract terms are enforceable harm, not drafting trivia. In a 6 November blog, Sarah Montgomery, Head of department for cross-cutting policy and strategy, set out how the regulator is using powers under the Consumer Rights Act (CRA) 2015 alongside the Consumer Duty to force firms to amend terms, stop relying on them in existing contracts, and pay redress (FCA). The message to senior leaders is that the perimeter of conduct supervision now extends well beyond the Handbook.
A wider toolkit, quietly deployed
The cases cited are instructive about where the bar now sits. A crypto firm was made to stop charging inactive customers storage fees that could exceed £40,000 a year and to pay redress (FCA). A financial adviser was challenged over an £800 charge for handling a complaint, which the FCA considered unfair because it could deter legitimate complaints and was inconsistent with the Consumer Duty (FCA). A travel insurer paid £18,000 in redress after ambiguous wording on what counted as a 12-hour delay led to claims being wrongly denied (FCA). None of these cases turned on novel conduct rules. They turned on contract drafting that failed basic fairness and transparency tests.
The strategic point for boards is that the FCA is willing to combine CRA powers with Duty expectations, and to seek court injunctions and redress orders where firms do not move voluntarily. That changes the calculus on legacy terms sitting in books of business written years ago. If a term is found unfair, it is unenforceable and compensation may follow, a materially different exposure from a Handbook breach that might end in a supervisory letter.
Why this lands now
It also fits a broader pattern. Sarah Pritchard, Deputy chief executive, has emphasised that the FCA is reviewing existing rules through its Rule Review Framework, with the Consumer Duty allowing the regulator to rely less on prescriptive requirements and more on outcomes (FCA). In parallel, the FCA has demonstrated through its intervention against Ethica Resolve Limited over disguised remuneration loan collections that it will use conduct powers to stop enforcement activity where the underlying obligation is contested (FCA). The common thread is a willingness to intervene upstream of formal rule breaches, using whichever statutory lever fits the harm.
What senior leaders should do
General counsel and conduct risk functions should assume that contract portfolios will be read against both the CRA and the Duty, and that social media and consumer referrals are now live supervisory inputs (FCA). Product governance committees need evidence that fairness and transparency were tested before launch, not retrofitted after complaints. The FCA has flagged that early engagement through authorisations has already blocked unfair terms from reaching market in a recent credit product case (FCA).
The implication is straightforward. Terms and conditions have moved from a legal artefact to a supervised conduct output, with redress attached. Firms that treat repapering as a compliance chore rather than a board-level risk will find out the difference the expensive way.
Sources
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