Brendan Burgess
Founder
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This is an extract from the IFSRA Consultative Paper
Other matters that may be worth considering in the review are briefly described below. This list is not exhaustive, so you may comment on other matters not specifically raised in this paper. If you believe that a particular approach is ineffective, you should suggest alternatives that are consistent with our duty to protect consumers.
Unsolicited contact (cold-calling)
Please submit any proposals you may have in relation to cold-calling rules, but make sure you focus on the fact that codes are there to make sure that consumers avoid inappropriate or pressurised selling techniques. Under this heading, you could also consider the issue of lenders offering unsolicited or pre-approved credit facilities.
Categories of intermediaries
This structure [authorised advisors and multi-agency intermediaries] has been in place now for three years, so it is worth considering if it is best for the consumer. When giving your views on this area, please consider if the structure remains appropriate and, if it does not, suggest a more consumer-friendly framework.
You could also suggest ways in which the categories could be made more transparent so that the consumer is aware if their broker checks the full market or provides a restricted service.
Complaints procedures
We welcome views on the essential elements that financial service providers should include in their complaints procedures. Your views should concentrate on developing procedures that ensure complaints are handled efficiently and that the complainant is kept informed of the status of their complaint at all stages in the process.
If you are a consumer who has gone through the experience of making a complaint we would especially welcome your views and any suggestions you may have as to how the service may be improved. In doing so, you may wish to consider a range of issues, including whether the firm:
fully explained the complaints procedure to you, including your options and your rights;
gave you a clear timeframe for dealing with your complaint;
up-dated you regularly on the progress of your complaint;
clearly explained the outcome; or
told you about other channels for pursuing your complaint, if they couldn’t resolve it.
Advertising rules
Financial services providers are among the largest advertisers across all advertising media. In many cases, the first time consumers are exposed to the services on offer is through advertising. It is critical then that all advertisements should be fair and truthful and that consumers get a clear indication of what is on offer. Because of this, we intend to include
advertising provisions in the unified code.
When making your submission, please consider the structure of
advertising requirements and whether certain products need more specific rules than others. The rule that consumers are likely to be most familiar with is the one that requires firms to indicate in all advertisements that they are regulated by the Irish Financial Services Regulatory Authority. Do you think this rule makes consumers more aware that they should only deal with a regulated firm or, does it seem that we, the Financial Services Regulator, are endorsing the particular product being advertised?
We would be grateful for your views on the value to consumers of this form of disclosure in advertising, and for any suggestions that would ensure that advertisements do not lead to over optimistic expectations among consumers.
When commenting on advertising provisions, you
should address not only advertising in the mainstream print or
electronic media, such as newspapers, TV or radio, but also consider whether the codes should apply to other forms of advertising, such as marketing and sponsorship.
Certifying loans
A recent survey of mortgage practices which we carried out brought to light some matters relating to consumer protection. While lenders carry out various checks on the borrowers ability to repay a loan, the borrower almost certainly is the best person to judge whether they can
meet the repayments on a particular loan. You are asked to consider if it would be worthwhile to introduce a measure that requires each lending institution to obtain from the borrower, in writing, agreement of its assessment of the borrower’s ability to repay, including a reference to any assumed levels of expenses that form part of that assessment. By having to formally sign-off in this way, the borrower may need to
focus on the assumptions that the lending institution has made about his or her ability to repay. However, it may be worth considering if introducing such a measure would serve only to increase “red tape” and provide further protection for the lender rather than help the consumer.
Another possibility involves borrowing from the practice of insurance and investment brokers, who must give a written statement of the suitability of a product to clients, outlining the reasons why they are recommending a particular product or investment strategy. Th i s statement, commonly called a “reason why” letter, explains the rationale for recommending one product or provider above others. In your submission, please consider if introducing a similar rule for loans would
be useful to consumers.
Disclosing details of financial products
A vital element of any consumer protection regime is that consumers understand the product they are buying and are fully aware of the risks and potential rewards involved in the product. Financial services providers must sell and market their products in a way that lets consumers understand them and make informed decisions on whether or not to purchase them. For example, it can be difficult for consumers to calculate the return on a tracker bond or to estimate the interest charge on a future credit card bill, so firms need to explain this to them.
We would like your views on how the codes of conduct could promote openness in light of the fact that consumers enter into complicated legal contracts and depend on the advice and guidance of their advisor. In doing so, you could consider what type of information should be disclosed, such as:
what would be the maximum potential loss and the maximum
potential gain on any investment product;
what type of guarantees are provided and the name of the
guarantor;
the effect of a change in interest rates on any assumptions made about loan repayments or returns on investments;
the relationship, if any, that exists between the advisor and the firm with which the investment is made;
the publication of product documentation in language that can be clearly understood by the consumer; or
the disclosure of information in such a manner as to meet the
needs of consumers with reading difficulties.
It is important that any information disclosed is relevant to the consumer – too little information means that the consumer would be unable to make an informed choice, while too much might confuse the consumer as to what is vital for them to know. We welcome any views on how to strike a balance between these extremes and whether additional
disclosure obligations might discourage international firms from
entering the Irish market because they may have to alter their standard documentation for the Irish market.
You should also consider how financial services providers should inform consumers of their right to compensation if the provider defaults on an agreement. The single financial services market in Europe is continuing to expand, so it is essential that firms tell consumers of the compensation scheme of which the firms are members. For example,
when a consumer makes an investment with a UK insurance company, the company should tell them whether they can claim from a UK compensation scheme or another one.
Voluntary codes
Many representative bodies in the financial services sector have introduced voluntary codes. We wish to consider the future role of voluntary codes and their relationship to the codes that we are putting together. Voluntary codes complement the codes set down by law, as they can concentrate on a single sector and can be adapted to changing circumstances more quickly than a statutory code can. However, our main concern with voluntary codes relates to whether effective action can be taken against a firm that breaches a rule in a voluntary code and what redress consumers can expect. We are interested in your views
on the future role of voluntary codes and the issues and concerns that such codes should address.
Other consultations
During the first half of 2004, we will be consulting publicly on a number of other consumer protection issues. These are outlined below.
Tracker bonds
Minimum competency of sales staff
Commission structures
Switching Accounts
Other matters that may be worth considering in the review are briefly described below. This list is not exhaustive, so you may comment on other matters not specifically raised in this paper. If you believe that a particular approach is ineffective, you should suggest alternatives that are consistent with our duty to protect consumers.
Unsolicited contact (cold-calling)
Please submit any proposals you may have in relation to cold-calling rules, but make sure you focus on the fact that codes are there to make sure that consumers avoid inappropriate or pressurised selling techniques. Under this heading, you could also consider the issue of lenders offering unsolicited or pre-approved credit facilities.
Categories of intermediaries
This structure [authorised advisors and multi-agency intermediaries] has been in place now for three years, so it is worth considering if it is best for the consumer. When giving your views on this area, please consider if the structure remains appropriate and, if it does not, suggest a more consumer-friendly framework.
You could also suggest ways in which the categories could be made more transparent so that the consumer is aware if their broker checks the full market or provides a restricted service.
Complaints procedures
We welcome views on the essential elements that financial service providers should include in their complaints procedures. Your views should concentrate on developing procedures that ensure complaints are handled efficiently and that the complainant is kept informed of the status of their complaint at all stages in the process.
If you are a consumer who has gone through the experience of making a complaint we would especially welcome your views and any suggestions you may have as to how the service may be improved. In doing so, you may wish to consider a range of issues, including whether the firm:
fully explained the complaints procedure to you, including your options and your rights;
gave you a clear timeframe for dealing with your complaint;
up-dated you regularly on the progress of your complaint;
clearly explained the outcome; or
told you about other channels for pursuing your complaint, if they couldn’t resolve it.
Advertising rules
Financial services providers are among the largest advertisers across all advertising media. In many cases, the first time consumers are exposed to the services on offer is through advertising. It is critical then that all advertisements should be fair and truthful and that consumers get a clear indication of what is on offer. Because of this, we intend to include
advertising provisions in the unified code.
When making your submission, please consider the structure of
advertising requirements and whether certain products need more specific rules than others. The rule that consumers are likely to be most familiar with is the one that requires firms to indicate in all advertisements that they are regulated by the Irish Financial Services Regulatory Authority. Do you think this rule makes consumers more aware that they should only deal with a regulated firm or, does it seem that we, the Financial Services Regulator, are endorsing the particular product being advertised?
We would be grateful for your views on the value to consumers of this form of disclosure in advertising, and for any suggestions that would ensure that advertisements do not lead to over optimistic expectations among consumers.
When commenting on advertising provisions, you
should address not only advertising in the mainstream print or
electronic media, such as newspapers, TV or radio, but also consider whether the codes should apply to other forms of advertising, such as marketing and sponsorship.
Certifying loans
A recent survey of mortgage practices which we carried out brought to light some matters relating to consumer protection. While lenders carry out various checks on the borrowers ability to repay a loan, the borrower almost certainly is the best person to judge whether they can
meet the repayments on a particular loan. You are asked to consider if it would be worthwhile to introduce a measure that requires each lending institution to obtain from the borrower, in writing, agreement of its assessment of the borrower’s ability to repay, including a reference to any assumed levels of expenses that form part of that assessment. By having to formally sign-off in this way, the borrower may need to
focus on the assumptions that the lending institution has made about his or her ability to repay. However, it may be worth considering if introducing such a measure would serve only to increase “red tape” and provide further protection for the lender rather than help the consumer.
Another possibility involves borrowing from the practice of insurance and investment brokers, who must give a written statement of the suitability of a product to clients, outlining the reasons why they are recommending a particular product or investment strategy. Th i s statement, commonly called a “reason why” letter, explains the rationale for recommending one product or provider above others. In your submission, please consider if introducing a similar rule for loans would
be useful to consumers.
Disclosing details of financial products
A vital element of any consumer protection regime is that consumers understand the product they are buying and are fully aware of the risks and potential rewards involved in the product. Financial services providers must sell and market their products in a way that lets consumers understand them and make informed decisions on whether or not to purchase them. For example, it can be difficult for consumers to calculate the return on a tracker bond or to estimate the interest charge on a future credit card bill, so firms need to explain this to them.
We would like your views on how the codes of conduct could promote openness in light of the fact that consumers enter into complicated legal contracts and depend on the advice and guidance of their advisor. In doing so, you could consider what type of information should be disclosed, such as:
what would be the maximum potential loss and the maximum
potential gain on any investment product;
what type of guarantees are provided and the name of the
guarantor;
the effect of a change in interest rates on any assumptions made about loan repayments or returns on investments;
the relationship, if any, that exists between the advisor and the firm with which the investment is made;
the publication of product documentation in language that can be clearly understood by the consumer; or
the disclosure of information in such a manner as to meet the
needs of consumers with reading difficulties.
It is important that any information disclosed is relevant to the consumer – too little information means that the consumer would be unable to make an informed choice, while too much might confuse the consumer as to what is vital for them to know. We welcome any views on how to strike a balance between these extremes and whether additional
disclosure obligations might discourage international firms from
entering the Irish market because they may have to alter their standard documentation for the Irish market.
You should also consider how financial services providers should inform consumers of their right to compensation if the provider defaults on an agreement. The single financial services market in Europe is continuing to expand, so it is essential that firms tell consumers of the compensation scheme of which the firms are members. For example,
when a consumer makes an investment with a UK insurance company, the company should tell them whether they can claim from a UK compensation scheme or another one.
Voluntary codes
Many representative bodies in the financial services sector have introduced voluntary codes. We wish to consider the future role of voluntary codes and their relationship to the codes that we are putting together. Voluntary codes complement the codes set down by law, as they can concentrate on a single sector and can be adapted to changing circumstances more quickly than a statutory code can. However, our main concern with voluntary codes relates to whether effective action can be taken against a firm that breaches a rule in a voluntary code and what redress consumers can expect. We are interested in your views
on the future role of voluntary codes and the issues and concerns that such codes should address.
Other consultations
During the first half of 2004, we will be consulting publicly on a number of other consumer protection issues. These are outlined below.
Tracker bonds
Minimum competency of sales staff
Commission structures
Switching Accounts