Consumer services

Central Bank of Ireland launches review of its 2012 Consumer Protection Code | Hogan Lovells

On October 3, 2022, the Central Bank of Ireland (CBI) announced that it was carrying out a thorough review of the Consumer Protection Code 2012 (Code) and published a discussion paper calling for comments and views consumers and stakeholders on the main topics of discussion. before reviewing and publishing proposed revisions to the Code.

What is the rationale for the review?

The Code was developed by the BCI under Section 117 of the Central Bank Act 1989 and other sectoral laws and there has been no substantive review of its provisions since 2012 (apart from a number of addenda). Since then, a number of consumer protection enforcement decisions have been made by the CBI, including follow-up mortgage review decisions, many of which were underpinned by the general principles of the Code.

The financial services sector in Ireland has changed significantly since the previous Code review, driven by, for example, technology, innovation, an aging population, climate change and a global pandemic.

What’s in the Discussion Paper?

The discussion paper focuses on the topic of securing consumer interests in the themes of availability and choice and businesses acting in the interests of consumers.

The first theme explores how efficient and effective markets can support consumer availability and choice and focuses on:

  • Switching;

  • The impact of developments in retail financial services (including the withdrawal of a number of retail banks from Ireland, branch closures and the emergence of new entrants into spaces such as buy it now , subsequent payment (BNPL) );

  • New delivery channels;

  • Regulation and competition; and

  • Regulation and innovation.

This final theme explores how companies operating within an efficient financial services market must appropriately balance the interests of their shareholders with the interests of their customers.

The discussion paper suggests that the CBI could develop guidance on what it means (and does not mean) for a company to act in the best interests of its customers and potential customers. In helping to develop such guidance, the CBI addresses a number of broad themes, including:

  • Companies must ensure that their actions serve the interests of their customers, and not simply comply with the rules;
  • This means companies need to focus on results for customers and whether those results are what one would expect when companies act in the best interests of customers;
  • In deciding what it means to “act in the best interests of customers”, a key determinant is the legitimate expectations of those customers;
  • The company must maintain an appropriate balance between the interests of shareholders and the interests of customers;
  • Asymmetries (of resources, information and expertise) must be identified and acknowledged, and deployed for the benefit of clients;
  • A high level of contractual clarity should be provided to customers. In case of material ambiguity, it must be interpreted in favor of the customers;
  • Companies must not take unfair advantage of the behavior or habits of customers for the benefit of the company and/or at the expense of the customer; and
  • Where failures or weaknesses are identified in the treatment of a client or group of clients, an impact assessment should be undertaken so that the issues are resolved for all clients in a similar position.

Regulated businesses that deal with consumers should not wait for the proposed guidance to be finalized, but rather should review their existing relationships and documentation with consumers in light of the above themes. There are also questions about how close the final guidelines will be to the UK Financial Conduct Authority’s consumer duty, which requires companies to act to achieve good results for retail customers.

Other topics raised by the discussion paper are centered around the following themes:

  • Innovation and disruption;
  • Digitization;
  • Unregulated activities;
  • Inform effectively;
  • Vulnerability;
  • Financial Literacy; and
  • The climate matters.

Next steps

The deadline for comments on the Discussion Paper is Friday, March 31, 2023 at 5:00 p.m.

The CBI intends to publish a summary of the feedback in the second quarter of 2023.

The public consultation phase will see the publication of a consultation document setting out specific proposals on how the Code should be updated and improved. This will be accompanied by a draft regulation. It is likely that the revised Code will be issued as a new set of regulations under Section 48 of the Central Bank (Supervision and Enforcement) Act 2013.

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