• Doing business with the FSA
  • Being regulated
    • Unfair contract terms
      • How these powers fit in with FSMA

In parallel to the Regulations, we have our FSMA powers and if we can achieve the same end of consumer protection by using these instead of the Regulations, then we may use FSMA.¹

Firms also have an obligation to act fairly under the Financial Services and Markets Act 2000 (FSMA), through our own Principles for Businesses (the Principles) which underpin the work that we are doing with firms as part of our Treating Customers Fairly initiative.

Principle 6 requires a firm to 'pay due regard to the interests of its customers and treat them fairly' and Principle 7 requires a firm to 'pay due regard to the information needs of its customers and communicate information to them in a way which is clear, fair and not misleading'. Taken together, Principles 6 and 7 reflect the forerunner Securities and Investment Board (SIB) Principle that a firm 'should observe high standards of integrity and fair dealing'.

Regulations and principles

There is an overlap between the Regulations and the Principles. The Principles, however, apply to the way that contract terms are used in practice, not just the way they are drafted. So a firm must not use an unfair term (or fair term) unfairly in practice. The Principles also apply to a 'core term', which is not subject to review under the Regulations.

If we think a term is fair under the Regulations, then we will not challenge it under them. However, firms may consider issues arising under the Regulations along with their wider obligations to treat customers fairly. We expect firms not to rely on narrow and technical interpretations of the Regulations to seek to justify a contract term that may be, in the wider context, unfair and in which context it may be open to challenge.

¹ See UNFCOG 1.4.5 G, in the FSA Handbook