• Doing business with the FSA
  • Being regulated
    • Unfair contract terms
      • Our powers

The Regulations also set out the powers for 'qualifying bodies' to address unfair contract terms. 'Qualifying bodies' include the FSA, the Office of Fair Trading and local authority Trading Standards Offices, as well as bodies such as utility regulators such as OFWAT.

Injunctions

We have the power to seek an injunction in the court to prevent firms using an unfair contract term. Whether to grant the injunction would be the decision of the court. We have set our policy on seeking injunctions under the Regulations in EG 10.12 - 10.20. Once an injunction is granted we are obliged to inform the Office of Fair Trading, who – generally – will publish it. If so we would also publish the injunction. Injunctions can be binding not just on the firm that it is granted against, but also on other firms using similar contract terms or anyone recommending their use.

Undertakings

Injunctions are the last stage of the statutory process under the Regulations. The majority of cases are settled by the firm undertaking to stop using unfair contract terms. In some cases, we ask firms to stop using a contract term altogether; in others, the firm undertakes to amend the contact term to make it fair under the Regulations and to treat their existing customers as though the fairly drafted term was included in existing contracts. A firm's failure to comply with its undertaking could lead us to apply for an injunction.

Undertakings will first be published on the Office of Fair Trading's Consumer Regulation Website. We then publish undertakings on our website on both the consumer and corporate pages. We consider it desirable for firms to contact their customers to inform them of any change to the way their contract will be operated. When appropriate, using our powers under the Financial Services and Markets Act 2000 (FSMA), we may ask firms to offer compensation to those consumers who have incurred loss because the firm has relied on a contract term which was unfair. We publish undertakings so that all firms can see those terms that have been amended to make them fair. Firms can then consider the terms of their own contracts in light of this.

We expect firms to take this into account in their Risk Management process. See UNFCOG 1.5.

Firms should always be aware of the risk that individual consumers could use the Regulations to resist enforcement of a contract term against them. Also, firms should realise that any action could result in the offending term being void and unenforceable and they should be aware of the implications this could have for their businesses more generally.

Where a firm has given an undertaking as described in UNFCOG 1.3.4G(1), or a court has ruled the firm's term unfair, then we consider it desirable that the firm should promptly notify those clients it has already concluded contracts with to tell them about the effect on their contracts.

Publication does not amount to a public censure. In most cases, firms work with us to help ensure that their contracts reflect their wider aspiration to treat their customers fairly.