Central Bank issues Consumer Protection Outlook Report 2022
May 2022On 14 March 2022, the Central Bank of Ireland (the “CBI”) published its Consumer Protection Outlook Report (
HERE).
This report highlighted five Key Cross Sectoral Risks facing consumers of financial services as follows:
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Poor business practices and weak business processes;
- Ineffective disclosures to consumers;
- The changing operational landscape;
- Technology-driven risks to consumer protection; and
- The impact of shifting business models.
To mitigate those risks, the CBI expects regulated firms to:
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Put in place robust product governance and oversight arrangements covering the design, sale and delivery of the product
Firms should be mindful that poor business practices can result in the sale of products with features, charges and risks that do not suit the needs of the consumers who purchase them. For example, the CBI has banned the widespread use of differential pricing in the motor and home insurance markets which led to consumers being charged for their loyalty thereby not necessarily representing the best long-term value for the consumer.
See our article on the New Differential Pricing Regulations HERE.
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Provide clear information in a timely manner to consumers, disclosing the key information upfront (i.e. risks and benefits, fees and costs)
Firms should ensure that statements of suitability and other disclosures to financial products provided to consumers, both in digital formats and by more traditional communications, are fully compliant with legislative requirements to ensure that consumers are supported in making good decisions about the products.
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Actively identify and address risks to consumers that may potentially emerge from changes in the landscape within which the firm and/or its consumers are operating
Due to the current low deposit interest rate environment, consumers seeking higher returns on their investments are being offered increasingly complex products, the level of capital protection and risk associated of which may not be fully understood by them. This may make it more difficult for consumers to identify what services and products are, and are not, regulated and who is ultimately providing the financial service in question. The CBI therefore expects firms to clearly define for the consumer between regulated and unregulated products, especially products carrying special risks such as virtual assets.
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Have comprehensive IT & cybersecurity risk management frameworks to achieve resilience and protect the interests of consumers
Firms must ensure consumers’ needs and interests are to the fore in its considerations when designing and providing financial products digitally and that the product will only be provided to consumers for whom it is suitable. Have effective measures to mitigate the risk of fraud and scams.
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Proactively assess the risks and consumer impact a commercial decision may pose to new and existing customers, and develop comprehensive action plans to mitigate these risks whilst ensuring that customers understand what changes mean for them.
Although, now more than ever, financial services are being delivered digitally thereby reducing in-person customer service, it is important that consumers can access timely and customer-focused service, including where a consumer needs, or is best served, by an in-person (or virtual) engagement with the firm.
If you require any further information or advice as to how the Report may impact your consumer practices and procedures, do not hesitate to contact us at
info@regsol.ie