The Central Bank of Ireland (Central Bank) has commenced the first phase of a three-stage review of the Consumer Protection Code 2012 (as amended) (Code). The review aims to ensure that the Code remains fit for purpose and future-ready, and that consumers remain well-protected amidst a rapidly changing financial services landscape.

As part of this first phase, and as signalled in our March briefing on the Central Bank’s 2022 regulation priorities, on 3 October 2022, the Central Bank launched a discussion paper (Discussion Paper) on the topic of consumer protection in financial services. The purpose of the Discussion Paper is to stimulate discussion and obtain feedback and views from consumers and stakeholders on key discussion topics before considering and publishing proposed revisions to the Code. The resulting feedback will then be the subject of a formal public consultation in the second phase of the review process.

The Discussion Paper presents a discussion based on two broad themes and eight specific themes, on which the Central Bank hopes to engage widely with stakeholders.

Broad Themes under the overarching category of securing consumers’ best interests are:

A. Availability and Choice – Effective Market Functioning

While recognising that an effectively functioning market with appropriate levels of competition, transparent pricing structures and clear information provides customers with access to the products they require, the Central Bank is seeking views on issues such as availability of choice of financial services and products for consumers and the channels through which those services and products are provided together with the importance of competition.  These views will assist the Central Bank in understanding the interaction between regulation and effective market functioning with availability and choice of products.

B. Firms Acting in Consumers’ Best Interests

The Central Bank considers that guidance on what it means for a firm to act in its customer’s best interest could be helpful and welcomes views in this regard.  The Central Bank has outlined some key components that would form the basis of such guidance as follows:

• taking a holistic approach to a customer’s best interest;
• focusing on outcomes for customers; and
• the legitimate expectations of such customer regarding the information provided on products and what the “ordinary consumer” in that market would have expected.

Specific Themes, which are informed by global standards such as the OECD’s High Level Principles on Consumer Financial Protection, include:

1. Innovation and Disruption – to ensure that benefits of change and innovation are realised for consumers and the economy with the appropriate risk mitigation measure in place.
2. Digitalisation – to maximise the benefits of increasing digitalisation while ensuring consumers are protected from unfair practices and the appropriate use of personal data.
3. Unregulated Activities – to ensure consumers have clarity around activities that are regulated and those that are unregulated.
4. Pricing Matters – ensuring consumers have access to clear and unbiased information on pricing.
5. Informing Effectively – ensuring consumers receive sufficient information at the right time to enable informed decisions as to financial products and services.
6. Vulnerability of Consumers – ensuring that firms understand vulnerability and take steps to address the needs of vulnerable consumers.
7. Financial Literacy – in recognition of financial literacy’s role in ensuring that consumers best interests are protected, the Central Bank is seeking views on what can be done to improve financial education.
8. Climate Matters – ensuring that firms act in customers’ best interests as financial products and services evolve to respond to climate change.

Additional points raised in the Discussion Paper

Retail banking review – Competition and consumer choice in retail banking is being considered as part of the Government’s ongoing Retail Banking Review, which will be published later this year. The outputs of this process may further shape the future approach to consumer protection.

Switching code – Any gaps emerging from the current migration of bank accounts may be addressed by a review of the Code of Conduct on the Switching of Payment Accounts with Payment Service Providers.

Authorisation – The Central Bank continues to look at enhancements to its pre-application engagement with firms considering authorisation as a regulated entity.

Innovation Hub – The Innovation Hub has been a successful initiative, and the Central Bank is keen to build on its engagement with innovation and innovators. A consultation on proposed enhancements to the innovation hub is planned for 2023. Development of spaces for interaction between regulation and innovation is also mentioned, including “regulatory sandbox” arrangements.

Review Timeline

For further information on the Discussion Paper and Code review process, please see the Central Bank press release here.

For more information, please contact any member of the Financial Regulation Unit  or your usual William Fry contact.

Contributed by Jane Balfe