Launch of the Central Bank’s consultation on the revised Consumer Protection Code

The Central Bank of Ireland (Central Bank) has today published a consultation paper on its review of the Consumer Protection Code 2012 (Code), together with two sets of draft Regulations, which will replace the Code once finalised, and two Guidance documents. These legislative and guidance proposals represent not only a consolidation of consumer protection rules but also an expansion of these principles in terms of scope and details.

Background

In October 2022, the Central Bank launched a three-phased review of the Code, aiming to enhance safeguards for consumers of financial products and services.

As part of the first phase of the review, the Central Bank published a Discussion Paper outlining themes relating to securing consumers’ best interests. A six-month engagement programme with consumers and stakeholders followed to gather views on the themes addressed in the Discussion Paper and on the issues emerging for consumers. In July 2023, the Central Bank published an engagement update following the feedback received on the Discussion Paper. Our previous insight considers the themes and outcomes discussed in the Discussion Paper and engagement update.  

The public consultation on the Code was launched today and marks the second phase of the Central Bank’s review.

Rationale

The commencement of the review came amidst the changing financial services landscape and technological developments in the financial services industry, which necessitated a re-evaluation of the existing requirements to ensure continued efficacy and relevance so that consumers remain protected.

As a result of the review, the Central Bank has now proposed significant changes to the Code to modernise, clarify and integrate consumer protections to ensure that they are accessible for consumers and firms. The Deputy Governor of the Central Bank stated, at the launch of the consultation, that the Central Bank’s focus is to “ensure that, underpinned by high quality regulation, the financial system is positioned so that consumers and the broader economy can realise these benefits - while also ensuring that risks are mitigated”.

Draft Regulations

The structure of the Code will be changed, with updated and new requirements contained in two new Central Bank Regulations, as follows:

1. Standards for Business

The first set of Regulations will contain ‘Standards for Business’, complemented by ‘Supporting Standards for Business’, which will replace the existing General Principles in the Code.

The Central Bank has noted in its Consultation Paper that the Standards for Business align with the application of individual conduct standards under the Individual Accountability Framework (IAF). The Business Standards under the IAF had not become effective while the review and development of the Code was ongoing.

The ‘Standards for Business’ broadly reflect the requirements in some of the existing General Principles from the existing Code, and also include additional standards (e.g. that a regulated firm must control and manage its affairs and systems to counter the risks of customers to financial abuse). The ‘Supporting Standards for Business’ provide further detail and guidance on firms’ obligations under the Standards for Business.

While the Standards for Business are not yet effective, regulated firms should carefully consider the draft regulations and how in due course they will ensure that these principles are embedded into their businesses as they continue to move to implement the various requirements under the IAF.

2. General Requirements

The second set of Regulations will contain ‘General Requirements’, which will include new and existing requirements and protections set out on a cross-sectoral and a sector specific basis.

Many of the most significant changes to the Code fall under the following key areas:

Digitalisation – new requirements to ensure that firms deploy a customer focus in the design and implementation of digital services and delivery channels.

Informing customers effectively – new requirements to ensure that firms communicate with customers more effectively and in a way that enables understanding and empowers customers to make decisions in their own interests.

Mortgage credit and switching – new and enhanced requirements to ensure consumers are supported to make informed decisions in relation to the provision of mortgage credit and switching, including disclosure requirements on switching options available and the cost of incentives.

Unregulated activities – new obligations on regulated firms to ensure that customers cannot have the impression or misunderstanding that they are purchasing regulated products or services where that is not the case. The Central Bank will issue guidance on the use of branding for this purpose.

Frauds and scams – new requirements to ensure that firms are vigilant to the evolving risks to the system and customers and take appropriate actions to protect customers, particularly in a digital context.

Vulnerability – new definition of vulnerability and new expectations of firms in relation to how firms should effectively support consumers in vulnerable circumstances.

Climate – new suitability and advertising requirements which will require firms to ensure that they communicate fairly and clearly on product sustainability features to avoid the risk of greenwashing.

Additional policy proposals – new and enhanced requirements in the areas of consumer credit, SME protections, insurance, and investments and pensions, along with a range of additional modifications and enhancements to existing requirements, which will contribute to the modernisation of the Code and assist with effective implementation.

Consolidation of other consumer protection requirements

The revised Code will also consolidate a number of existing Central Bank conduct regulations and codes including:

  • the Central Bank’s Code of Conduct on Mortgage Arrears (CCMA);
  • the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Licensed Moneylenders) Regulations 2020; and
  • the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Insurance Requirements) Regulations 2022.

This consolidation exercise will also include certain enhancements and amendments to these Regulations and the CCMA. Industry will be considering as part of this consultation process the materiality and impact of any changes to the key requirements as part of this consolidation.  

Furthermore, the Central Bank has indicated that it will undertake further work to consolidate the SME Regulations into the revised Code, and that this work will coincide with work to extend the scope of the revised Code to all credit union activities.

Draft Guidance

To complement the revised Code, the Central Bank has published two sets of draft Guidance:

  • Guidance on Securing Customers’ Interests – the guidance articulates the Central Bank’s expectations of firms in meeting their obligations under the Standards for Business to secure customers’ interests and support firms to effectively implement their consumer protection obligations; and
  • Guidance on Protecting Consumers in Vulnerable Circumstances – the guidance provides background to the definition and approach to vulnerability under the revised Code and describe the Central Bank’s expectations of firms in meeting their obligations in relation to vulnerable consumers.

In addition to this guidance, the Central Bank will develop new digital tools, explainers and guides to support consumers and firms in accessing the information that they need.

For consumers, the central Bank will publish a Consumers’ Guide to the Consumer Protection Code, which will set out, in easy-to-read terms, what protections are provided for consumers and what their responsibilities are when dealing with financial services firms.

For firms and practitioners, the development of proposed online tools will support improved navigability and provide clarity on relevant obligations.

Timing for implementation

Following completion of the entire consultation process, the Central Bank expects to publish the new Regulations early in 2025. The Central Bank is proposing a 12-month period for implementation beginning from the date of publication of the Regulations.

Next steps

The consultation period will run until 7 June 2024. Following consideration of stakeholder feedback on the proposed changes, which will help to inform any further updates to the requirements, the Central Bank will publish the final Regulations in early 2025, together with a feedback statement, marking the third and final phase of the Code review.

Following this process, the Central Bank will continue to consider further enhancements to the framework in a number of specific areas to build on the current proposed changes and to develop further changes based on on-going legislative developments at a domestic and European level, including in relation to access to cash services, the Department of Finance’s National Payments Strategy, the EU’s Retail Investment Strategy and the evolution of the EU payment services framework.

We will be publishing detailed analysis of the wide ranging changes to the Code as set out in the Consultation Paper and draft Regulations in due course.

For more information, and how ALG can assist your business, please contact Dario Dagostino, Partner, Patrick Brandt, Partner, Mark Devane, Partner, Chloe Culleton, Partner, Ciarán Rogers, Partner, Laura Mulleady, Partner, Sinéad Lynch, Partner, Sinéad Hayes, Senior Associate, Laura Corrigan, Senior Associate, Louise Hogan, Associate, Sarah Lee, Senior Knowledge Lawyer, or your usual ALG contact.

Date published: 7 March 2024