A senior Central Bank official has said that its plans for a revised Consumer Protection Code are built on financial firms’ statutory obligation to act in the best interests of consumers.

Gerry Cross (director financial regulation – policy and risk) was speaking at an event held by the Compliance Institute in Dublin today (11 April).

Earlier this year, the regulator launched a public consultation on its proposals, which remains open until 7 June.

‘Concrete obligations’

Referring to recent issues surrounding tracker mortgages, differential insurance pricing, and business-interruption insurance, Cross said that there had been “a broad part of the consumer-protection landscape in respect of which there has not been a lot of guidance available, but where a good deal of activity takes place”.

He told the event that the revised code would articulate clearly, and with supporting guidance and examples, the concrete obligation that firms had to develop their business models, their culture, and their decision-making in a way that aligned clearly with the interests of their customers.

Cross added that such an obligation required firms to pay attention to outcomes as well as processes.

“For example, it is one thing to fulfil your formal disclosure obligations to your customers and potential customers, or to provide them with information; it is another thing to do so in a way that will be most effective in helping them really understand what it is they need to know,” he stated.

Customer needs

Cross warned firms that new products should be designed with “real customer needs and preferences” in mind.

He added that, while firms could take account of people’s behaviour and habits, they could not seek to generate “inappropriate gains or advantages” by taking advantage of factors such as customer inertia or digital dynamics.

“Digitalisation is expanding the availability of financial data facilitating customer profiling, and increasing the risk that firms can seek to inappropriately exploit consumer behaviours, habits, preferences or biases,” the Central Bank official continued.

On incentives offered to consumers, Cross warned that these should not seek to interfere with the ability to compare products effectively, or to unfairly exploit customer behaviours, habits, preferences, or biases.