UK FCA reviews action against unfair consumer contract terms and reiterates firms’ responsibilities

In a new blog post, the Financial Conduct Authority (FCA) reviewed its use of consumer law powers to challenge unfair contract terms and reiterated firms’ responsibilities to maintain fair, transparent contracts. Sarah Montgomery, head of department for cross-cutting policy and strategy, explained that unfair terms are unenforceable and consumers may also be entitled to redress under the Consumer Rights Act 2015 (CRA). Where concerns arise, firms are expected to amend or delete problematic terms, stop relying on them in existing contracts and compensate consumers for harm caused. In some cases, firms may provide voluntary undertakings under the CRA. The FCA can also seek court injunctions preventing the use or enforcement of terms and court orders requiring redress. Cases reviewed included a crypto firm that removed disproportionate storage charges, which could exceed GBP 40,000 annually, and compensated affected customers. A travel insurer clarified ambiguous wording about a 12-hour delay and paid GBP 18,000 in redress for wrongly rejected claims. Firms should regularly assess both their contract wording and how terms operate in practice. This includes considering consumers’ legitimate interests, explaining costs and rights in plain language, and making important terms easy to identify. Reviews should reflect relevant requirements and judgments, draw on complaints and customer outcomes, and test whether consumers actually understand key terms. Staff training should support compliance with the standards set out in contracts and other product literature.