FSA Pushes TCF Code of Practice

by Gill Montia

Story link: FSA Pushes TCF Code of Practice

The Financial Services Authority (FSA) has recorded a sharp increase in the number of penalties imposed for breaches in its treating customers fairly (TCF) code of practice. According to Reynolds Porter Chamberlain, the law firm, TCF fines increased to 40% of all fines imposed by the authority in the 12 months to end March 2007. This compares with 11% of fines in the previous year. In the overall picture, the number of financial penalty notices issued by the FSA increased by 58%, to 30, during the 2006/07 financial year, compared with 19 cases in the previous year.

Whilst the FSA’s TCF initiative is showing signs of success, it has been criticised for being too vague, particularly in view of the fact that the authority has not defined, or provided guidelines on how to implement TCF. Consequently, businesses have complained that it is both difficult and costly to ensure compliance. In brief, the TCF code expects companies to fully explain terms and conditions and make customers aware of all costs involved in a transaction. Promotional material needs to be evaluated with a non-expert and customers should be able to change service providers without facing unreasonable obstacles.

Small firms in particular have had difficulty meeting the FSA’s requirements. Only 41% implemented TCF by the authority’s March 2007 deadline. This compares with a compliance rate of 93% for major retails firms.

The decision as to whether companies have breached the TCF code of practice is made by the Financial Ombudsman Service.