The unfair contract terms act
The EU unfair contract terms directive was established into UK law by the Unfair Terms in Consumer Contracts Regulation 1999. These regulations apply to all contracts between seller/supplier and a consumer, including life insurance contracts.
These regulations do not apply to clauses or words required to be used as a result of legislation. Such as Inland Revenue terms required for pension contracts or FSA terms of business agreements.
Any contract term not mutually agreed between the parties can be regarded as unfair if it creates a significant imbalance between the two contracting parties to the detriment of the consumer. The unfairness test does not apply to terms written in plain English which define the subject matter of the contract e.g. scope of cover, exclusions, or concern the adequacy of price.
If there is doubt over the meaning of any term the term will be read in favour of the consumer.
The unfair term is not binding on the consumer but the rest of the contract, if it is capable of existing remains in place.
The OFT can consider complaints about unfair terms. The trading standards and consumer’s association can also apply for injunctions.
The FOS will take these regulations into account when they consider a complaint. The FSA is also a qualifying body under the regulations and is taking the lead in responsibility for contracts regarding investments, pensions, life and general insurance.
The Financial Services and Markets Act 2000 FSMA 2000
The intention behind the act was to bring together various regulations affecting the financial services industry.
The previous regulations were under some of the following,
- Banking by the Bank of England under the Banking Act 1987
- Building Societies by the Building Societies Commission under the Building Societies Act 1986
- Friendly Societies by the Friendly Societies Commission under the Friendly Societies Act 1992
- The prudential regulation of insurance companies by the Treasury under the Insurance Companies Act 1982
- Investments (including long-term insurance) by the self regulatory organisations ( SRO’s) under the Financial Services Act 1986
The FSMA 2000 also set up the FSA as the sole regulatory body with affect from 30 th November 2001. The scope of he FSMA 2000 covers,
- Deposit taking (e.g. bank and building society accounts)
- Stocks and shares
- Gilts and local authority bonds
- Debentures
- Futures
- Unit trust
- Open ended investment companies ( OEIC's)
- All contracts of insurance (including general insurance and the Lloyd’s market)
- Loans secured on land (i.e. mortgages) y with effect from October 2004.
- Funeral plan contracts with effect from 1 January 2002,
- Insurance mediation activities with effect from 14 th January 2005.
The act also set up one ombudsman service in the form of the FOS and one compensation scheme in the form of the FSCS.
The Act was passed on the 14 th June 2000 and consisted of 433 sections and 22 schedules. The act is an enabling act and provides for the Treasury to issue regulated activity orders and financial promotions orders and the FSA to issues rules and regulations.