Deputy Governor Derville Rowland Opening Remarks for Launch of Consultation Paper on Review of the Consumer Protection Code

Good morning everyone.

 Firstly I would like to thank all of you for joining us here in NWQ.

 I want to speak today about our review of the Consumer Protection Code and the changes and enhancements we are proposing to make to the Code – these are set out in the Consultation Paper we are publishing today.

 I will start by speaking about the importance for consumers of well-functioning markets, in providing the products and services they need. I then want to speak briefly about the evolution of our approach to consumer protection, highlighting some of our learnings from past experience. I will then speak about the broader context for our review and highlight some of the key proposals we are bringing forward in our Consultation Paper. My colleague Patrick Casey will present some additional material on the revised Code before we finish with a Q&A which will be facilitated by Director Gerry Cross. 

Role of well-functioning markets

Consumer interests are best served by well-functioning financial services markets providing appropriate levels of availability and choice from sustainably profitable, resilient, well-run, consumer-focused firms, who secure their customers’ interests.

High quality regulation has an important role in underpinning a well-functioning market and our regulatory approach seeks to support a resilient and trustworthy financial system serving the needs of consumers and the economy.

Evolution of Consumer Protection

The Irish consumer protection framework comprises a range of EU and domestic legislation aligned with the OECD/G20 High-Level Principles on Financial Consumer Protection.^[1]

The Consumer Protection Code is a cornerstone of the Central Bank’s consumer protection regulatory framework. Since its publication in 2006, it has served consumers well. It has established a set of rules and expectations for how firms should treat their customers. It has allowed us to intervene to protect consumers when we need to, through our supervisory actions and ultimately, where warranted, through enforcement.

We have continued to update the Code, since it was first introduced in 2006, ensuring it has remained fit for purpose. But a full review is timely now given the transformation taking place in financial services, the evolution of consumer protection regulation internationally and the learnings from our recent experience domestically in terms of the protection of customers’ interests.

Context for Review of Consumer Protection Code

Today, Ireland has a well-developed financial sector, providing consumers with access to a broad range of products and services. However, the financial services landscape is rapidly evolving and over the course of the next decade we will continue to see ongoing transformation, driven by innovation and technology, climate change and the evolving expectations and needs of consumers and businesses.

This transformation can play a key role in ensuring markets can function more effectively. It has the potential to bring significant benefits to both firms and consumers. Our 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.

Internationally, there have been significant developments in consumer protection regulation in recent years. This has included the OECD’s recent review of the G20/OECD Principles, which introduced new principles in relation to access and inclusion and the quality of financial products, along with new cross-cutting themes covering the areas of digitalisation, sustainable finance and financial well-being.

Effective consumer protection requires firms to have a strong customer focus as they pursue their fundamental commercial goals. Experience has shown how failing to do so can lead to poor outcomes for both consumers and firms. We have also seen examples where firms taking a system-wide approach, which reflects a consumer-focus, has supported positive customer outcomes, including the recent large migration of business and household current accounts between banking providers. A key driver of the review of the Code therefore, is to reflect all of these developments in a way which provides enhanced clarity and predictability to both firms and their customers.

We want to see a maturing of firms’ understanding and engagement with their consumer protection obligations. In the first instance, we want to see firms protecting consumers through the application of a customer-focused approach to their strategies, business models and decision making. Where issues arise we want firms to be proactive in addressing them – and not waiting for direction or intervention from the Central Bank to address such issues. This involves a shift away from a narrow tick-box compliance approach to consumer protection obligations, towards a customer-focused mind-set where firms take ownership of, and retain accountability for, the protection of their customers.

We believe that we can support firms to achieve this through the focus on ownership and accountability reflected in the Individual Accountability Framework and by providing a clearer articulation in the revised Code of how firms should approach meeting their consumer protection obligations, informed by the learnings from past experience.

This is the broader context to our extensive review to deliver a modernised Code, which supports effective consumer protection and reflects the changes that are taking place in financial services.

Approach to the Review

In undertaking the Code Review, as a first step we wanted to better understand, anticipate and be forward-looking and responsive to the emerging context and the far-reaching changes taking place in financial services. In October 2022 we launched our Discussion Paper seeking the views and perspectives of key stakeholders on the issues facing consumers today.

The publication of the Discussion Paper was complemented by an extensive six-month engagement programme with a broad range of stakeholders – I am delighted to see many of you here this morning. This was undertaken through a range of interactions including roundtables, bilateral meetings, an online public survey, consumer research and direct engagement with members of the public. The scale of our engagement was outlined in our July 2023 Engagement Update^[2], which provided an outline of the feedback we received across the ten Discussion Paper themes.

So overall, the proposals put forward in our Consultation Paper are informed by our research, analysis, supervisory experience and the extensive feedback we received during our engagement. We have also considered in the context of retail banking, the relevant recommendations from the Government’s 2022 Retail Banking Review report.^[3]

In our engagement, we also heard about issues and potential risks to consumers which are beyond the scope of the Code, including matters pertaining to EU policy development and matters pertaining to broader domestic policy development, including financial literacy and access to basic payments services. The Government’s Financial Consumer Protection Roadmap, published in September last year, recognises these important policy areas and the development of Ireland’s first National Financial Literacy Strategy and the development of a new National Payments Strategy can play an important role in addressing them.

A Modernised Consumer Protection Code

Our goal is to deliver a modernised Code that can facilitate a well-functioning financial system, supporting the economy and delivering appropriate levels of availability and choice to serve the financial services needs of consumers into the future.

The proposals set out in our Consultation Paper bring forward a modernised Code which builds on the existing Code which provides its backbone, reflects the provision of financial services in a digital world, and enhances clarity and predictability for firms on their consumer protection obligations.

Consumers will benefit from the added clarity on their regulatory protections, as well as a package of new protections that reflects how most are accessing financial services today.  

Regulated firms will benefit from an integrated regulatory format, a more coherent structure and a clearer articulation of their consumer protection obligations.

Our proposals are focused on modernising, clarifying and integrating consumer protections while ensuring they are accessible for both firms and consumers.

We are seeking to provide enhanced clarity for firms on their consumer protection obligations through a reorientation and clearer articulation of a number of important obligations, including Securing Customers’ Interests. We are also proposing a targeted package of new measures, as firms and consumers navigate financial services transformation. This package focuses on key areas including digitalisation, unregulated activities, frauds and scams, and vulnerability. As I mentioned, Patrick will provide some additional information on our key proposals, but I would like to take the opportunity to say a few words about Securing Customers’ Interests.

In pursuing their objectives, firms make their own commercial decisions. But in doing so it is necessary that they effectively incorporate the interests of customers into their strategy, business model and decision making process. Recognising this, firms are currently subject to a range of consumer protection obligations including the fundamental obligation to act in the best interests of customers.^[4]

The revised Consumer Protection Code will continue to reflect this existing obligation. Additionally we are seeking to assist firms in meeting their obligations in practice, through Securing Customers’ Interests, which will support firms to effectively implement all their consumer protection obligations.

This is reflected in a Securing Customers' Interests Standard for Business and complementary Supporting Standards for Business along with detailed guidance on Securing Customers' Interests, which will apply when firms are doing business with consumers and small businesses. Together these elements are designed to support firms by describing what they need to consider, the actions they need to take, and the mind-set they should have, towards their customers.

Importantly, the introduction of Securing Customers’ Interests is not about introducing new, more extensive customer best interest obligations for firms – rather it is about providing firms and their customers with increased clarity and predictability on already existing requirements to support effective implementation in practice.

Implementation

We know that industry will need time to consider how they will implement the changes under the revised Code. We want to balance the need to maintain momentum on the modernisation of the Code, with allowing adequate time for in-scope firms to ensure high quality and consistent implementation. Accordingly, we are proposing a 12-month period for implementation, starting from the final date of publication of the revised Code, following completion of this consultation process.

We also plan to develop supports for consumers and firms to make the revised Code accessible. In addition to guidance, we will develop explainers and guides and explore how digital tools can be utilised to present information in accessible formats.

For consumers we 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, proposed online tools will support improved navigability and provide clarity on relevant obligations.

Conclusion

This consultation paper sets out changes that we are proposing to make under the revised Code. We want to hear the views of stakeholders and the public on our proposals, so we can consider their feedback before we finalise the revised Code. Following completion of the consultation process, we expect to publish the revised Code early in 2025.

We look forward to engaging with you and hearing your views on our proposals.