James Daley

By James Daley

The Financial Conduct Authority published an update to its work on Smarter Communications this week - including a few welcome actions to get rid of some mandatory documents that simply aren't doing what they were designed to do.

If you work in financial services and you're not yet familiar with the FCA Smarter Communications work, then you should be. For the first time, the regulator is letting companies know that it's not ok to talk to customers in a language that they don't understand. And by our analysis (we look at over 350 documents in detail every six months), every single financial services firm is failing to a greater or lesser extent. We haven't yet found a single document that is objectively "clear, fair and not misleading" from a customer's perspective. But things are about to change.

From listening to enforcement

For now, the FCA's focus is on listening and being helpful - removing regulations which companies believe are preventing them from being clear with their customers.

But in due course, companies who don't start having an honest conversation about how clear their customer documents are, will find themselves in line for some unwelcome regulatory attention.

Over the past two years, we've built up considerable expertise in this area, and have worked with over a dozen companies to either review or rewrite their documents. In our experience, almost all terms and conditions and policy documents are written primarily to protect the company, rather than inform the customer. That's entirely the wrong way round.

Written by lawyers, for lawyers

Communicating clearly must be the priority, with legal and compliance imperatives being inserted afterwards - and even then, in a language that customers can understand.

This kind of transformation is not simple. It requires a complete change of mindset - both in terms of product complexity, and in terms of organisations' approach to risk.

Some of the companies that we've worked with have been up for this - and while progress has at times been slow, we're excited that by next year, we'll have concrete examples in the public domain of new policy documents and Ts & Cs which break the mould. These are documents with reading ages of 11, 12 or 13, rather than 18. Documents that eliminate jargon, or go the extra mile to explain complex terms that can't be avoided.

Other companies we've worked with have struggled to step up to the challenge. In the knowledge that most customers don't read these documents, the feeling is that it's not worth the time and risk to start rethinking their business's contracts. Too often we hear "It's working, so why change it". Working for who? Consumers or the company's legal and compliance teams?

A warning shot

The FCA's Smarter Communications work is a warning shot. Do nothing, and you will soon find that your contracts are less enforceable at the Ombudsman, and even in the courts - where the Consumer Rights Act raises the bar in terms of transparency and prominence of key information.

Most companies terms or policy docs that we analyse have clauses which people in the organisation don't understand - let alone the consumer. In many cases, documents haven't had a full redraft for two decades.

Companies that start the hard work now will not only have the chance to carve out a reputation as consumer champions, but will also save themselves time and resources later down the line.

If you think the FCA's Smarter Communications work isn't relevant to your organisation - think again.