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BCOBS 4.1 Enabling banking customers to make informed decisions

The appropriate information rule

BCOBS 4.1.1 R

1A firm must provide or make available to a banking customer appropriate information about a retail banking service and any deposit made in relation to that retail banking service:

  1. (1)

    in good time;

  2. (2)

    in an appropriate medium; and

  3. (3)

    in easily understandable language and in a clear and comprehensible form;

so that the banking customer can make decisions on an informed basis.

BCOBS 4.1.2 G
  1. (1)

    In determining:

    1. (a)

      what is "in good time";

    2. (b)

      the appropriate medium for communicating information; and

    3. (c)

      whether it is appropriate to provide information (that is, send or give it directly to the banking customer) or make it available (that is, make it available to obtain at the banking customer's option);

    a firm should consider the importance of the information to the decision-making process of the banking customer and the time at which the information may be most useful. Distance communications requirements are also relevant.

  2. (2)

    For example, (unless BCOBS 3applies) a firm should provide the terms and conditions of the contract for a retail banking service on paper or in another durable medium in good time before a banking customer is bound by them.

  3. (2A)
    1. (a)

      A firm should provide a summary box in the form set out in BCOBS 2 Annex 1R on paper or in another durable medium in good time before a banking customer is bound by the terms and conditions of a savings account, except where the firm has already provided the summary box to a banking customer on a previous occasion.5

    2. (b)

      If the contract for the savings account has been concluded at a banking customer’s request using a means of distance communication that does not enable the provision of the summary box in that form in good time before the banking customer is bound, the firm should provide the summary box on paper or in another durable medium immediately after the conclusion of the contract.5

    3. (c)

      In the case of a savings account that is a cash deposit ISA or a cash deposit CTF, the firm may include the summary box in a key features document provided to the banking customer in line with the rules and guidance in COBS 13 and COBS 14.5

    4. (d)

      In preparing the summary box, a firm should have regard to the provisions of BCOBS 2.2A.1R as if they were guidance.5

  4. (2B)

    A firm should ensure that the rate of interest that applies to a savings account is prominently shown alongside, or in close proximity to (or, in the case of (b), on a page accessed directly through a link that appears prominently alongside or in close proximity to) any account balance information included in:5

    1. (a)

      any paper or online statement of account provided or made available by the firm;5

    2. (b)

      where the firm provides an online banking service to the banking customer, the first personalised page of the firm’s website that the banking customer accesses when using this service;5

    3. (c)

      any notification of a material change to a rate of interest provided in accordance with (3)(c);5

    4. (d)

      any notification of the expiry of an introductory, promotional or preferential rate of interest provided in accordance with (5); and5

    5. (e)

      any notification of the expiry of a fixed term of a fixed term savings account provided in accordance with (6A).5

  5. (2C)

    For the purposes of (2B):5

    1. (a)
      1. (i)

        unless (ii) applies, the firm should show the rate of interest that applies to the savings account as a numerical figure (and not merely the method for determining the current figure under the terms and conditions);5

      2. (ii)

        where the rate of interest that applies to the savings account automatically tracks a reference interest rate (within the meaning of the Payment Services Regulations), the firm should indicate how the rate of interest is calculated and direct the banking customer to where the level of the reference interest rate may be accessed from time to time; and5

    2. (b)
      1. (i)

        in the case of account balance information made available online, the firm should show the rate of interest that applies to the account at the time the banking customer accesses the information; or5

      2. (ii)

        in the case of account balance information provided in a durable medium, the firm should show the rate of interest that applies to the account at the time the information is sent.5

  6. (2D)

    A firm should inform a banking customer of the current rate of interest that applies to a savings account on the telephone or in a branch of the firm at the request of the banking customer.5

  7. (2E)

    A firm should publish the current rate of interest that applies to each savings account it provides on its website (whether or not the savings account is available to new customers) and ensure that this is kept continuously up to date and is easily accessible by a banking customer.5

  8. (3)

    2Where a firm proposes to exercise a power to make:

    1. (a)

      a change to any term or condition of the agreement; or5

    2. (b)

      a change to any charge; or

    3. (c)

      a material change to any rate of interest;

    that applies to the retail banking service and that will be to the disadvantage of a banking customer, the firm should provide reasonable notice to the banking customer on paper or in another durable medium before the change takes effect, taking into account the period of notice required by the banking customer to terminate the contract for the retail banking service. A change to a rate of interest should always be considered ‘material’ except where the balance of the account is less than £100 at the time when the firm would provide the notice.5

  9. (3A)

    When providing a notice under (3)(c), (5) or (6A), a firm should ensure that the heading of the notice clearly indicates the main substance of the change to which the notification relates. When providing a notice under (3)(c) relating to a decrease in the rate of interest, for example, a firm should ensure that the heading of the notice clearly indicates that the rate of interest is decreasing.5

  10. (4)

    Where a firm notifies a banking customer of a material change to a rate of interest that applies to a retail banking service and that will be to the disadvantage of a banking customer, this notification should, where applicable:

    1. (a)

      refer to the fact that the firm offers a comparable retail banking service for which the banking customer is eligible;

    2. (b)

      indicate that the banking customer may move to that retail banking service or a retail banking service provided by another firm; and

    3. (c)

      indicate that the firm will assist the banking customer to move to another retail banking service if he wishes to do so.

  11. (5)

    Subject to (5A), where5, under a contract for a retail banking service, an introductory, promotional or preferential rate of interest applies to the retail banking service until a specified future date or the end of a fixed period, a firm should5 provide notice of the expiry of the application of that rate of interest to the banking customer on paper or in another durable medium within a reasonable period before that rate of interest ceases to apply.

  12. (5A)

    Paragraph (5) does not apply where the balance of the account is less than £100 at the time when the firm would otherwise provide the notice.5

  13. (6)

    [deleted]5

  14. (6A)

    In relation to a fixed-term savings account, a firm should provide notice of the expiry of the fixed term to the banking customer on paper or in another durable medium in good time before the end of the fixed term. This notice should explain, in easily understandable language and in a clear and comprehensible form:5

    1. (a)

      the consequences of the expiry of the fixed term, including whether the firm proposes to transfer the balance of the account to another fixed-term savings account if the banking customer does not provide further instructions to the firm while the customer has an opportunity to do so; and5

    2. (b)

      the options available to the banking customer for dealing with the balance in the fixed term savings account, including when and how these options may be exercised.5

  15. (6B)

    Where a notice under (3)(c), (5) or (6A) is provided by the firm more than 14 days before the change to which the notice relates takes effect, a firm should also provide a reminder to the banking customer within a period beginning 14 days before the relevant change takes effect and ending on the day before it does so. The firm may choose the medium in which the reminder is provided. In doing so, the firm should take account of any preferences expressed by the banking customer about the medium of communication between the firm and the banking customer, for example, if the banking customer has indicated a preference to receive information by mobile telephone text message.5

  16. (7)

    The general law, including the Unfair Terms Regulations (for contracts entered into before 1 October 2015) and the CRA, 4also limits the scope for a firm to use or rely on a variation clause in a contract with a consumer.

BCOBS 4.1.3 R

Where a rule in this chapter requires information to be provided on paper or in another durable medium before a banking customer is bound by the terms and conditions of the contract, a firm may instead provide that information in accordance with the distance communication timing2 requirements (see BCOBS 3.1.11 R and BCOBS 3.1.12 R).

BCOBS 4.1.4 G

The appropriate information rule applies before a banking customer is bound by the terms of the contract. It also applies after a banking customer has become bound by them. In order to meet the requirements of the appropriate information rule, information provided or made available 2by a firm to a banking customer should include information relating to:

  1. (1)

    the firm;

  2. (2)

    the different retail banking services offered by the firm which share the main features of the retail banking service the banking customer has enquired about, or which have the product features the banking customer has expressed an interest in, unless the banking customer has expressly indicated that he does not wish to receive that information;

  3. (3)

    the terms and conditions of the contract for a retail banking service and any changes to them;

  4. (4)

    the rate or rates of interest payable on any deposit, how and when such interest is calculated and applied and any changes to that rate or those rates;

  5. (5)

    any charges at any time payable by or on behalf of a banking customer in relation to each retail banking service and any changes to those charges;

  6. (5A)

    2the time at which any funds placed with or transferred to the firm for credit to the banking customer's account will be made available to the banking customer;

  7. (6)

    a banking customer's rights to cancel a contract for a retail banking service;

  8. (7)

    how a banking customer may make a complaint (at the time and in the manner required by DISP 1.2);

  9. (8)

    the terms of any compensation scheme if the firm cannot meet its obligations in respect of the retail banking service;3

    23
  10. (9)

    basic bank accounts but only if the firm offers a basic bank account and the banking customer meets the firm's eligibility criteria for such an account; and

  11. (10)

    the timescales for each stage of the cheque clearing process.

BCOBS 4.1.4A G
  1. (1)

    3This guidance applies to a firm only with respect to its communications and dealings with consumers where a firm has a right of set-off.

  2. (2)

    To ensure compliance with the appropriate information rule, the firm should:

    1. (a)
      1. (i)

        provide an explanation of the nature and extent of the firm'sright of set-off; and

      2. (ii)

        if the firm considers that it is entitled to exercise a right to set off or combine a debt due solely from a consumer, or a debit balance on an account held in the sole name of a consumer, against or with a credit balance on an account held in the joint names of that consumer and another consumer, also provide an explanation of that right to the consumers in whose names the joint account is held;

      in good time before the consumer is bound by the contract for the retail banking service. This information may be incorporated in the terms and conditions that apply to the contract for the retail banking service;

    2. (b)
      1. (i)

        on the first occasion that the firm proposes to exercise a right of set-off in its dealings with the consumer; and

      2. (ii)

        where appropriate, on any subsequent occasion that the firm proposes to exercise a right of set-off in its dealings with the consumer;

      provide general information in relation to the nature of the firm'sright of set-off and the generic circumstances in which the firm may rely on that right within a reasonable period before the firm seeks to exercise its right of set-off. The FCA considers that this information should be provided at least 14 days before the firm seeks to exercise its right of set-off. It may be incorporated in another communication sent by the firm to the consumer; and

    3. (c)

      where it has exercised a right of set-off, provide prompt notification of this to the consumer. This notification should clearly identify the date that the firm exercised its right of set-off and the amount debited from the consumer's account in reliance on that right.

  3. (3)

    The information referred to in (2) should be provided in plain and intelligible language on paper or in another durable medium.

  4. (4)

    In determining whether it is appropriate to provide general information under (2)(b)(ii), the firm should consider the period of time that has elapsed since the firm last provided that information under (2)(b)(i) or (ii).

  5. (5)

    Nothing in (2)(a)(ii) should be considered as expressing a view on the validity, enforceability or fairness of any right of set-off in relation to a joint account that a firm considers it is entitled to exercise.

BCOBS 4.1.5 G

The information required by the appropriate information rule may vary according to matters such as:

  1. (1)

    the banking customer's likely or actual commitment;

  2. (2)

    the information needs of a reasonable recipient having regard to the type of retail banking service that is proposed or provided and its overall complexity, main benefits, risks, limitations, conditions and duration;

  3. (3)

    distance communication information requirements (for example, under the distance communication rules less information can be given during certain telephone sales than in a sale made purely by written correspondence (see BCOBS 3.1)); and

  4. (4)

    whether the same information has been provided to the banking customer previously and, if so, when that was.

BCOBS 4.1.6 G

The existence of cancellation rights does not affect what information it is appropriate to give a banking customer in order to enable him to make an informed purchasing decision.

BCOBS 4.1.7 G

If the retail banking service is a cash deposit ISA or a cash deposit CTF, the rules in COBS 13.1 (Preparing product information) and COBS 14.2 (Providing product information to clients) also apply.

BCOBS 4.2 Statements of account

BCOBS 4.2.1 R
  1. (1)

    A firm must provide or make available to a banking customer on paper or in another durable medium such regular statements of account as are appropriate to the type of retail banking service provided, but need not do so where:

    1. (a)

      the firm has provided a banking customer with a pass book or other document in a durable medium that records transactions in relation to the retail banking service;

    2. (b)

      the retail banking service is provided at a distance by means of electronic equipment where the banking customer can access his account balance, view transactions and give instructions in relation to the retail banking service at a distance by such means;

    3. (c)

      a banking customer has elected not to receive periodic statements of account, and for so long as such election is in force; or

    4. (d)

      it has reasonable grounds to believe that the banking customer is not resident at the address last known to it as the address of the banking customer and it is not practicable after reasonable inquiry to ascertain the banking customer's address.

  2. (2)

    A firm must not charge for providing information which is required to be provided by (1).

  3. (3)

    A firm must provide a banking customer with a true copy of any statement of account provided to him under (1) on paper or in another durable medium within a reasonable period of time following a request to that effect made by or on his behalf.

  4. (4)

    A firm and a banking customer may agree on a charge for:

    1. (a)

      providing a copy of a statement of account under (3); or

    2. (b)

      providing statements of account more frequently than required by (1);

    at the request of the banking customer. Any such charge must reasonably correspond to the firm's actual costs.

BCOBS 4.2.2 G

1A firm should indicate2 the rate or rates of interest that apply to a retail banking service in each statement of account provided or made available to a banking customer in respect of that retail banking service in accordance withBCOBS 4.2.1R (1).2Firms are also reminded of the provisions of BCOBS 4.1.2G(2B) and (2C).3

2 2

BCOBS 4.3 Information to be provided by a non ring-fenced body to individual account holders

Application and purpose

BCOBS 4.3.1 G

1Article 14 of the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014 “the Ring-fenced Bodies and Core Activities Order 2014” places a duty on the FCA to make rules specifying the information that a non ring-fenced body must provide to certain classes of individuals. The purpose of this section is to set out those rules.

BCOBS 4.3.2 R

This section applies to a firm that is a non ring-fenced body or is to become a non ring-fenced body.

BCOBS 4.3.3 G

A non ring-fenced body is a firm which has a Part 4A permission to carry on the regulated activity of accepting deposits and which is neither a ring-fenced body nor an institution which is exempt from the definition of a ring-fenced body. Section 142A(1) of the Act defines a ring-fenced body as a UK institution which carries out one or more core activities under section 142B of the Act for which it has a Part 4A permission. Section 142A(2) of the Act and the Ring-fenced Bodies and Core Activities Order 2014 provide that a building society and certain other classes of UK institution are exempt from this definition. Further, firms do not fall within the definition unless they hold deposits in EEA accounts.

To whom must information be provided?

BCOBS 4.3.4 R
  1. (1)

    A firm that is to become a non ring-fenced body must provide the information specified in BCOBS 4.3.6R to any individual from whom the firm proposes to accept, or contemplates it is likely to receive, a declaration of eligibility under article 9(1)(a) of the Ring-fenced Bodies and Core Activities Order 2014 (whether accompanied by a confirming statement or not).

  2. (2)

    A firm that is a non ring-fenced body must provide the information specified in BCOBS 4.3.6R to:

    1. (a)

      any individual who has applied to open an EEA account for the purpose of making one or more deposits (including a joint account) with that firm; and

    2. (b)

      any individual who holds an EEA account for that purpose (including a joint account) with that firm,

    except where the firm has already provided that information to the individual on a previous occasion.

BCOBS 4.3.5 G

A request made by an individual to switch to an EEA account with a firm is to be regarded as an application to open an EEA account with that firm (it is immaterial if the switch is from an account held with a ring-fenced body in the same group as the firm or whether the existing account will be closed when the switch is complete).

What information must be provided?

BCOBS 4.3.6 R

The information required to be provided by BCOBS 4.3.4R is:

  1. (1)

    a summary of the purpose of the provisions of Part 9B of the Act (Ring-fencing) and of the key risks to which a non ring-fenced body may be exposed which distinguish it from a ring-fenced body;

  2. (2)

    a description of any excluded activity which the firm is carrying on or (for information provided before the date on which Part 9B of the Act comes fully into force) a description of any activity the firm is carrying on which would, if carried on after that date, be an excluded activity; and

  3. (3)

    a description of any prohibited action which the firm has taken or (for information provided before the date on which Part 9B of the Act comes fully into force) a description of any action the firm has taken which would, if taken after that date, be a prohibited action.

BCOBS 4.3.7 G
  1. (1)

    The summary described in BCOBS 4.3.6R(1) should include a brief explanation that the purpose of ring-fencing is to separate the retail banking activities, on which households and small businesses depend, from wholesale or investment banking activities which may involve a greater degree of risk and expose an entity undertaking those activities to financial problems arising elsewhere in the global financial system.

    It should also indicate that certain ring-fenced bodies carrying on retail banking activities will have to comply with restrictions on the other activities they can undertake, and with rules made by the appropriate regulator intended to ensure that they are capable of carrying on the business of providing the core services related to the acceptance of deposits independently of other members in their group. They will, for example, not be able to carry on activities called ‘excluded activities’ which make them vulnerable to problems arising in the financial system or which may make it more difficult for banks to be wound down in an orderly fashion. The summary should explain that, as a non ring-fenced body, the firm is not subject to these restrictions.

  2. (2)

    It is not necessary for the information provided under BCOBS 4.3.6R(2) and (3) to contain an exhaustive list of each specific activity or action that constitutes an excluded activity or prohibited action, so long as the information about the nature of the activities and actions is sufficient to enable the individual to make an informed decision as to whether to open or continue to hold an account with the firm in the light of its status as a non ring-fenced body.

When must the information be provided?

BCOBS 4.3.8 R
  1. (1)

    The information required to be provided under BCOBS 4.3.4R(1) must be provided in good time before the individual becomes an eligible individual in relation to the firm.

  2. (2)

    The information required to be provided under BCOBS 4.3.4R(2)(a) must be provided in good time before the individual opens an account with the firm.

  3. (3)

    The information required to be provided under BCOBS 4.3.4R(2)(b) must be provided as soon as practicable after the firm has become a non ring-fenced body.

BCOBS 4.3.9 G

In determining what is “in good time” under BCOBS 4.3.8R, the firm should consider the time at which the information may be most useful to the individual in making a decision as to whether to continue to hold or to open an account with the firm.

How must the information be provided?

BCOBS 4.3.10 R

The information required under BCOBS 4.3.4R must be provided:

  1. (1)

    in writing;

  2. (2)

    in a prominent manner and in a medium that is calculated to bring the information to the attention of the individual to whom it is addressed; and

  3. (3)

    in easily understandable language and in a clear and comprehensible form,

so that the individual can make a decision as to whether to continue to hold or to open an account with the firm on an informed basis.

BCOBS 4.3.11 R

A firm must not charge for providing the information required to be provided by BCOBS 4.3.4R.

Requirement to publish the information on a website

BCOBS 4.3.12 R

A firm must, on or before the first date it is required to provide information under BCOBS 4.3.4R, make the information in BCOBS 4.3.6R accessible continuously on its website and keep such information up to date.