Acting In The Best Interests Of Consumers: Key Theme In Central Bank's CPC Review

• Law Firm: William Fry
• Subject Matter: Finance and Banking, Consumer Protection, Financial Services, Dodd-Frank, Consumer Protection Act
• Author: Mr Derek Hegarty, Hilary Rogers, Shane Kelleher and Gail Nohilly
• Published date: 17 March 2023

The consumer protection framework in financial services in Ireland is governed by legislation, codes, regulations, and Central Bank of Ireland (Central Bank) guidance. The Consumer Protection Code (CPC) was originally introduced in 2006, revised in 2012 and 2015, and strengthened with addenda since its introduction. The CPC has been described by the Governor of the Central Bank, Gabriel Makhlouf as "the cornerstone" of the Irish consumer protection framework in financial services.

In October 2022, the Central Bank launched the first phase of a three-stage review of the CPC with the publication of a discussion paper (Discussion Paper) spanning ten themes, including regulated financial service providers (RFSPs) acting in consumers' best interests. (For further information, access our Financial Regulation Unit's note on the review, including relevant timelines, here). The principal objective of the Discussion Paper is to get feedback from stakeholders on the themes, which will shape a formal public consultation in the second phase of the review process.

Acting in consumers' best interests

The Central Bank is mandated under the Central Bank Act 1942 to ensure the proper regulation of RFSPs and markets while ensuring the protection of consumers' best interests. The Discussion Paper reminds RFSPs that securing consumers' best interests is at the core of consumer protection.

The focus on consumers' bests interests is also reflected in the Central Bank (Individual Accountability Framework) Act 2023 (Act). The Act inserts a new section into the Central Bank Act 2010, allowing the Central Bank to prescribe business standards so that RFSPs conduct their affairs in such a way to act in the best interests of customers and further, incorporating duties on those who perform relevant controlled functions in RFSPs to act in the best interest of customers.

Judicial consideration of CPC

Irish case law has confirmed that codes issued by the Central Bank form part of the law, obligating RFSPs to obey the codes. Whilst the best interests requirement under the CPC has not been the subject of judicial scrutiny in the Irish courts, the general significance of the CPC has been addressed in the context of Financial Services and Pensions Ombudsman (FSPO) complaints.

For example, in Utmost Paneurope DAC v FSPO [2022] IECA 77, the Court of Appeal (Court) held against a position adopted by the FSPO that it was a matter for him to decide, at his discretion, whether to have regard to the...