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Last Friday, the Financial Service Authority (FSA) released its report on the implementation of Key Features Documents (KFDs) by the industry as part of the Treating Customers Fairly (TCF) requirements – “Good and Poor Practices in Key Features Documents”. They found that only 15% of the sample investigated met both the FSA’s Conduct of Business and TCF requirements.
FSA requirements are that the provision of clear information is an essential component of delivering fair outcomes for consumers. The KFD is seen as one of the necessary “key facts” required. All firms dealing with retail customers are expected to provide KFDs as part of the suite of literature. KFDs must comply with FSA Principle 7 – A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading; the FSA Conduct of Business rules; the TCF requirements – Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale; and accepted good practice for clear design and language.
The FSA reviewed over 200 KFDs – from many products across large and small firms, but found that only 15% satisfied all of the criteria. 35% of the KFDs were “often difficult to understand with a wide range of deficiencies and few, if any, positive attributes. A consumer would find it very hard to work out the important features of the product.” The remaining 50% had the required elements but were unclear or misunderstanding – “Only a very well informed and engaged consumer would be able to understand the important features of a product by reading the KFD”.
The report identifies the steps that the FSA is planning to rectify issues: asking for firms’ TCF implementation plans, with particular reference to KFDs, and asking how they will hit the March 2008 deadline; taking direct action regarding the poorer examples from the survey; and creating seminars and workshops on good practice. Specifically, TCF and KFDs will be included in ongoing supervision, including ARROW visits, and they will revisit the original survey examples in November 2008 and carry out a new survey at the end of 2010.
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