CRED 11
Conduct of business
CRED 11.1
Introduction
- 01/12/2004
Conduct of business
CRED 11.1.1
See Notes
- (1) The Banking Conduct of Business sourcebook (BCOBS) sets out rules and guidance for firms on how they should conduct their business with their customers.
- (2) In particular there are rules and guidance relating to communications with banking customers and financial promotions (BCOBS 2), distance communications (BCOBS 3), information to be communicated to banking customers (BCOBS 4), post sale requirements (BCOBS 5), and cancellation (BCOBS 6).
- (3) Except as provided for in (4), the Conduct of Business sourcebook (COBS) does not apply to accepting deposits.
- (4) COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Systems and controls and approving and communicating financial promotions), COBS 13.1 (Preparing product information) and COBS 14.2 (Providing product information to clients) apply to accepting deposits as set out in those sections.
- (5) BCOBS 5.1.13 R does not apply to credit unions (BCOBS 1.1.5 R).
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CRED 11.1.2
See Notes
(1) [deleted]
(2) [deleted]
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CRED 11.1.3
See Notes
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CRED 11.1.4
See Notes
The FSA logo
is a registered mark, is subject to copyright and is the property of the FSA. Credit unions are permitted to use the FSA
logo in limited circumstances. Any credit
union which wishes to use the FSA logo should refer to GEN 5 (FSA logo).
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Electronic commerce activities
CRED 11.1.5
See Notes
BCOBS 3.2 (E-Commerce) contains rules applicable to a credit union which carries on an electronic commerce activity; that is, a credit union which accepts deposits, or carries on certain other activities, by way of an information society service.
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CTF providers
CRED 11.1.7
See Notes
A credit union which acts as a CTF provider needs to be aware of the requirements relating to CTFs in COBS, in particular COBS Chapters 3,4, and 9 Annex 1, 10, 13, 14 and 15 SUP 15, where relevant, IPRU(INV) Chapter 8 and MIPRU.
- 01/11/2007
CRED 11.2
Financial promotion
- 01/12/2004
CRED 11.2.1
See Notes
Financial
promotion is defined as an invitation or inducement to engage in investment activity.
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CRED 11.2.2
See Notes
Financial
promotions can be real time or non-real time. A real time financial promotion is communicated in the course of a personal
visit, telephone conversation or interactive dialogue. A non-real time financial promotion is not
a real time financial promotion.
It includes a financial
promotion made by letter, e-mail or contained in a newspaper,
journal, magazine, other periodical publication, website, television or radio
programme or teletext service.
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CRED 11.2.3
See Notes
- (1) Where a financial promotion relates to a retail banking service BCOBS 2 applies.
- (2) Except as provided for in (3) the Conduct of Business sourcebook (COBS) does not apply to a firm with respect to the activity of accepting deposits.
- (3) COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Systems and controls and approving and communicating financial promotions), COBS 13 (Preparing product information) and COBS 14 (Providing product information to clients) apply to a firm with respect to the activity of accepting deposits as set out in those provisions, COBS 4.1 and BCOBS.
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CRED 11.2.4
See Notes
In addition to the limited application of the financial promotion rules, a number of exemptions within the defined term excluded communication are relevant. In particular, paragraphs (a) and (e) of the definition provide further limitations on the application of the financial promotion rules in relation to credit unions:
- (1) Exemption (a): A financial promotion that would benefit from an exemption in the Financial Promotion Order if it were communicated by an unauthorised person, or which originates outside the United Kingdom and is not capable of having an effect in the United Kingdom.
- (2) Exemption (e): A "one off" financial promotion that is not a cold call. If the conditions set out in (a) to (c) are satisfied, a financial promotion is to be regarded as "one off"; if not, the fact that any one or more of these conditions is met is to be taken into account in determining if a financial promotion is "one off", but a financial promotion may be regarded as "one off" even if none of the conditions are met; the conditions are that:
- (a) the financial promotion is communicated only to one recipient or only to one group of recipients in the expectation that they would engage in any investment activity jointly;
- (b) the identity of the product or service to which the financial promotion relates has been determined having regard to the particular circumstances of the recipient;
- (c) the financial promotion is not part of an organised marketing campaign.
- (3) [deleted]
- 01/11/2007
CRED 11.2.5
See Notes
In addition to the rules and guidance contained in BCOBS and the exemptions mentioned in CRED
11.2.4 G,
financial promotions (including those which
are exempt) may be subject to more general rules including Principle 7 (Communications with clients) and
SYSC 3 (Systems and controls) and the fair, clear and not misleading rule.
- 01/11/2009
CRED 11.2.6
See Notes
The requirement on a firm under BCOBS 2.2 is that it must ensure that a financial promotion is fair, clear and not misleading. This is supported by further detailed rules including BCOBS 2.3.1 R:
- (1) A firm must ensure that information for a retail client:
- (a) includes the name of the firm;
- (b) is accurate and in particular does not emphasise any potential benefits of a retail banking service without also giving a fair and prominent indication of any relevant risks;
- (c) is sufficient for, and presented in a way that is likely to be understood by, the average member of the group to whom it is directed, or by whom it is likely to be received; and
- (d) does not disguise, diminish or obscure important items, statements or warnings.
- (2) [deleted]
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CRED 11.3
Statutory status disclosure
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CRED 11.3.1
See Notes
This
section summarises the requirements of GEN 4 (Statutory status disclosure)
in the context of credit
unions which do not have overseas offices.
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CRED 11.3.2
See Notes
GEN
4.3 (Letter disclosure) requires a credit union to take reasonable care to state
that it is "authorised and regulated by the Financial Services Authority"
in every letter and e-mail which it sends to a depositor or potential depositor
on or after 1 March 2004.
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CRED 11.4
Entering into a distance contract for accepting deposits
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CRED 11.4.1
See Notes
Those parts of
BCOBS
that relate to distance contracts for accepting deposits will
have limited application to a
credit union. This is
because the
Distance
Marketing Directive
only applies
where there is "an organised distance sales or service-provision scheme run
by the supplier" (Article 2(a)). If, therefore, the credit union normally operates face to face
and has not set up facilities to enable customers to
deal with it at a distance, such as facilities for a customer to deal with it purely by post,
telephone, fax of the Internet, the provisions will not be relevant. A one-off
transaction dealt with by distance means in order to deal with a particular
contingency or emergency will not fall under the
BCOBS
provisions.
- 01/11/2009
CRED 11.4.2
See Notes
For those credit unions to which the provisions in BCOBS will apply, the provisions which are of particular relevance concern the distance communications provisions (BCOBS 3), pre-contract information (BCOBS 4), cancellation rights (BCOBS 6) and the financial promotion rules (discussed at CRED 11.2). If the credit union provides cash deposit ISAs or cash deposit CTFs further rules may apply.
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Pre-contract disclosure requirements
CRED 11.4.3
See Notes
BCOBS 3.1
sets out the
basic requirements that apply before a credit union enters into a distance contract for accepting deposits. The credit union has to ensure that the terms
on which it will conduct business, including, in particular, certain required
information, is provided to a
consumer
in good time in a durable medium, before
the retail customer is
bound by the distance
contract or offer, unless
certain exemptions apply.
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CRED 11.4.4
See Notes
The required information is the contractual terms and conditions and the other information set out in BCOBS 3 Annex 1 R, and covers basic information about the credit union, the main characteristics of the service on offer, the price, details about any distance contract such as its duration, cancellation rights and any other early termination rights and penalties, and information about out-of-court complaints and compensation arrangements.
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Exemptions
CRED 11.4.5
See Notes
The exemptions referred to in CRED 11.4.3 G are set out in BCOBS 3.1. They are relevant:
- (1) where the contract is concluded by telephone and the consumer gives explicit consent to receiving a more limited range of information BCOBS 3.1.11 R sets out the information to be provided in such cases;
- (2) where a means of communication is used at the consumer's request which does not enable provision of required information in a durable medium before the consumer is bound by any distance contract or offer; in this case full information must also be provided in a durable medium immediately after conclusion of the distance contract BCOBS 3.1.12 R;
- (3) where there is an initial service agreement and the contract is in relation to a successive or separate operation of the same nature under that agreement (BCOBS 3.1.9 R to BCOBS 3.1.10 R)
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Cancellation
CRED 11.4.7
See Notes
A
consumer
has a right
to cancel a contract for a retail banking service without giving any
reasons and without penalty. The right to cancel has to be exercised within
14 days of the day of the conclusion of the contract or the day on which he
received the contractual terms and conditions, if later (BCOBS 6.1.1 R).
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CRED 11.4.8
See Notes
The only exemptions from the right to cancel are when:
- (1) a contract (other than a cash deposit ISA) where the rate or rates of interest payable on the deposit are fixed for a period of time following conclusion of the contract; or
- (2) a contract whose price depends on fluctuations in the financial market outside the firm's control that may occur during the cancellation period; or
- (3) a cash deposit CTF (other than a distance contract).
- 01/11/2009
CRED 11.4.9
See Notes
The effects of cancellation are set out
in
BCOBS 6.3 (Effects of cancellation). Unless the
contract relates to a a cash deposit
ISA or a cash
deposit CTF, the credit union has to return, no later than
30 days after the date it received notice of cancellation, any sums paid by
the customer in connection with the contract. The customer can be required to pay for any services
provided up to the date of cancellation, provided that the sums are in proportion
to the extent of the services actually provided and could not be construed
as a penalty. No payment can be required if the credit union cannot prove that a customer was told the
amount that would be payable or if the credit union starts performance of the contract before expiry
of the cancellation period without the customer's prior consent.
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