Insights Blog

This week’s Consumer Protection Outlook Report 2023 from the Central Bank of Ireland noted that the five key drivers of consumer risk listed below remain unchanged from last year. Rising interest rates, higher costs of living and developments in digital financial services are likely to impact these over the next year.

Risk 1: Risk of changing operational landscape

Impacted by the war in Ukraine, energy-driven inflation, the ongoing post-pandemic recovery (staff shortages and wage growth) and rising inflation, this remains a key risk.  The Central Bank’s November 2022 Dear CEO letter to regulated firms set out its expectations on how this risk should be managed – read our insights on that letter here: Protecting Consumers: Central Bank reminds RFSPs of its expectations.

Risk 2: Ineffective disclosure

Against a backdrop of financial innovation and changes in how consumers engage with financial services, the Central Bank expects regulated firms to ensure that communications and advice are clear, and help consumers make well-informed decisions.

The Central Bank continues to be concerned about the risks inherent for consumers in crypto-assets in light of the growing use of social media as a medium for delivering advice and commentary. It expects firms to flag that these products (albeit currently unregulated) involve ‘significant risk’.

Risk 3: Technology-driven risk

While the Central Bank sees this risk as largely unchanged (it notes in the report that firms have been proactively telling consumers about the risks of scams and fraud and how consumers can protect themselves), it cautioned that the increased use of digital channels to deliver financial services could lead to financial exclusion – firms should continue to consider when consumers might need to deal with providers ‘in-person’ (whether face-to-face or remotely).

Risk 4: Shifting business models

The Central Bank sees new issues arising under this heading, particularly in the investment product space.  In particular, it flagged the risk that firms may not keep their existing product suites up-to-date when dealing with broader economic developments, and changes in the financial services space. Re-visiting whether products continue to be suitable for consumers, and ensuring that due diligence processes take account of all relevant factors, are highlighted as key action points.

Risk 5: Poor business practices and weak business processes

The report highlights two key issues:

  • inadequate/ineffective processes and controls adversely impacting consumers (e.g. not having adequate processes in place where there was a surge in consumers needing additional support)
  • unfair/problematic strategies, such as the (recently-banned) practice of price-walking in the home and motor insurance markets

Specific expectations

Appendix 1 to the report sets out specific expectations for regulated firms by reference to each of the above risks.

Plans for 2023

Pages 13-15 of the report set out the Central Bank’s planned work for 2023 in the consumer protection area.  These are broadly the same as those set out in its recently-publicised plans for 2023 (read our insights here and here), save that the report also lists supervisory oversight of the new categories of retail credit firms (buy-now-pay-later, personal contract plans and hire purchase) and high-cost credit providers, implementation of the new Client Asset Regulations, assessing the implementation and effectiveness of differential pricing measures under the 2022 Insurance Regulations.

Thematic supervision

Thematic supervisory work is also planned in the areas of:

  • costs and charges – MiFID firms
  • product governance – MiFID firms
  • marketing and advertising – MiFID firms
  • value for money and commission levels – unit-linked funds
  • insurance pricing risks
  • ongoing suitability of long-term life assurance products

If you would like to discuss the above in more detail, please get in touch with any member of our market-leading Financial Regulation Group.