RegSol Blog

Central Bank Dear CEO Letter on Protecting Consumers in a Changing Economic Landscape

November 2022

The Dear CEO Letter issued on 17th November 2022 by the Central Bank expands on the Consumer Protection Outlook Report 2022 and provides further guidance to firms on its expectations in a challenging economic landscape characterised by energy-driven inflation and uncertainty and the responsibility of firms to navigate these challenges in a manner that places the best interests of consumers at the heart of their commercial decision-making.

The Report highlighted five cross-sectoral risk areas facing financial services and set out specific actions to be taken by firms to address these potential risks, namely:

  • Actively identify and address risks to consumers that may potentially emerge from changes in the landscape within which the firm and/or its consumers are operating.
  • Have sufficient operational resilience to manage change without creating risks to consumers.
  • Proactively assess the risks and consumer impact a commercial decision may pose to new and existing customers, and develop comprehensive action plans to mitigate these risks whilst ensuring that customers understand what changes mean for them.
  • Have the customer service capacity and structures in place to meet expected service levels to provide a timely and customer focused service through all channels.
  • Consider the impact of their decisions on vulnerable customers and provide the assistance necessary. This should include specific and effective processes and communication plans to support vulnerable customers.
  • Only design and bring to market products with features, charges, and risks that meet the needs of consumers identified for the product.

Furthermore, the Appendix to the letter the Central Bank highlights a number of items for particular attention which should be incorporated into a firm’s work programme, senior management and board considerations, respective to the financial services that the firm provides.

Affordability and suitability

Firms should:
  • Ensure that credit is affordable, including, in the case of mortgage firms, adhering to specific obligations under Provision 5.9 of the Consumer Protection Code to assess affordability based on an interest rate increase (i.e. 2% at a minimum).
  • Prior to the sale of a financial product or during the course of a financial product, firms should pay particular attention to assessing not just the current circumstances of the consumer but how those circumstances could be impacted by the current economic outlook.
  • Identify consumers in vulnerable circumstances, including financial difficulty, and provide appropriate support.
  • Consider the consumer's short and long-term needs when advising on savings and investments, including factoring in anticipated day-to-day costs and unanticipated increases in costs.
  • Have clear procedures for calculating a consumer's capacity for loss.
  • Explain the impact that inflation may have on the performance/value of an investment.

Provision of relevant, clear and timely information

  • Consumers should be able to make informed decisions, shop around for better value and know the available support. Firms should provide information accordingly, including on websites, business premises and publicly available material.
  • Firms should inform consumers facing difficulties meeting their payment obligations under existing financial products of support available.
  • Changes to terms or conditions, which may impact the cost of a financial service or product, should be clearly explained by Firms to consumers.
  • Firms should use their data to identify and engage with groups of consumers that may benefit from early engagement.

Effective operational capacity

Firms should:
  • Be reactive and monitor and manage resources to respond appropriately to consumer needs (e.g. customers requiring credit, facing arrears or in need of swift processing of insurance claims and timely processing of credit applications).
  • Plan and ensure they have the required expert resources to assess individual circumstances and offer appropriate and sustainable solutions to consumers.
  • Staff should be trained appropriately, including knowing protections and supports for borrowers under the various Central Bank codes.
  • Pay attention to operational resilience and provide that payment services to consumers go uninterrupted.

Sales and product governance

Firms should:
  • Have robust product governance and oversight arrangements and develop action plans to mitigate such risks.
  • Consider the impact of increasing costs on consumers’ budgets (both to meet premium payments and in the event of an insurable event) in the context of sales and advice on insurance products.
  • Help consumers understand the implications of any reduction in insurance coverage.
  • Engage with consumers to ensure they understand any implications and avoid the cancellation of necessary coverage where customers choose to cancel or reduce insurance coverage due to affordability concerns.
  • Monitor and evaluate the investment products they sell, consider how their risk profile may change in this period of volatility, and seek to mitigate risks to clients accordingly. Relevant factors for consideration in due diligence on products include risk-return profile, liquidity, costs and charges, and any kick-out or trigger features that may alter the nature of an investment product under certain conditions.
If you have a query regarding any of the issues highlighted by the Central Bank above, or in particular, wish to discuss arranging tailored staff training in respect of the Central Bank codes, you can contact us at