Out-Law Analysis 2 min. read

Financial firms must pay heed to direct marketing guidance on Consumer Duty comms

New guidance published by the Information Commissioner’s Office (ICO) on direct marketing and regulatory communications interacts with the Financial Conduct Authority’s (FCA) upcoming Consumer Duty.

Previously, the ICO’s Draft Direct Marketing Code of Practice – not to be confused with its direct marketing detailed guidance – indicated that the ICO considered such communication separate from other categories and therefore that it ought to be treated differently.

The ICO has now issued new guidance on direct marketing and regulatory communications, which specifically explains how the rules around direct marketing may apply these types of correspondence. In relation to direct marketing, ‘regulatory communication’ is when a statutory regulator like the FCA asks or requires the industry it regulates to send specific messages to individuals.

In 2022, the FCA issued a new Consumer Duty which introduces an obligation for organisations to act in good faith, avoid causing foreseeable harm and enable and support retail customers to pursue their financial objectives. Additionally, financial services firms must support their customers’ understanding as well as communicating with customers to meet their information needs.

Alex Ha Kyung Kim

Associate, Pinsent Masons

Even though regulators may have the interests of customers in mind when requiring specific communication to be sent, privacy and data protection rules will still be applicable.

The communication must be done in a way which is likely to be understood and will equip the customers to make decisions that are effective, timely and properly informed. Communication sent by organisations for the purposes of the new FCA Consumer Duty constitutes regulatory communication in the context of the direct marketing rules.

Even though regulators may have the interests of customers in mind when requiring specific communication to be sent, it is important to remember that the Privacy and Electronic Communications Regulation (PECR) and the UK General Data Protection Regulation (GDPR) will still be applicable.

In practice, the fact that regulatory communication sent for the purposes of Consumer Duty can be considered direct marketing may present data protection compliance issues to organisations. It may mean that organisations are prevented from sending regulatory communication to customers if they do not have the appropriate lawful basis to send those individuals with direct marketing.

For such communication to not be considered as direct marketing, the communication must be:

  • in a neutral tone, without any encouragement or promotion;
  • solely for the benefit of the individual; and
  • against the sender’s interests and the only motivation for the communication is to comply with a regulatory requirement.

Nevertheless, this should always be determined on a case-by-case basis. These requirements are very much similar to the distinction between direct marketing and service messages as set out in the Draft Direct Marketing Code of Practice and Direct Marketing Detailed Guidance.

The ICO guidance on direct marketing and regulatory compliance is particularly helpful because it provides useful instances of when regulatory communication will be seen as direct marketing. For example, in relation to a customer whose contract is about to end, inserting promotional language – such as “But there is great news that as a valued customer you qualify for our special contract deal” – means the communication is direct marketing. The communication goes beyond factually presenting the relevant information in a neutral and informative way and encourages and promotes individuals to take out a new contract.

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