PRIN 2A.5: Consumer Understanding Rules
PRIN 2A.5 sets out the Consumer Duty requirements for how firms must communicate with their retail customers. . These requirements apply to all firms involved in creating, approving, or distributing customer communications, regardless of whether they have direct customer relationships.
Application (PRIN 2A.5.1R and 2A.5.2R)
Rule PRIN 2A.5.1R establishes that these communication rules apply to all firms subject to Principle 12 and the Consumer Duty who are involved in producing, approving, or distributing communications to retail customers. This includes financial promotions, advertisements, sales materials, and post-sale communications across all channels – whether verbal, visual, written, or electronic (including social media).
Rule PRIN 2A.5.2R clarifies that when we refer to “retail customers” in this context, we mean the specific retail customers who are intended to receive the particular communication being sent.
Core Communication Requirements
Rule PRIN 2A.5.3R sets out the fundamental standard that firms must achieve in their customer communications. All communications must support customer understanding by meeting three key criteria: they must address customers’ information needs, be easily understood by the intended audience, and provide customers with what they need to make effective, timely, and properly informed decisions. Additionally, all information must be communicated in a way that is clear, fair, and not misleading.
Target Audience Considerations
Rule PRIN 2A.5.4R explains how firms should think about their audience when creating communications. For product-specific communications, firms should focus on the target market for that particular product, while for general communications, they should consider their broader retail customer base.
Timing Requirements
Rule PRIN 2A.5.5R emphasizes that providing information on a timely basis means communicating early enough for customers to make effective decisions based on that information.
Communication Channel Standards
Rule PRIN 2A.5.6R requires firms to carefully consider their chosen communication methods. The communication channel must enable the delivery of relevant information that supports effective decision-making and provide customers with adequate opportunity to review the information and assess their options where appropriate.
Best Practices for Clear Communication
Guidance PRIN 2A.5.7G provides practical advice for creating communications that customers can understand. Firms should present information logically, use plain language (explaining any unavoidable jargon), make key information prominent through good design and layout, avoid unnecessary disclaimers, and provide the right level of detail – enough to inform but not so much as to overwhelm customers.
Tailoring Communications
Rule PRIN 2A.5.8R mandates that firms must customize their communications based on four key factors: the characteristics of their customers (including any vulnerabilities), the complexity of the product being discussed, the communication channels being used, and the firm’s role (such as whether they’re providing advice or information only).
One-to-One Interactions
Rule PRIN 2A.5.9R sets special requirements for direct, personal interactions between firms and customers. During phone calls, branch visits, or other interactive dialogues, firms must tailor their communication to meet the individual customer’s needs (particularly considering any vulnerabilities) and actively check whether the customer understands key information by asking if they have questions.
Testing and Monitoring Communications (PRIN 2A.5.10R)
Rule PRIN 2A.5.10R requires firms to take a proactive approach to communication quality. Where appropriate, firms must test communications before sending them to customers and regularly monitor their impact afterward to ensure they’re achieving good customer outcomes. When issues are identified, firms must investigate, correct deficiencies by adapting communications or underlying processes, and where necessary, provide appropriate remedies to affected customers.
Determining When Testing is Appropriate
Guidance PRIN 2A.5.11G clarifies that it’s typically more appropriate for firms to test communications when they’re responsible for creating or adapting them, and to monitor communication impact when they have direct customer interactions.
Guidance PRIN 2A.5.12G helps firms decide when testing is necessary by considering factors such as the communication’s purpose and importance, its context and frequency, customer information needs and vulnerabilities, potential for harm if misunderstood, and whether urgent communication is more important than testing.
Adapting Communications Based on Feedback
Guidance PRIN 2A.5.13G advises firms to modify their communications when they discover common customer misunderstandings or when certain customer groups aren’t achieving good outcomes. A notably different customer response than expected (such as a much lower response rate to action requests) suggests the communication hasn’t been properly understood.
Supply Chain Communication Issues
Rule PRIN 2A.5.14R addresses situations where firms work with other companies in the distribution chain. When a firm identifies that another firm’s communication in their distribution chain isn’t delivering good customer outcomes, they must promptly notify the relevant firm (such as the product manufacturer) about the issue. This creates a collaborative responsibility where firms must actively monitor communication quality throughout their distribution network and flag problems even when they didn’t create the communication themselves.
Rule PRIN 2A.5.15R complements this by requiring firms to proactively share information with other firms in their distribution chain. Firms must provide information in good time when it’s either specifically requested by another firm and reasonably required, or when the firm considers it reasonably necessary for the other firm to communicate effectively with retail customers. This ensures all firms in the distribution chain have what they need to meet their communication duties.
External link
This guide provides a plain English interpretation of the FCA regulations. For legal compliance, always refer to the official FCA Handbook text.