Consumer Duty has not shortened the small print; financial T&Cs remain as long as classic novels two years on

Two years since the Financial Conduct Authority’s (FCA) Consumer Duty came into force, and Fairer Finance’s latest analysis shows that many financial‑services firms have barely trimmed the length or complexity of their policy documents.

The average policy wording or terms and conditions for travel insurance and investment products still stretch well beyond 21,000 words, longer than some classic novels and even scientific research papers.  For example, Franz Kafka’s ‘The Metamorphosis’ is around 21,000 words long, and John Steinbeck’s ‘Of Mice and Men’ is just over 29,000.

Yet, Consumer Duty requires firms to prove that customers can understand their communications.

James Daley, managing director at consumer group Fairer Finance, said: “Two years on from the introduction of Consumer Duty and many policy documents and Ts&Cs from across financial services are still far too complex and lengthy. The longer these documents are, the less likely consumers are to engage with them, and the harder they are for customers to understand.

Helping consumers understand the complexity of these products is essential if we’re to create a fair financial services market which people can trust and have confidence in.

We know from working with dozens of firms in the sector that it is possible to shorten these complex documents and make them clear and accessible for customers. But many firms have not started the hard work that Consumer Duty requires them to do. The grace period is now over – and we expect the regulator to start holding companies to account where they are ignoring the Consumer Duty.”

Having examined the length of financial terms and conditions for over a decade, Fairer Finance has identified the financial products with the highest word counts. Travel insurance policies and investment terms and conditions top the list, closely followed by home insurance policies. Even a typical bank account agreement runs to more than 15,000 words, which is almost as long as Shakespeare’s ‘Macbeth’(c17,121).

Table one below shows the average word count of financial services policy documents:

The National Literacy Trust reports that 16.4% of adults in England (7.1 million people) have “very poor literacy skills” classifying them as “functionally illiterate” as reading information from unfamiliar sources or on unfamiliar topics could cause them problems. These consumers with poor literacy skills are also deemed “vulnerable” by the FCA. Furthermore, the government estimates that one in seven adults in England (14.9%) has the literacy skills expected of a child aged between 9 and 11 years old.

Fairer Finance’s Document Analyser Tool flags legalese, jargon, sentence length, and layout issues, and benchmarks documents against peer products.  It is now looking to expand the offering to include a new jargon buster to allow financial companies to test how their literature can be used and understood by customers.

For more detail on Fairer Finance’s analysis of terms and conditions and policy wording please visit www.fairerfinance.com.