Consumer duty presents opportunity for increased communications with customers

Where Firms send planned regulatory communications to comply with the consumer duty, it is possible to do this in a way that does not trigger direct marketing rules. Alternatively, firms may wish to send more promotional-style communications that are more likely to encourage an action from a customer. 

This could be prompted by the consumer duty if a customer is invested in an old product and the firm has a new offering with a wider range of investments.  Alternatively, a customer may have built up a good credit rating which makes them eligible for products with more favourable rates.  However, sending communications to encourage customers to take action such a product switch even where this is to deliver better outcomes triggers direct marketing rules.

Content and context of the communication is key. The phrasing, tone and context of the communication message are likely to determine if it is a direct marketing or a regulatory communication.

A regulatory communication is any communication that a regulator asks or requires the bodies it regulates to send people. This can cover a full range of communications that FCA authorised firms send from requirements to send periodic statements or to provide information about a firm; to requirements to keeping customers informed, for example about the progress of complaints.

The specific rules regarding direct marketing mean firms must give customers the unconditional right to object to an organisation using their personal data for direct marketing purposes, as well as ensure that the direct marketing complies with the requirements of the UK GDPR and the Data Protection Act 2018 - particularly regarding fair, lawful and transparent processing.

Direct marketing covers all types of advertising, marketing or promotional material including commercial marketing. The rules apply to any method of communication such as emails and text messages, phone calls, post, online advertising and social media marketing. Using personal data for direct marketing purposes includes the activity undertaken up to the point of communicating the direct marketing, including profiling. For example, using people’s information to try to infer what products or services people in a particular geographical location might be interested in or disclosing their information to third parties for direct marketing purposes.

To count as a direct marketing communication, a communication must be ‘directed to’ particular people. For example, personally addressed post, emails to a particular account, or calls to a particular number.

Further, electronic messages such as emails, SMS and in-app inboxes, must comply with the direct marketing provisions set out in the Privacy and Electronic Communications Regulations (PECR). PECR provides that an organisation must not send electronic direct marketing communications to retail contact details unless the recipient of that electronic mail has previously notified the sender that they “consent for the time being to such communications being sent”. Broadly, this rule does not apply to corporate contact details.

Generally, this consent is notified via the use of a tick box (i.e. the customer needs to ‘do something’ to indicate consent) and the consent will be limited to the sending of electronic direct marketing only (i.e. it will not apply to other communication channels).  However, there is an exception to this rule for existing customers Known as the ‘soft opt-in’.

The soft opt-in is available where:

• the recipient’s contact details were obtained by the organisation during the course of a sale or negotiations for a sale of a product or service
• marketing messages relate to similar products or services of that organisation (not those of another group company even where operating under the same brand) that the recipient initially showed interest in; and
• the firm has given a clear and easy way to opt out of receiving further direct marketing messages, both at the time their details were collected and in every subsequent message.

The biggest issue is often that many customers are ‘unknowns’. This means there is no record of that customer opting out nor opting in. There may also be a cohort of customers that have explicitly opted out, although the number of clear opt-outs tends to pale into insignificance when compared to the number of ‘unknowns’. A communication which seeks to ascertain this, for instance by inviting that customer to revisit their marketing preferences, could in and of itself be considered direct marketing. Therefore, these rules can be very tricky to navigate.

If the message is in a neutral tone and does not contain any active promotion or encouragement for people to take a particular action, it is unlikely to count as direct marketing. For example, factually presenting people with their options once a fixed term contract ends. Context will also help firms decide.

It is unlikely to be direct marketing if the information provided to customers is solely for the customers’ benefit and opposed to the firm’s interests. Instead, these forms of communication could be considered a ‘regulatory communication’, sent in compliance with the consumer duty.

However, the consumer duty represents an opportunity to reconnect with the ‘unknowns’ and the ‘opted out’ customers who would have previously been uncontactable other than in very limited circumstances - such as for prescribed regulatory communications or service messages. Firms seeking to reconnect with customers do need to proceed with caution because one adjective or adverb could convert a regulatory communication into a direct marketing communication.

Many communications that would be considered ‘regulatory communications’ are set out in a prescribed format or are purely factual and straightforward to provide. However, the consumer duty with its expectation of customer support and understandable communications expands the circumstances where firms may need to communicate with customers to meet the requirements of the duty leading to more regular, ongoing contact. For instance, the end of an introductory credit card rate would need to be communicated to customers at this stage. Further, there are more complex situations too where the duty is more nuanced and not tied so closely to the product lifecycle, such as communication with customers who have potentially rebuilt a credit profile and are now eligible for other products or services that may suit them better.

Standard banner advertising around the messaging or including language about other campaigns that are not necessarily specific to products or services, or related to the consumer duty, is not a ‘direct marketing communication’ because it is not a direct communication sent to a specific individual. It means that language used on a website can be more persuasive. However, where a firm has used cookies, or similar technologies, to tailor the banner ads, that firm will need to comply with the cookies rules under PECR, as well as the requirements of the UK GDPR and the Data Protection Act 2018 , particularly regarding fair, lawful and transparent processing. The FCA rules around financial promotions will also apply.

If an organisation is willing to take a case-by-case approach depending on a customer’s marketing preferences, there is scope to issue more ‘persuasive communications’ to those customers who have agreed to direct marketing for that particular communication channel.

For those customers who have clearly opted out, the regulatory communication is the only option. For the ‘unknowns’, issuing as a regulatory communication is the prudent option, but there may be scope to remind customers about their direct marketing preferences, if the reminder forms a minor and incidental addition to a message that the firm is sending anyway - for example in order to comply with the consumer duty. The content must be for another purpose and not include marketing material such as an annual statement that includes a message at the end saying how that customer can update marketing preferences but not encouraging them to change their mind.