CII R01 Consumer Protection 4 — Questions and Answers
Question 1: What protection does the Consumer Rights Act 2015 provide in financial services?
- It replaced all FCA consumer protection rules
- It provides rights regarding unfair contract terms and requires services to be performed with reasonable care and skill (Correct answer)
- It only applies to goods, not services
- It gives consumers the right to free financial advice
Correct answer: It provides rights regarding unfair contract terms and requires services to be performed with reasonable care and skill
The Consumer Rights Act 2015 provides protections against unfair contract terms and requires that services (including financial services) are performed with reasonable care and skill.
Question 2: What is a 'client money' account?
- The firm's own operational bank account
- A segregated account holding money that belongs to clients, separate from the firm's own money (Correct answer)
- A savings account offered to clients
- An account used to pay FCA fees
Correct answer: A segregated account holding money that belongs to clients, separate from the firm's own money
Client money must be held in segregated accounts separate from the firm's own money, as required by the FCA's Client Assets Sourcebook (CASS), to protect clients if the firm fails.
Question 3: What is the purpose of FCA's Client Assets Sourcebook (CASS)?
- To regulate how firms invest their own assets
- To protect client money and assets held by firms through segregation and other safeguarding rules (Correct answer)
- To set out requirements for client-facing staff
- To define what constitutes a client asset for tax purposes
Correct answer: To protect client money and assets held by firms through segregation and other safeguarding rules
CASS sets out detailed requirements for how firms must safeguard client money and assets, including segregation requirements, reconciliation, and reporting obligations.
Question 4: What is an 'appropriateness assessment'?
- An assessment of whether a firm is appropriate for FCA authorisation
- An assessment of whether a client has the knowledge and experience to understand the risks of a non-advised product (Correct answer)
- An assessment of the appropriateness of a firm's office location
- An assessment of staff qualifications
Correct answer: An assessment of whether a client has the knowledge and experience to understand the risks of a non-advised product
An appropriateness assessment is required for non-advised sales of complex products. It checks whether the client has sufficient knowledge and experience to understand the risks of the product.
Question 5: What rights does a consumer have when a financial firm becomes insolvent?
- No rights — all money is lost
- The right to claim compensation from the FSCS up to applicable limits (Correct answer)
- The right to take over the firm's operations
- The right to automatically transfer to another firm
Correct answer: The right to claim compensation from the FSCS up to applicable limits
When an authorised financial firm becomes insolvent, eligible consumers can claim compensation from the FSCS up to the applicable limits for their type of claim (e.g., £85,000 for deposits).
Question 6: What is the FCA's approach to 'persistent debt' on credit cards?
- The FCA has no rules on credit card debt
- Firms must contact customers in persistent debt and help them repay more quickly or offer options (Correct answer)
- Customers in persistent debt have their cards automatically cancelled
- Firms must write off all persistent debt after 36 months
Correct answer: Firms must contact customers in persistent debt and help them repay more quickly or offer options
The FCA requires credit card firms to identify customers in persistent debt (paying more in interest and charges than they repay of the balance over 18 months) and take steps to help them, including offering ways to repay more quickly.
CII R01 Consumer Protection 4
What protection does the Consumer Rights Act 2015 provide in financial services?