A shift in consumer protection
Our previous guest blog for the Risk Coalition uncovered the hidden risk of intelligibility in financial services compliance. The definition of compliant disclosure in financial services (FS) has fundamentally changed with the Consumer Duty, moving from static compliance to demonstrating objective consumer understanding. The Competition and Markets Authority (CMA) has now aligned itself with this new thinking, affecting a much wider range of sectors beyond FS, and all types of consumer disclosure:
the CMA has been granted sweeping new powers under the Digital Markets, Competition and Consumers Act (DMCCA), including direct enforcement and the ability to levy fines of up to 10% of global turnover
the CMA's changes to the Unfair Contract Terms Guidance, reflecting the recent Motor Finance Court Decision, has shifted the focus away from simply ensuring that legal disclosure rules are complied with
the new guidance emphasises the need to leave consumers in a position to make an informed decision, and clarifies what constitutes transparency
this shift directly mirrors the FCA’s Consumer Duty (specifically Outcome 4: Consumer Understanding), signalling a cross-sector regulatory movement towards measurable intelligibility.
Redefining transparency - it’s not just about words
The CMA is making it clear that transparency is no longer just a simple matter of legally precise disclosure. Structural and navigational factors are now equally critical. This is a challenge for most organisations – how do they now objectively test and report on how the structure of their comms will affect reader’s understanding, do this at scale, and in an auditable and defensible way?
the CMA guidance explicitly states that transparency depends not only on the words used but also on how the contract is structured and presented
it clarifies the previously fuzzier guidance on critical issues such as prominence, and considers structure and navigation for the first time
critically, the core test is whether the average consumer is likely to understand the meaning and practical effect of the term
structural density and fragmented journeys create massive cognitive loads, disproportionately impacting vulnerable consumers
when information is vast and disjointed, it becomes objectively unintelligible to anyone but the most experienced reader, breaching modern transparency requirements.
One investment and trading platform’s main t&cs agreement for their stock and shares ISA require consumers to navigate over ten supporting documents, totalling 186 pages and over 50,000 words.
The measurement gap
Firms are exposing themselves to significant risk by relying on outdated testing methods and ineffective surface-level reporting. They instead need to assess the factors that are likely to impact on consumer understanding and actionability, not just at the point of presentation, but over the longer term. Are they intelligible? Do they support understanding and action?
It’s therefore important to identify issues at the drafting stage, not just at delivery, and ensure the various intelligibility factors are assessed using up-to-date, rules-based testing methods alongside existing governance.
Common intelligibility risks we have observed include:
a document can score well on readability metrics and still be widely misunderstood, especially where meaning depends on conditional rules, exceptions, trade-offs, or future consequences
a term may appear clear to an industry professional, but still fail to communicate its real implications, such as the financial consequences of a pricing clause or how a renewal mechanism operates
if a consumer struggles to piece together fragmented information, or to navigate and find the information they need in a dense, poorly structured document, it will fail the transparency test
a term may fail the transparency requirement even if it is not inherently unfair
crucially, where a term is ambiguous due to a lack of transparency, the interpretation most favourable to the consumer applies.
The exposed flank for risk and legal professionals
Risk professionals, legal teams, and senior management must recognise that the potential for unchecked intelligibility risk is much broader, and regulators see it as a direct pathway to enforcement action, unenforceability of contracts, and mass remediation (e.g., the Motor Finance case). So, what’s changed?
risk professionals can no longer assume that a legally accurate document is a compliant one if it cannot be navigated or understood by the target audience
firms must move beyond completing plain language and disclosure checklists
risk and compliance teams must ask themselves: do we have defensible evidence and a clear audit trail proving that our customers actually understand the practical effects of our terms?
treating readability as a proxy for understanding creates false assurance for boards and senior management.
The solution?
To mitigate these risks, could firms leverage technology to deliver frictionless journeys and objectively test comprehension? The answer is yes, new intelligibility testing techniques can directly measure a range of factors that can be directly linked to the quality of outcome for the end consumer, potentially months or years downstream. And developing digital ‘journeys’ in place of static PDFs can help to deliver much more understandable, practical consumer disclosure, and provide in situ risk data to the firm. There are a few key actions a firm should take:
the solution lies in moving away from static, linear PDFs and embracing layered, digital presentation of terms
layered digital presentation can improve both engagement and understanding outcomes considerably
firms are increasingly adopting AI-driven intelligibility testing to objectively assess and simplify communications at scale. Amplifi now measures intelligibility across multiple factors including linguistic complexity (concepts, sentences, jargon); visual analytics (charts, tables, etc); information structure (hierarchy, cohesion, flow) and financial maths (numbers, figures, calculations)
testing must prove that content design actively supports decision-making, converting abstract legal terms into concrete, understandable concepts for all consumers, including vulnerable consumers.
Conclusion… rip off the plaster!
Ignorance is no longer a defence. Proactive, data-driven compliance is the only way forward, and there are three essential steps for the firm to recognise:
the regulatory interpretation of legal transparency has permanently shifted
firms that proactively test their communications, monitor consumer outcomes, and deploy layered digital disclosures will not only satisfy the CMA, FCA, Gambling Commission and other regulators, but will build deeper consumer trust
risk professionals must champion this transition from assumed readability to proven intelligibility.
Ask yourself – is your firm prepared?
This blog was written for the Risk Coalition by Ewan Willars and Tom Barratt at Amplified Global, whose intelligibility assessment technology is used for testing and compliance by firms and regulators across multiple sectors. If you’d like to know more about hidden intelligibility risk, how to uncover it or improve your communications, please contact Tom at Tom@amplified.global.