Welcome to this month’s Regulatory Round-Up, which summarises FCA announcements and other regulatory information we have circulated during August.
Overview
During August, we continued our discussions with the Government on the ‘Brexit’ implications for financial services with meetings at HM Treasury and we wrote to the Prime Minister (see attached), the Chancellor of the Exchequer, the Secretary of State for Business, Energy and Industrial Strategy, together with the Secretary of State for Exiting the EU. We have emphasised the need for the Government, the Bank of England and other public bodies to maintain confidence among consumers and businesses and outlined where regulatory and tax changes could be made to help boost investment and growth. Our Conference on the Implications of Leaving the EU will be held on 18 October 2016.
This month the FCA published its long-awaited Feedback Statement confirming that it will introduce a two year deadline for bringing PPI complaints. However it is consulting further on whether ‘profit share’ should be included (alongside commission) when assessing fairness and redress. Final rules and guidance are expected by end-December 2016, after which the rules and guidance for dealing with ‘Plevin-type’ complaints will come into force by end-March 2017 and the two year deadline will commence by end-June 2017. In the interim, we are represented on FCA Working Groups looking at the communications campaign and redress calculations.
With regard to the EU Data Protection Regulation, we recently met with Government officials responsible for implementation by 25 May 2018. Ministers have yet to decide how this will be done, ie, through either primary or secondary legislation. While there are clear attractions in there being a single reference point via a new Data Protection Act, the Brexit impact on the legislative timetable over the next few years may leave Ministers with more limited options. The Government will consult on implementation (in early 2017), but this will only focus on the discretions and derogations in the Regulation (which allow Member States some flexibility) and the impact of withdrawing certain provisions from the current DPA. The Government is looking to the Information Commissioner’s Office to produce guidance to help firms implement the changes, some of which is already available. The FLA’s Data Protection Conference will be held on 6 December 2016, looking at the impact of the Regulation on financial services. We will also be exploring what further guidance is needed from the ICO.
The final quarter of the year is invariably the busiest from a regulatory perspective and we expect the following FCA announcements over the next few months:
Assessing Affordability and Creditworthiness – Consultation
Thematic Report on Early Arrears handling
Thematic Report on Staff Remuneration
Update on the Review of the Consumer Credit Act
Guarantor Lending – Use of a Default Notice
We will let members know as soon as these have been published.
Our research with the University of Bristol looking at how firms can more readily identify and assist vulnerable customers is now underway and many thanks to all the members who have agreed to be involved. We appreciate that it is an extremely busy time and therefore your support with this project is greatly appreciated. Thank you.
FLA emails issued in August
All these emails can be found on the Members’ Section of the FLA website – www.fla.org.uk. If you do not have access to the website, please contact Hanifa.Teladia@fla.org.uk.
FCA publishes its Financial Crime Reporting rules – 29 July 2016
The FCA’s Policy Statement (PS 16/19) sets out the FCA’s proposals for introducing a Financial Crime Return (REP-CRIM). All firms with full permission for consumer credit and a total revenue exceeding £5 million will be required to complete the return from end-2016 and within 60 days of their reporting year. The FLA’s Financial Crime Committee will run through the form in detail, when it next meets on 23 September 2016.
Debt Management Authorisation and Standard Financial Statement Updates – 1 August 2016
The FCA is currently still considering applications from 89 fee-charging debt management firms. Around 130 debt management firms have withdrawn from the authorisation process. However, the number of impacted consumers approaching free-to-client advice organisations has not risen significantly as a result. The FCA expects exiting debt management firms to notify their customers promptly so that they can begin the process of making alternative arrangements.
The Money Advice Service has confirmed that it now expects the new Standard Financial Statement (SFS) to ‘go live’ from 1 March 2017. The Common Financial Statement (of which the FLA is a sponsor) will continue in use. Both Statements are used for budgeting purposes when setting alternative payment arrangements for customers in financial difficulty.
The Claims Management Regulators latest bulletin for CMCs – 1 August 2016
The latest Claims Management Regulation Business Bulletin contains information and advice for claims management companies, including consent for direct marketing; compliance with the agreed new principles for letters of authority; best practice when dealing with customer complaints (at the Legal Ombudsman Service) and recent fines and enforcement action.
IVA Protocol update published – 1 August 2016
An updated version of the IVA protocol has now been published and will go live on 1 October 2016. There are no major changes but one issue which remains under discussion is the treatment of equity in a customers’ property. We will keep members informed if any further changes are made relating to this.
FCA Occasional Paper on predicting financial distress – 3 August 2016
The FCA has published Occasional Paper 20: Can we predict which consumer credit users will suffer financial distress? The paper will help to inform the FCA’s current examination of different approaches to assessing creditworthiness in the consumer credit market, on which it is expected to publish its findings in the Autumn. The paper acknowledges that lenders must base their decision on known or predictable elements. It argues that there is a strong correlation between high Debt to Income (DTI) ratios and likelihood of financial distress and suggests that the DTI ratio is a more reliable predictor than, for example, using the overall personal indebtedness and/or the total number of credit products.
European Commission Proposal on 4AMLD company and trust ownership – 4 August 2016
The Fourth Anti-Money Laundering Directive (4AMLD) was officially adopted in May 2015 and must be implemented by 25 June 2017. Some Member States are planning to implement the package more swiftly, but the UK Government is understood to have reservations about this approach. HM Treasury will publish a consultation paper ahead of implementation.
The European Commission has prioritised the fight against tax avoidance, money laundering and terrorism financing. It has recently adopted a proposal to further reinforce EU rules in these areas and increase transparency around who really owns companies and trusts.
Summary of responses to EU Retail Financial Services Green Paper – 4 August 2016
The European Commission (EC) has published a summary of the contributions it received to its Retail Financial Services Green Paper, which had aimed to help the EC understand the extent to which the European retail financial services market should be “opened up”. The EC is expected to publish an action plan in November 2016. We will keep members informed.
Bank of England interest rate decision – 4 August 2016
The FLA issued a comment for the media following the decision by the Bank of England’s Monetary Policy Committee (MPC) to reduce Bank Rate from 0.5% to 0.25%. Other measures included a new Term Funding Scheme to assist the pass-through of the cut in Bank Rate; the purchase of up to £10 billion of UK corporate bonds, and expansion of the existing asset purchase scheme for UK government bonds by £60 billion, taking the stock of asset purchases up to £435 billion.
The Bank’s decision to cut Bank Rate coincides with the publication of its August 2016 Inflation Report.
FCA PPI Complaint Handling – 8 August 2016
The FCA has published its Feedback Statement (CP16/20) and launched a further 10-week consultation on rules and guidance for PPI complaint handling. It has decided to take forward its proposal for a two year deadline for new PPI complaints, which is expected to commence in Spring 2017. We will be discussing with members what, if any, further comments we might want to put forward at relevant Committee meetings in September. The FLA is also represented on FCA Working Groups helping shape the communications campaign, which will run in conjunction with the two year complaint deadline.
Credit Card Market Study Update – 9 August 2016
Following publication of the FCA’s Credit Card Market Study (CCMS) Final Report on 26 July 2016, we have met the FCA to discuss how the three informational remedies proposed in Annex 3 to the Study might be implemented. The aim is for the remedies to be incorporated into the FLA Lending Code and the BBA/UK Cards Standards of Lending Practice rather than being included in CONC. The FCA is also keen to ensure that appropriate oversight is in place for these new remedies. We will now work with UK Cards and the FCA to take this forward. We are planning a Conference Call/meeting with members on 15 September 2016 (10.30am to 12pm) to discuss the CCMS Final Report and remedies.
FLA industry Standard for financial crime prevention in motor finance credit application processing – 9 August 2016
The FLA’s industry Standard for financial crime prevention has now been published and is available on the FLA website here. Although the Standard has been drafted primarily for the motor finance market it will also be relevant both to asset and consumer finance members. It will be updated early in 2017 to reflect the upcoming changes to UK Money Laundering Regulations, which are due to be transposed from The Fourth Anti-Money Laundering Directive.
FCA proposals on increasing transparency and engagement at renewal in general insurance (GI) markets – 10 August 2016
The feedback and final rules published in this Policy Statement (PS 16/21) relate solely to the general insurance markets, but may read across to other FCA regulated markets. For example, the FCA hopes the new requirements will prompt more consumers to shop around at renewal and make any price increases which arise at renewal more transparent.
New Glossary Codes for SARs reporting – 22 August 2016
Two key documents giving guidance on the future reporting of Suspicious Activity Reports (SARs) have been published. These relate to the planned transition to new Glossary Codes from 1 September 2016. A guidance booklet will be available on the National Crime Agency’s website from 1 September and a telephone Help Desk will operate throughout September to deal with queries relating to the new Glossary Codes.
Financial Action Task Force (FATF) “Detecting Terrorist Financing: Relevant Risk Indicators” – 25 August 2016
FLA members interested in seeing a copy of this Report should contact Richard.Bostock@fla.org.uk
Review of the FLA Lending Code
The review of the FLA Lending Code is now underway and we will be consulting with members this Autumn on a revised approach. If you would like to be involved on the Working Group reviewing the changes, please contact Henry.Aitchison@fla.org.uk (Full Members)
FCA Updates
Regulation Round-Up
Consumer Credit Update
FLA meetings in September 2016
7 September – Legal Committee
7 September – Regulatory Reform Working Group
8 September – Motor Finance Fraud Group and NaVCIS Review Group
15 September – AFD Management Committee
19 September – Credit Committee
20 September – General Insurance Group (GIG)
20 September – Healthcare Group
21 September – CFD Management Committee
21 September – Secured Lending Group
21 September – Business Finance Code Group
23 September – Financial Crime Forum
29 September – Litigation Forum
29 September – MFD Management Committee
Events
6/7 October 2016 – Annual Convention of the European Consumer Credit Industry. The Annual Convention organised by Eurofinas will take place on 6 & 7 October at the Hilton Athens, Greece. Registration is now open (deadline 16 September) – further details are available here.
18 October 2016 – FLA Brexit Conference.
9 November 2016 – FLA Financial Crime Conference.
6 December 2016 – FLA Data Protection Conference