Welcome to the final Regulatory Round-Up of 2014, which provides a reminder of recent FCA announcements, the regulatory emails we have circulated during December and a list of FLA meetings scheduled for 2015.
Review of 2014
The pace of regulatory change for consumer credit in 2014 has been unprecedented. The year started with a fast-tracked consultation on the new draft CONC rules and 50,000 firms applying for Interim Permission before the 1 April 2014 deadline. While the market contracted by around 30k firms overnight, there has been no marked impact so far on the supply of consumer credit services to customers.
The FCA has been very open about its need to gain a fuller understanding of how the different consumer credit products and sectors work in practice. And the regulator has been swift to do this. The initial focus was on High Cost Short Term Credit (HCSTC) and fee charging debt management companies. New HCSTC price controls will be introduced in January 2015, resulting in revised business models and products for many firms operating in this market. With regard to fee charging debt management, the FCA is anticipating that some firms will decide to leave the market or will fail to meet the authorisation criteria. Consumers affected by this will need help in setting up new Debt Manage Plans or alternative payment arrangements and we have been speaking to the FCA about how this could be managed (see emails below).
The FCA took early action to review consumer credit advertising, which involved firms across the consumer credit industry and cases of non-compliance were dealt with quickly. The regulator has also been quick to deal with poor practice by credit brokers charging up-front fees – which resulted in new guidance being published without prior consultation – a unique approach by the FCA. We understand that as the FCA gains a closer insight into the industry, it is bringing forward the authorisation slots of some firms so it can look at their business models at an earlier stage.
And the pace of regulatory change looks set to continue as the FCA undertakes its credit card market study over the course of 2015, reviews how lenders undertake affordability and credit worthiness assessments, transfers second charge mortgage lending into MCOB and consults on further changes to CONC. In early 2015, we will also see the FCA’s papers on working with vulnerable consumers and Smarter Disclosure.
One of the biggest challenges for the FCA remains dealing with all the authorisation applications up to April 2016. Firms are already showing signs of being less engaged and leaving it to the last minute and the FCA accepts that it may need to communicate with firms in different ways. The second authorisation slots ends on 31 December 2014 has 3,000 firms in it – only 300 firms have submitted their applications so far.
An early priority for the FLA in 2015 will be looking at the retained provisions of the CCA and working with HM Treasury and the FCA on a sensible timetable for change. It is clear that the unenforceability provisions of the CCA have presented particular challenges for many firms over the past 18 months (especially in connection with statements and notices), with no substantive evidence of consumer detriment. On 4 February (10.30am to 2pm), we will be hosting a roundtable meeting for members to discuss the retained provisions and priorities for change. Please let Hanifa know if you would like to attend Hanifa.Teladia@fla.org.uk
Our next FCA Regulation Conference will be held at the British Library on 18 March 2015 – FCA Regulation – What Does Good Look Like?
FLA emails issued in December 2014
(Copies of these emails will also appear on the Member Section of the FLA website).
FCA introduces new rules for credit broking – 1 December 2014 – email attached
The FCA has published new rules aimed at dealing with poor practice in credit broking. This is the first time the FCA has introduced new rules in the consumer credit sector without consulting beforehand. The rules will ban credit brokers from charging fees to customers and from requesting customers’ payment details for that purpose, unless they comply with new requirements ensuring that customers are given clear information about who they are dealing with, what fee will be payable, and when and how the fee will be payable. The rules come into force on 2 January 2015.
FCA to review unsolicited consumer credit marketing – 1 December 2014
The FCA has confirmed that the rules on unsolicited marketing in consumer credit need to be reviewed. Subject to cost-benefit analysis, the FCA intends to consult on further changes to the FCA rulebook – including restricting unsolicited marketing – in 2015. The FCA will also consider the role of other unsolicited communications including text messages and email.
THE AUTUMN STATEMENT – 3 December 2014
The Chancellor’s Autumn Statement was published which included a number of points of interest for FLA members. As predicted by many commentators, the proximity of the General Election restricted the Chancellor’s freedom of movement.
EU banking supervisor publishes opinion on scope of banking regulation – 4 December 2014 – email attached
On 27 November, the European Banking Authority (EBA), which is the European banking supervisor, published an Opinion addressed to the European Commission on the scope of the term ‘credit institution’ in the EU Member States. In the UK, ‘credit institution’ commonly refers to deposit-taking banks.
FCA announces new strategic approach – 9 December 2014
The FCA has announced that with the increase in its responsibilities, particularly that of consumer credit, and the challenges of meeting those responsibilities it is embarking on a new strategic approach to lend ‘sharper focus’ to the manner in which it regulates. It will be based on emphasising sector and market-wide work which will reflect the FCA’s competition duties.
Launch of the “MyLicence” service – 11 December 2014
The DVLA has announced the launch of its MyLicence service. Developed jointly between the DVLA and Motor Insurers’ Bureau (MIB), it will allow motor insurers access to driver information. It is intended to act as a deterrent against insurance fraud and, in some cases, to protect motorists from unwittingly making false declarations regarding their motoring convictions which could invalidate their insurance. It is hoped that the service will improve road safety by providing a more accurate risk assessment of drivers, and may reduce some drivers’ insurance premiums.
Potential changes to the debt management landscape – 12 December 2014 and 19 December 2014 – emails attached
This email updates members on our recent discussions with the FCA concerning fee-paying Debt Management Companies (DMC) who may not obtain FCA authorisation. This will have implications for both customers and lenders. It will be of interest to colleagues who deal with customers in financial difficulty and Collections Teams. The Money Advice Service has produced an information sheet for consumers.
FCA – Improving complaints handling consultation paper – 12 December 2014
The FCA has published a consultation paper looking at how to improve complaints handling. This CP proposes changes to FCA rules to improve complaints handling by, and access to the ombudsman service for customers of, firms in the compulsory jurisdiction. This paper also proposes changes to the voluntary jurisdiction and changes to FOS’ procedures.
FCA proposals for GAP Insurance – 12 December 2014
The FCA has published its promised consultation paper setting out proposed changes to the Guaranteed Asset Protection (GAP) insurance market.
Future EU approach to securitisation – 16 December 2014 – email attached
The European Banking Authority’s development of a standardised EU approach to securitisation.
CMC Complaint Handling Rules – 19 December 2014
The Ministry of Justice has published guidance on the new Legal Ombudsman complaints handling scheme which will come into effect on 28th January 2015.
High Court Judgement in the case of Northern Rock Asset Management Plc (NRAM) v McAdam and Hartley – 19 December 2014 – email attached
Incorporating Consumer Credit Act provisions into unregulated agreements – a test case heard by the Commercial Court
FCA Regulatory Update – December 2014
FLA Meetings in 2015
A list of all the meetings of the Consumer and Motor Finance Divisions in 2015 is attached.
It has been a pleasure working with members on regulatory issues over the course of the year and we look forward to this continuing in 2015.