This Regulatory Round-Up summarises FCA announcements and the regulatory emails we have circulated during February, together with a list of FLA meetings scheduled for March 2015.
Overview
February saw the FCA publish its long-awaited paper on how firms should treat Vulnerable Consumers and a Consultation Paper on further changes to the Consumer Credit Sourcebook (CONC).
The FCA’s research on vulnerability found that firms lacked clear overarching policies on how to deal with vulnerability; had poor internal communication resulting in customers having to explain their circumstances time and time again; lacked solutions for temporary delegation (which would allow a carer to manage an account for a while) and had clear gaps between policy and what was actually happening on the ground. The FCA’s paper sets out good practice examples for firms to consider, including having products which are clear and easy to understand, flexible and tailored responses being available, firms taking time to listen to customers and consistent advice being provided. We will be running training courses on dealing with vulnerability, and the dates will be publicised shortly (FLA Contact: Ryan.White@fla.org.uk).
The FCA’s Consultation Paper on CONC changes focuses on credit broking, financial promotions, debt management, second charge lending and several other lending issues. Some of the proposed amendments had been trailed in advance (such as new requirements for guarantor loans, the use of continuous payment authorities in financial difficulty cases and revisiting the new brokers rules made in late 2014), whereas others had not been raised for some time and are potentially quite significant – for example, extending the current exemption for instalment credit to agreements with up to 12 monthly payments. Currently an agreement will only be exempt if no more than four repayments are due. The change will take effect shortly and will apply to agreements where no additional charges or interest are due. This move is expected to be welcomed by the insurance industry, as some insurance premiums paid in monthly instalments will now benefit from this exemption. This type of lending in relation to insurance contracts is already exempt in other EU Member States.
Other points to note are a suggestion that where there are joint borrowers, firms should consider whether it is appropriate to provide separate pre-contractual information (rather than a single explanation) and a need to consider the borrower’s degree of ‘sophistication in credit matters’ when providing an adequate explanation. With regard to unenforceable credit agreements, the FCA has clarified that lenders are expected to make clear in any request for payment, or any communication relating to payment (but not necessarily every communication) in cases where a firm has not complied with Sections 77-79 of the CCA (eg, statements) that the debt is unenforceable. The paper also highlights where the FCA would welcome further feedback from industry to inform the content of another consultation on CONC later in 2015 – and one of the areas is broker commissions and other remuneration structures. The FLA will be responding to the Consultation Paper.
In March, the FCA is expected to publish final rules for introducing the Mortgage Credit Directive and transferring second charge mortgages into the mortgage regime under MCOB.
The FCA’s Smarter Disclosure Paper (looking at how firms communicate with customers) has yet to be published and we will keep members posted on this.
FLA emails issued in February 2015
All these emails can be found on the Members Section of the FLA website – www.fla.org.uk
Regulation fees for claims management companies – 5 February 2015
This paper confirms the regulatory fees for claims management firms in the 2015 to 2016 regulatory year. The FLA responded to the proposals at the end of 2014.
Rent to Own Sector – 10 February 2015
On 10 February, the All Party Parliamentary Group (APPG) on Debt and Personal Finance published a report following its inquiry into the Rent to Own (RTO) sector.
The RTO sector uses hire purchase and conditional sale agreements and therefore it is useful to consider the report and any potentially wider implications.
Potential Changes to the debt management landscape – 10 and 12 February 2015 .
The FCA has provided a list of a further 7 known DMCs that did not apply for authorisation by the end of the second Application Period (31 January 2015) and where interim permission has now lapsed. Members are advised that this list may not include all DMCs that failed to apply for authorisation by the end of the application period. Details of firm authorisation or interim permission can be obtained from the relevant FCA register.
Accuracy of FCA registers – 11 February 2015
This email updated members on problems that the FCA is currently experiencing with updating the Interim Permission and Financial Services Registers in a timely fashion. It will be of interest to colleagues responsible for compliance generally and those monitoring that necessary permissions are held by intermediaries in accordance with CONC 2.3.4R.
Secured Lending Update – 11 February 2015
This email updated members on recent discussions with the FCA on the ESIS, CeMAP and the authorisation process for second charge lenders. The FLA is pressing for changes to the CeMAP qualification to recognise second charge mortgages
FLA’s response to FOS’s latest plans and budget – 13 February 2015 – response attached
The FLA has responded to the Financial Ombudsman Services (FOS) 2015/16 plans and budget. As well as addressing their specific questions, we have also used it as an opportunity to draw out members key concerns.
Irremediably unenforceable credit agreements and Credit Reference Agency records – 13 February 2015
At the end of 2014, the court decision in Grace v Blackhorse looked at, amongst other things, how accounts which are irremediably unenforceable should be recorded with the Credit Reference Agencies. The FLA, together with the other financial services trade associations, is now speaking to the Information Commissioner on this issue and the action lenders should take.
Second Charge Mortgages and the FCA – 13 February and 18 February 2015
The FCA has produced a webcast for second charge lenders, which focuses on authorisation issues for firms in this market. In recent weeks, members have raised a number of queries regarding the authorisation process for second charge mortgage lenders and these have been incorporated in a Briefing Note to be discussed with the FCA on 5 March 2015.
FCA and Attestations – 16 February 2015
The FCA has provided further information on its use of attestations, including the number issued in 2014 and in which markets. 59 attestations were issued in 2014, the majority of which were to C1 and C2 firms (banking & insurance groups and firms across all sectors with a substantial number of retail customers and/or large wholesale firms). The wholesale and investment management sectors received the most attestations. We will monitor these figures to assess to what extent attestations are being used in the consumer credit market in the future.
DVLA Toolkit – 18 February 2015
The DVLA have launched a toolkit of marketing resources which businesses can use to communicate the removal of the paper counterpart on 8th June 2015. The FLA has also been provided with a slide deck which sets out how the counterpart’s replacement service (Share Driving Licence) will operate. Links to the toolkit and slides can be found here.
Debt Claims Pre-Action Protocol Update – 19 February 2015
The Rule Committee met on 6 February to consider the Pre-action Protocol for Debt Claims and agreed that a further redraft is required in the light of the many comments received (including from the FLA) and that it would be helpful to extend the subcommittee to include some of the respondents. A letter of invitation will be sent out by the MOJ shortly inviting organisations to nominate a person to join the subcommittee. The FLA will be seeking representation on that group.
Vulnerable Consumers and the FCA – 23 February 2015
The FCA has published an Occasional Paper on Consumer Vulnerability, which looks at the scale of consumer vulnerability in the UK, where the problem areas are in the financial services sector, where firms need to focus their attention and what does ‘good’ look like for consumers. This will be of interest to colleagues responsible for setting policy and procedures to help vulnerable customers within FLA member firms.
FCA sets out approach to Non-Executive Directors and the Senior Managers Regime – 23 February 2015
The FCA and PRA have confirmed that Non-Executive Directors (NEDs) with specific responsibilities, such as Chairman, will come under the new Senior Managers Regime (SMR), which will replace the Approved Persons framework for some firms. Following a detailed consultation across industry and with stakeholders it was also decided the regime would not apply to those NEDs who do not perform delegated responsibilities. The consultation paper can be found here.
FOS Complaints Data – 24 February 2015
The Financial Ombudsman Service has released the latest six-monthly complaints data relating to individual financial businesses. The data published on the Ombudsman’s website, details complaints received and resolved by the Ombudsman Service between 1 July and 31 December 2014. The figures show that the Ombudsman took on a total of 161,649 new cases in the second half of 2014. Of the total cases referred to the ombudsman in the second half of the year, payment protection insurance (PPI) made up two thirds (65%) – with a total of 104,877 new PPI complaints
FCA consults on changes to CONC – 24 February 2015
The FCA has published a consultation on further changes to the Consumer Credit Sourcebook (CONC), covering credit broking, lending, financial promotions, debt management and consequential matters relating to the implementation of the Mortgage Credit Directive. The consultation runs until 6 May 2015.
CMA reports on payday lending – 24 February 2015
The Competition and Markets Authority (CMA) has published its final report and recommendations following its Market Investigation into payday lending. This email provided a brief summary of the CMA’s report, which looks at the concerns with the payday lending market, what regulatory changes have been made, market evidence and potential remedies.
European Commission publishes Capital Markets Union Green Paper – 26 February 2015
The European Commission has published plans for a Capital Markets Union, including stimulating the securitisation market and improving access to SME finance. The FLA will draft a response which will be circulated to members for comment in March. On 18 February, the European Commission published a Green Paper on Capital Markets Union. The European Commission (EC) led by President Juncker, believes that by establishing a Capital Markets Union (CMU), it can boost economic growth and employment. The EC argues that there has been an over-reliance on bank funding compared to other parts of the world. Consequently, it seeks to develop a single market in capital which encourages alternative forms of finance to complement the contribution of banks. According to the EC, stronger capital markets would unlock more investment for companies (including SMEs), attract non-EU investors and make the financial system more stable.
Standard Financial Statement emerging themes from consultation – 27 February 2015
The Money Advice Service (MAS) has published a paper setting out the emerging themes from responses to the consultation on proposals for a Standard Financial Statement (SFS).
FCA Updates – February 2015
FCA Consumer Credit Update
FCA Regulation Round-Up
FLA Meetings in March 2015
2 March – SAF Steering Group
4 March – Legal Committee
4 March – Regulatory Reform Working Group
5 March – CFD Management Committee
5 March – Secured Lending Group
6 March – AFD Technology & Business Equipment Group
9 March – AFD Brokers & Intermediaries Group
10 March – Litigation Committee
10 March – Financial Crime Forum
11 March – Credit Committee
12 March – MFD Management Committee
13 March – Vehicle Remarketing and Asset Registration (VRAR) Group
20 March – AFD Business Finance Code Group
23 March – AFD Associate Members’ Advisory Panel
25 March – General Insurance Group
26 March – FLA Board
31 March – AFD Tax & Accounting Committee
FLA Conferences 2015
FCA Regulation: What Does ‘Good’ Look Like? 18 March 2015 – The British Library
Automotive Financial Crime Conference – 21 April 2015
Asset Finance Conference: Helping Britain Work – 18 June 2015