Welcome to this edition of Regulatory Round-Up, which summarises the FCA announcements and regulatory information we have circulated during February.
Overview
As we head towards the final landing-slot for FCA authorisation closing at the end of March this year, we have been asking members how they have found the process. Interestingly, the responses fall into two distinct groups. Those firms who have been able to forge a direct relationship with the FCA early on (possibly as a result of inviting officials to visit them) had a relatively good experience as they had the benefit of established contact points they could call on if there were delays/problems etc. Other lenders, however, experienced protracted delays, regular changes to their case officer, frustration with the on-line application process and concern at officials’ market knowledge. We will be speaking to the FCA about how the process can be improved – especially as the regulator’s workload over the next 12 months will be dominated by considering Full authorisation applications.
This month, the FCA confirmed that a ‘discovery’ theme to consumer credit supervision was now being adopted, as the regulator sought to understand in more detail how the different sectors operated. A ‘market-based’ approach to supervision would also be rolled-out, running in parallel to the more lengthy and formal Thematic Review process. Market-based supervision would allow the FCA to be ‘more nimble and fleet of foot’ when exploring particular markets. It could be on a project basis, where only a small number of firms were looked at – or it might involve exploring how a larger group of firms could be helped with compliance.
This month we also launched our Vulnerability Hub, which brings together a range of reports and guidance on how lenders can better identify and assist vulnerable customers. Members can access the Hub via the members’ section of the FLA website. We will shortly announce the commission of new research to further support this work.
The steady flow of FCA consultations and our responses has continued unimpeded during February. We responded to the FCA’s consultations on new rules for PPI complaint handling, financial crime reporting and a raft of issues in the Quarterly consultation. We also commented on the Financial Ombudsman’s Annual Plan 2016/17, reiterating the need for FOS to provide more detailed data on complaint types. New consultations issued this month focus on the remaining provisions in the Consumer Credit Act (and what should happen to them), the treatment of older customers, the enforcement of security in CCA lending, Loan to Income ratios in mortgage lending and the content of Privacy Notices used by lenders. We will be responding to all of these.
Looking to the month ahead, we will launch our review of the FLA Lending Code which will explore the future role of the Code in light of the FCA’s new regulatory regime. We will be working closely with members on the review, which will include discussions with consumer groups and the FCA. The review should report by the end of 2016.
FLA emails issued in February 2016
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.
Government response to consultation on protections for SMEs purchasing goods and services – 2 February 2016
The Government’s response recognises that further work is needed before any final decisions are taken to extend the current range of protections to small firms.
FCA to charge a levy to fund Illegal Money Lending Teams – 2 and 24 February 2016
The budget for funding Illegal Money Lending Teams, which tackle illegal money lending, has recently been cut. The FCA has been given power to collect a levy of approximately £4.7m per annum from consumer credit firms to fund the Teams. The FCA will consult on how the levy will be collected in its annual fees consultation in the Autumn.
FCA Data Bulletin and new secondary legislation – 2 February 2016
The FCA’s latest Data Bulletin provides information on consumer credit authorisations, financial promotions, skilled person reports and retirement income market data. The Government has also published the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2016, which makes a number of amendments relating to activities connected with consumer credit and mortgage lending.
Banks’ exposures to shadow banks: EBA guidelines & BCBS consultation – 4 February 2016
The European Banking Authority (EBA) has published Guidelines, which will apply from 1 January 2017, relating to limits on banks’ exposures to so-called ‘shadow banks’. The Basel Committee on Banking Supervision (BCBS) has published a consultation on the identification and measurement of ‘step-in risk’, defined as where a bank provides financial support to a shadow bank in times of market stress. We are running a Prudential Regulation Workshop for members on 10 May 2016 which will consider the latest prudential developments, including FLA-market specific EU/international measures, securitisation and shadow banking.
The ADR Directive: Ministry of Justice Guidance for CMCs handling financial complaints – 4 February 2016
The Ministry of Justice has issued guidance for claims management companies and their consumers, in the light of the provisions of the Alternative Dispute Resolution Directive (ADR), which has introduced alternative ways of resolving contractual disputes between consumers and businesses.
OfCom consults on changes to its enforcement approach to silent and abandoned calls – 4 February 2016
OfCom has consulted on proposals to strengthen its enforcement policy where firms generate silent and abandoned calls.
Insurance Distribution Directive formally agreed – 5 February 2016
The Insurance Distribution Directive (IDD), formerly known as the Insurance Mediation Directive, was published in the Official Journal of the European Union on 2 February 2016 and will come into force on 23 February 2018. The IDD includes requirements for ancillary insurance providers, including FLA members.
EU Proposals for the Regulation of Benchmarks – 8 February 2016
The European Union intends to introduce a Benchmark Regulation to create a common framework and consistent approach for financial benchmarks. The FCA has set up a mailing list to enable firms to receive updates and supply information to help the FCA target its contact with firms.
FLA Vulnerability project – 10 February 2016
The FLA has created a Vulnerability Information Hub, located in the members’ area of the website. The Hub brings together guidance, reports and technical notes on a broad range of issues linked to customer vulnerability. The Hub also seeks to share good practice amongst members on the identification and treatment of vulnerable customers.
Information Commissioner consults on Privacy Notices – 15 February 2016
The Information Commissioner’s Office (ICO) is currently consulting on changes to its Code of Practice on what information should be included in Privacy Notices – which are used by firms to tell customers about how their data will be used. The FLA will be responding to this consultation.
PRA consults on LTI ratios – 15 February 2016
The PRA has published CP 6/16, which proposes to exclude second and subsequent charge mortgage contracts from the current Loan to Income ratio limits. However, the regulator will revisit this position in 2017. We will be responding.
The Claims Management Regulator consults on proposals to restrict the level of fees CMCs charge consumers – 15 February 2016
The Claims Management Regulator has launched a consultation on proposals to introduce restrictions on the level of fees that regulated Claims Management Companies (CMCs) can charge consumers for financial claims. We will be responding to this consultation.
Call for Input on retained provisions of the Consumer Credit Act – 18 February 2016
The FCA has issued a Call for Input to help it plan its review of the provisions of the Consumer Credit Act which have been retained and not yet translated into FCA rules and guidance. We will be holding a Roundtable Discussion for members on 6 April 2016 and responding to this consultation.
FCA revises its view of enforcing security under the Consumer Credit Act 1974 – 19 February 2016
The FCA is consulting on proposed guidance on the need for default notices under the Consumer Credit Act 1974 when seeking to enforce securities. This consultation will be of particular interest to those members who accept guarantees or indemnities in connection with regulated consumer credit or hire agreements. We will be responding to this consultation.
FCA looks at older customers and access to financial services – 22 February 2016
The FCA has published a Discussion Paper (DP16/1) Ageing Population and Financial Services. The DP includes contributions from a range of interested organisations. The FCA intends to develop a Strategy on the Ageing Population which will be launched in 2017.
Financial Services Vulnerability Taskforce publishes recommendations for industry – 23 February 2016
The Financial Services Vulnerability Taskforce has published a report outlining best practice recommendations for industry when dealing with customers in vulnerable circumstances. The report identifies nine principles intended to improve outcomes for customers in vulnerable circumstances and also features a number of case studies.
Updated JMLSG Guidance on Electronic Verification – 24 February 2016
The Joint Money Laundering Steering Group is currently consulting on draft guidance on the electronic verification of identity. We will be responding.
Second Charge Mortgages and the FCA website – 24 February 2016
The FCA’s webpages on second charge lending have been updated to include further information on a number of issues regarding authorisation.
FCA Updates
Consumer Credit Update
Regulation Round-up
FLA meetings in March 2016
2 March – Legal Committee
2 March – Regulatory Reform Working Group
3 March – General Insurance Group
8 March – AFD Brokers & Intermediaries Group
10 March – AFD Risk & Fraud Group
10 March – MFD Management Committee and Dinner (Savoy Place)
15 March – Litigation Committee
16 March – AFD Technology & Business Equipment Group
17 March – CFD Management Committee
17 March – Secured Lending Group
22 March – Consumer Fraud Forum