Welcome to this month’s Regulatory Round-Up, which summarises the FCA’s announcements and other regulatory information we have circulated during February.
Overview
This month the FCA has been focussing on the future structure and funding of the Financial Services Compensation Scheme (FSCS), and has hosted a number of roundtable discussions which we have attended. With regard to consumer credit, the FCA wants to extend the FSCS to debt management firms (as they hold client monies) but recognises that contributions to the Fund from that sector alone would be insufficient to meet potential claims. To address this, the FCA is proposing that consumer credit lenders (but not consumer hire permissions) would also be asked to contribute to the Fund as the regulator believes that ‘the lending practices of consumer credit lenders may have been part of the reason the client ended up seeking the services of a debt management firm in the first place.’ The consultation is also exploring whether, in markets such as mortgages, lenders should also contribute to the cost of claims involving intermediary firm failures, to reflect the wider responsibilities of ‘product providers’ in the process. We will be responding to this consultation.
We are putting the finishing touches to the revised FLA Lending Code 2017, which all Full members of the Consumer and Motor Finance Divisions subscribe to. In advance of the new Code being formally agreed at the FLA AGM in the Spring, we will shortly be approaching these members for final sign-off,
Tomorrow Ofcom introduces a new Statement in relation to silent and abandoned calls, which can arise where firms use automatic diallers to contact customers. Fines of up to £2 million can be imposed for non-compliance. Further information is provided below.
The next few weeks should see a number of FCA publications – some of which have been long-awaited. The regulator is due to publish its work on affordability and credit worthiness, a further consultation as part of the Credit Card Market Study (looking at persistent debt), a consultation on FCA fees and the FCA’s Annual Plan. The Policy Statements following the Staff Remuneration Thematic Review and a two year deadline for PPI claims are also awaited. Our recent response to the FCA’s Call for Input on High Cost Credit is attached.
Save the Date – the next FLA Regulation Conference will be held on Tuesday 20 June 2017 and a programme will be circulated shortly.
FLA emails issued in January
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 fines Deutsche Bank £163 million for serious anti-money laundering controls failings – 2 February 2017
The Financial Conduct Authority (FCA) has fined Deutsche Bank AG (Deutsche Bank) £163 million for failing to maintain an adequate anti-money laundering (AML) control framework between 2012 and 2015. This is the largest financial penalty for AML controls failings ever imposed by the regulator. The full details are set out in the Final Notice.
Government White Paper on Brexit – 2 February 2017
The Government has published a Brexit White Paper. Chapter 8 includes a section on financial services (pp. 42-43). The Bill to trigger Article 50 of the Lisbon Treaty, which will start the two-year exit process from the EU, is continuing its progress in Parliament. The Government is currently aiming for Royal Assent on 7 March.
ICO publishes update on GDPR guidance – 3 February 2017
The Information Commissioner’s Office has published its guidance on the General Directive on Data Protection: what firms can expect and when. (See below for email of 14 February concerning CIFAS’s draft Fair Processing Notice.)
FLA’s response to the Financial Ombudsman Service (FOS) consultation on its Plan and Budget for 2017/18 – 3 February 2017
We circulated our final response to the FOS’s recent Plan and Budget consultation for 2017/18.
Second charge mortgage repossessions down almost 37% in 2016 – 9 February 2017
Figures for 2016 show that the number of second charge mortgage repossessions was 144, almost 37% lower than in 2015. The rate of second-charge mortgage repossessions, as a percentage of average outstanding agreements, fell from 0.34% in 2009 to just 0.07% in 2016.
Housing White Paper – 9 February 2017
The Government has launched its Housing White Paper – Fixing Our Broken Housing Market. A short summary of the paper was attached to this email.
Standard Financial Statement update – 9 February 2017
The Money Advice Service (MAS) will formally launch the Standard Financial Statement (SFS) from 1 March 2017. MAS anticipates that it may take a year for all debt advice providers to move to the new format. This email also asks members for views on changes to the industry-agreed ‘Creditor Principle’ that where a consumer’s expenditure falls within pre-agreed objective ‘trigger figures’, they should not challenge the statement unless the firm believes that the figures provided are incomplete or inaccurate.
Continued Growth in Consumer Finance in 2016 – 10 February 2017
Recently-released figures show growth of 9% in consumer finance new business in 2016. New business in December grew by 2% compared with the same month in 2015. Credit card and personal loan new business together grew by 8% in 2016, while retail store and online credit new business was up by 2% over the same period. Second charge mortgage new business grew 4% by value, while volumes fell by 6%.
New proposed template for the forthcoming Insurance Distribution Directive (IDD) – 10 February 2017
The forthcoming Insurance Distribution Directive (IDD) – formerly the Insurance Mediation Directive (IMD) – will include a prescriptive standardised templated form allowing customers to compare different product offerings prior to purchasing non-life insurance products The new form has been produced by the European Insurance And Occupational Pensions Authority (EIOPA). It will need to be used when the IDD comes into effect on 23 February 2018. The FCA is proposing to publish two consultations on the IDD during 2017.
Legal Ombudsman strategy and business plan for 2017-2020 – 10 February 2017
The Legal Ombudsman Service has recently published its latest business plan. The document confirms jurisdiction over customer complaints against claims management companies, which the LEO took over in January 2015, is to move to the Financial Ombudsman Service (FOS) at a date yet to be confirmed (but no earlier than April 2018).
Draft CIFAS FPN – 14 February 2017
The General Data Protection Regulation, which must be implemented by 25 May 2018, requires businesses to update their fair processing notices (FPNs). We have sought members’ views on a draft FPN produced by CIFAS (with the support of National Hunter) and will circulate the credit reference agencies’ draft FPN as soon as it is available.
FCA Call For Input on High Cost Credit – FLA Response – 15 February 2017
We have responded to the FCA’s recent Call for Input on High Cost Credit (copy attached).
Leaseurope’s Ranking Survey 2016 – 17 February 2017
Members were invited to participate in Leaseurope’s annual survey, which ranks leasing companies in Europe.
CRD V/CRR II – 21 February 2017
Eurofinas/Leaseurope, the FLA’s European umbrella bodies, have published summaries of the European Commission’s proposed amendments to the Capital Requirements Directive and Regulation, known respectively as CRD V and CRR II. The key points include an extension of a waiver for capital requirements; a proposal for a harmonised binding requirement for the Net Stable Funding Ratio (NSFR) for credit institutions and systemic investment firms; changes to capital requirements for exposures to SMEs (no upper limit for SME exposures above €1.5 million); and a proposal to strengthen the leverage ratio beyond the 3% Tier 1 capital (see Workshop below).
Ofcom publishes an updated Statement affecting abandoned and silent calls – 23 February 2017
An updated Ofcom Statement on persistent misuse of electronic communications networks and services is due to come into effect on 1 March 2017. It draws attention to the need for firms to take action to avoid making silent or abandoned calls – which can cause “unnecessary annoyance, inconvenience or anxiety” to the call recipient. Fines of up to £2 million may be imposed on firms found to be non-compliant. This email may be of particular interest to Collections Teams, where electronic diallers are used more widely.
Proposed Changes to Capital Requirements for Banks – 24 February 2017
The Prudential Regulation Authority (PRA) has launched a consultation on its Pillar 2A Capital framework. The PRA has said that the proposals aim to “reduce the disparity in capital requirements between the Standardised Approach (SA), mainly used by smaller banks and building societies, and the Internal Ratings Based Approach (IRB). The changes will help ensure our capital standards are not overly prudent for smaller firms, facilitating effective competition”.
Other publications
FLA Vulnerability and Debt News
We have recently published the third edition of our bi-monthly newsletter focusing on vulnerability and debt issues. If you or any of your colleagues would like to receive this, please contact Patsy.Calnan@fla.org.uk.
Eurofinas Executive Briefing – Regulatory Overview
FCA Updates
Regulation Round-Up
Regulation Round-Up – Special Edition
FLA meetings in March 2017
1 March – AFD Business Finance Code Group
1 March – Regulatory Reform Working Group
1 March – Legal Committee
3 March – Motor Finance Fraud Group
3 March – NaVCIS Review Group
9 March – General Insurance Group
14 March – Litigation Forum
16 March – MFD Management Committee
16 March – MFD Independents’ meeting
21 March – Financial Crime Forum
21 March – AFD Brokers’ and Intermediaries’ Group
23 March – AFD Regulatory Working Group
30 March – AFD Tax and Accounting Group
30 March – Secured Lending Group
30 March – CFD Management Committee
FLA events – 2017
25 April – Automotive Financial Crime Conference
9 May – Best Practice in Asset Finance Conference
20 June – Financial Regulation Conference
Eurofinas/Leaseurope Prudential Regulation Workshop (27 April)
Eurofinas/Leaseurope is running a prudential regulation workshop in Brussels on 27 April which will cover the CRD V/CRR II proposals, EBA technical and implementing standards and proportionality in relation to FLA markets. A brochure is attached: early booking is advised as places are limited.