Welcome to this month’s Regulatory Round-Up which provides a quick summary of FCA announcements and the regulatory emails we have circulated during May.
Overview
The FCA spoke at our recent Authorisation Workshop attended by over 80 members. The key messages were:
• Once an authorisation application has been submitted, it can take several weeks for a case handler to be appointed to the firm. This delay is not unusual.
• Firms should not be surprised to be asked additional questions on their authorisation application. This is common and firms will need a process in place to deal with these within the deadlines or request extensions.
• Many firms are incorrectly calculating their ‘consumer credit income’, on which the FCA’s fees will be based. Double check this is correct at the outset.
• Make sure a suitable point of contact is included on the authorisation application. Too often this has proved to be someone who cannot readily deal with subsequent queries raised by the FCA. It needs to be someone of sufficient seniority.
• Make sure any statements, such as, ‘we are committed to treating customers fairly’ and ‘we will assess affordability’ are backed up by a description of the process. Many firms fail to do this.
• Set out the relationship with the customer from start to finish and be clear on what the pre-contractual information includes.
• A firm’s conduct throughout the authorisation process will be considered as part of the decision-making process.
The FCA will publish a further update in June on how the authorisation process is progressing.
FLA emails issued in May 2015
All these emails can be found on the Members’ Section of the FLA website – www.fla.org.uk
Competition and Markets Authority’s Payday Lending draft Order – 1 May 2015
On 1st May the CMA published a draft Order as part of its market investigation into payday lending. The Order prohibits the supply of payday lending unless the lender has (a) published information on an FCA-authorised price comparison website and (b) provided customers with a summary of the cost of borrowing. It also obliges payday loan providers to produce and submit compliance reports to the CMA.
FCA’s thematic review and guidance for firms in relation to risks to customers from performance management at firms – 7 May 2015
In March, the FCA published the results of a thematic review into the risks to consumers which may arise as the result of staff financial incentive structures and other performance management issues. We had previously alerted members to this in an email dated 16 March: in this email we invited any further comments on the consultation guidance, the closing date for which was 15th May.
Response to FCA Consultation Paper 15/6 – 8 May 2015
The FLA has responded to CP 15/6, which proposed changes to the rules and guidance on consumer credit. The response expressed concern at the frequency of proposed changes to the new consumer credit framework, and urged the FCA to make such changes only following careful analysis and consideration.
FCA’s proposal to end opt-out selling of insurance add-ons – 8 May 2015
In March, we drew members’ attention (email dated 25 March) to proposals published by the FCA to end opt-out selling of insurance add-ons. The consultation closes on 25th June and the proposals will be discussed at the forthcoming GIG meeting on 23rd June.
Provision of premium finance to retail general insurance customers – 11 May 2015
The FCA has published its thematic report into the provision of premium finance to retail general insurance customers. The report may be of interest to firms providing regulated credit or acting as a credit broker, and the findings will be discussed at the forthcoming GIG meeting on 23rd June.
Post-election changes to Government and Opposition frontbench teams – 12, 13 and 22 May 2015
Details of changes to frontbench teams made following the General Election on 7th May have been circulated as further information has become available. Harriet Baldwin (Economic Secretary to the Treasury) will cover FCA regulation, including consumer credit and access to finance. Nick Boles will be the Minister of State responsible for Consumer and Competition Policy at the Department for Business, Innovation and Skills.
Draft EBA guidelines on banks’ exposures to ‘shadow banking entities’ – 13 May 2015
In March, the European Banking Authority (EBA) published a consultation on guidelines on limits to banks’ exposures to “shadow banking entities.” The EBA believes that there is a risk to banks from exposure to shadow banks, which are not generally subject to prudential regulation, do not provide access to deposit guarantee schemes to investors and do not have access to central bank liquidity. The closing date for responses is 19th June: members’ views were invited by 27th May.
Borrowers in Arrears – Bank of Scotland v Rea – 13 May 2015
A decision made by the High Court in Northern Ireland has drawn attention to lenders’ practices when dealing with borrowers who fall into arrears on mortgages. The FCA is examining lenders’ practices and may decide to consult on further rules and guidance to clarify its expectations under MCOB and TCF. The Secured Lending Group will consider the implications of the decision when it meets on 4 June 2015.
Keep Me Posted campaign – 18 May 2015
The ‘Keep me Posted’ group campaigns for consumers to have the choice of receiving their bills and statements on paper, rather than being moved online by their banks and service providers. The group is concerned about those who want to retain a paper bill or statement but are being charged to do so – a situation which disproportionately affects some of the most vulnerable in society. The campaign is supported by around 70 charities, organisations and businesses.
Financial Ombudsman Service Annual Review for 2014/15 – 19 May 2015
The Financial Ombudsman Service’s Annual Review reports an overall reduction of approximately 25% in the number of initial enquiries and complaints received from consumers. 63% of new cases were about PPI, although the overall number of PPI complaints is declining. Complaints about payday lenders rose by almost 50% and complaints about credit broking, debt collecting and debt management also saw significant rises.
Enterprise Bill and Queen’s speech – 19 May 2015
The newly appointed Business Secretary, Sajid Javid MP, has outlined the proposed content of an Enterprise Bill, which was due to be included in the Queen’s Speech on 27 May. The proposed measures include cutting red tape, creating a Small Business Conciliation Service to help resolve disputes, and extending and simplifying the Primary Authority scheme, which allows business to get advice on regulation from a single local council whose advice must then be respected by all other local authorities.
FCA Data Bulletin No 3 – 20 May 2015
The FCA has published the third in its series of Data Bulletins, which highlight information which the FCA holds about authorised firms. This edition includes items on numbers of consumer calls to the Contract Centre; the ScamSmart campaign; complaints published for H2 2014; numbers of applications for Approved Person status; numbers of attestations requested by the FCA over the past 12 months; numbers of Skilled Person’s reports commissioned during the first 3 months of 2015 and the outcome of a review of financial promotions during the first 3 months of 2015.
EU agreement reached on Fourth Anti Money Laundering Directive – 22 May 2015
The European Parliament has agreed its position on the Fourth Anti Money Laundering Directive. The text is expected to be published in the Official Journal before this Summer, following which Member States will have a further two years to implement it. This fourth iteration of the Directive adopts a new definition of ‘politically exposed persons’ and requires national governments to host a central register of beneficial owners.
FCA message on unallocated payments from debt management firms – 26 May 2015
The FCA has become aware of instances where payments, made on behalf of consumers by debt management firms, are being returned as unallocated by lenders. The FCA expects debt management firms and lenders to act collaboratively to ensure that customers are treated fairly where funds remitted on their behalf cannot be allocated to an account. It also suggests that, as a matter of good practice, lenders should alert debt management firms when debts are sold or assigned.
Queen’s Speech – 27 May 2015
The Queen’s Speech announced 26 Bills to be introduced over the next 12 months. Of particular interest to FLA members are Bills on Enterprise, Full Employment and Welfare Benefits, National Insurance Contributions/Finance and Bank of England.
PPI update in light of the Plevin v Paragon Supreme Court Judgment – 28 May 2015
The FCA has announced that it is considering whether additional rules and/or guidance are required to deal with the impact of the Plevin decision (see email of 11 November 2014) on complaints about PPI. It proposes to engage with relevant stakeholders in the coming months. Members’ views will be invited at the next Legal Committee meeting on Wednesday 3rd June.
FCA Updates – May 2015
Regulation Round-up
Consumer Credit update
FLA Meetings in June
2 June – Motor Finance Fraud Group
3 June – Legal Committee
3 June – Regulatory Reform Working Group
4 June – Secured Lending Group
10 June – Credit Committee
10 June – AFD Risk & Fraud Group
11 June – Litigation Committee
16 June – Financial Crime Committee
17 June – CFD Management Committee
17 June – Secured Lending Group
23 June – General Insurance Group
23 June AFD Regulatory Working Group
24 June – MFD Management Committee
25 June – CMC Group
FLA Conferences and training 2015
Asset Finance Conference – Equipping UK Businesses – 18 June 2015
Secured Lending Workshop – 23 June – details to follow
FCA Regulation Conference – 15 October 2015 – details to follow.
Eurofinas Convention 15-16 October (Cascais, Portugal)
Registration for the Eurofinas Annual Convention, bringing together representatives from the consumer credit industry across Europe, is now open. Accommodation can be booked here.