Welcome to this month’s Regulatory Round-Up which summarises the FCA announcements and regulatory information we have circulated during November.
Overview
As we head towards the end of the year, the flow of regulatory announcements from the FCA and Government is escalating rapidly, as regulators and officials seek to clear their desks before the Christmas break.
This month saw the FCA publish its long-awaited Interim Report on the Credit Card market. While the sector was found to be working relatively well – with customers valuing the flexibility credit cards offer – the FCA is now consulting on a range of measures aimed at promoting shopping around and helping customers avoid problem debt. And some of the recommendations could have broader implications across the consumer credit sector, for example, the provision of quotation searches by all firms undertaking risk-based pricing and new standards for Price Comparison Websites so financial products can be compared on a clearer and fairer basis.
The FCA also published a consultation paper on further rules for dealing with PPI complaints, proposing a two year deadline for new complaints – accompanied by a £42.2m advertising campaign paid for by the 18 firms with the highest volume of complaints. Additional rules are also outlined for PPI complaints linked to an ‘unfair relationship’ claim, with important considerations for the industry to review around the failure to disclosure commissions and the impact on good customer outcomes.
The level of protection afforded to SMEs taking out financial services remains under the spotlight in another FCA consultation. Some of the proposals include giving SMEs rights to complain to the Financial Ombudsman Service and revisiting the current rules which exclude SMEs from benefiting from consumer credit promotions and communications. The Government is also keen to hear whether such changes could reduce SMEs’ access to certain services.
Second charge mortgage lenders continue their preparations for transferring to the MCOB regime in March 2016. The FCA has agreed to update the current Mortgage Advice Exam Standards (via CeMAP) to include second charge lending.
The FCA has recently shared its ‘key workstreams timeline’ for 2015/2016:
Q4 2015 – Research commissioned on the broker market (including remuneration models to see if new rules are required).
Q1 2016 – Announcement on how the FCA will review the retained provisions in the CCA (FLA has already sent a Briefing Paper on priorities)
Q2 2016 – Thematic Reviews on Remuneration Structures and Early Arrears report
Q2 2016 – Final Report on Credit Card Market Study
Q2/Q3 2016 – Creditworthiness consultation published
Q3 2016 – Potential consultations on guarantor loans and credit broking (possibly covering remuneration)
Q4 2016 – Further announcements on the review of the CCA provisions
FLA emails issued in November 2015
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
Pre-Action Protocol for Debt Claims – 29 October 2015
The Civil Procedure Rules Committee has launched a further consultation on a draft Pre-Action Protocol for Debt Claims. We expressed severe concerns with an earlier draft, which has now been updated. We will respond by the deadline of 11 January 2016 and members have been invited to comment.
Credit Card Market Study – Interim Report Published – 3 November 2015
The FCA has published its interim findings on the Credit Card Market and is now seeking comments on its provisional recommendations by 8 January 2016. The FCA found that competition in the market was broadly working well for consumers. Consumers valued the flexibility that credit cards provided and there was clear evidence of consumers switching between credit cards and using their credit cards for a range of purposes. The FCA did, however, find that higher risk consumers were less well served due to the perceived regulatory and reputational risks and, the FCA believes, less likely to switch due to the potential for multiple credit searches to impact on credit files.
Unfair Contract Terms – ParkingEye Limited v Beavis [2015] – 6 November 2015
This Supreme Court case looked at the enforceability of contractual penalty clauses under the Unfair Terms in Consumer Contracts Regulations 1999 and at common law. The Supreme Court dismissed the Appeal, which might have affected charges levied under consumer credit contracts.
Treatment of pre-2004 regulated first charge mortgages – 9 November 2015
The FCA has published a short 6 week consultation on the future regulatory treatment of first charge mortgages entered into prior to 31 October 2004 and which are currently subject to the Consumer Credit Act. The consultation runs until 18 December 2015.
CMC regulatory fees consultation – 10 November 2015
The Ministry of Justice has published a consultation paper on the regulatory fees to be paid by claims management companies (CMCs). They are proposing that fee levels should remain unchanged for 2016 to 2017, which will allow the regulator to deliver an effective regulatory regime fully funded by CMCs.
Guidelines on Product Oversight and Governance – Insurance – 10 November 2015
The European Insurance and Occupational Pensions Authority (EIOPA) (the EU Insurance Supervisor), has published revised draft Guidelines on Product Oversight and Governance. These are primarily targeted at ‘insurance manufacturers’ (i.e. product developers) but may be of interest to insurance distributors.
PPI Complaint Handling – update from the FCA – 11 November 2015
The FCA has written to the FLA setting out how firms should handle complaints in the period prior to the FCA making any rules and guidance following the court decision in Plevin.
Money laundering and terrorist financing controls in overseas jurisdictions – Advisory Notice – 12 November 2015
The HM Treasury Money laundering and terrorist financing controls in overseas jurisdictions – advisory notice has been updated. The notice looks at the risks posed by unsatisfactory money laundering and terrorist financing controls in a number of jurisdictions. The Money Laundering Regulations 2007 require members to put policies and procedures in place to prevent money laundering and terrorist financing activities.
Changes to the Financial Services and Markets Act – 13 November 2015
The House of Lords Committee has agreed two amendments to the Financial Services and Markets Act (FSMA) 2000 to correct technical oversights. The first clarifies who can enforce a credit agreement on behalf of the lender, either by administering the agreement or collecting debts. The current provisions exclude appointed representatives and firms entitled to an exemption as a member of a designated professional body. The second amendment amends Section 27 of FSMA, which deals with agreements made through unauthorised persons.
High Level Principles on Beneficial Ownership Transparency – 17 November 2015
This document clarifies how the UK intends to implement the G20 High Level Principles on Beneficial Ownership Transparency. This is a useful document on this important subject (anti-money laundering) which has, to date, lacked a practical implementation plan.
Review of Trade Associations – 20 November 2015
The team conducting the review of trade associations on behalf of a group of the larger banks has published a further report, containing their final recommendations. The review has recommended a merger of four existing bodies: the British Bankers’ Association; the Council of Mortgage Lenders; Payments UK (formerly the Payments Council); and the UK Cards Association. The report envisages that the Asset Based Finance Association (ABFA) might join at a later stage, and that a “close partnership” would be established with the UK Payments Administration and Financial Fraud Action UK. This means seven bodies are “in scope” for the review’s proposals. The review has accepted that the FLA and the BSA should remain independent, and that close working relationships and effective coordination should be established with them. This reflects the FLA’s responses to the review’s two previous reports.
FCA publishes information on mortgage affordability assessments – 24 November 2015
The FCA has published Occasional Paper No 11 which looks at affordability assessments developed as part of the work undertaken on the Mortgage Market Review.
Call for inputs: Big Data in retail general insurance – 25 November 2015
The FCA is seeking views on how Big Data is affecting (and is likely to affect) consumer outcomes and competition in the retail general insurance (GI) sector. They are also seeking views on whether the regulatory framework affects developments in Big Data or unduly constrains innovation in the interest of consumers. We will be responding by the deadline of 8 January 2016.
Financial Conduct Authority consults on changes to PPI complaint handling rules – 26 November 2015
The FCA has published a consultation paper on introducing a two year deadline for making payment protection insurance (PPI) complaints (accompanied by a consumer communications campaign) and on new rules/guidance for handling PPI complaints in light of the Supreme Court’s decision in Plevin v Paragon Personal Finance Ltd. The deadline for this consultation is 26 February 2016 and we will be working with members on our response.
FCA supervision action for financial crime failings – 26 November 2015
The FCA has fined Barclays Bank (Barclays) £72,069,400 – the largest fine yet imposed for financial crime failings. The FCA did not conclude that the £1.88bn transaction in question involved financial crime. However, it found that the circumstances of the transaction indicated a higher level of risk, requiring a higher level of due skill, care and diligence. A Final Notice has been published.
FCA seeks views on financial services and protections for SMEs – 27 November 2015
The FCA has published a Discussion Paper ‘Our Approach to SMEs as Users of Financial Services’, which looks at whether the current level of regulatory protection for small and medium sized enterprises (SMEs) is broadly appropriate. The paper has been published in response to the FCA’s concerns about the way some financial services firms have treated their SME customers. The FCA’s research found that complex products, limited choice, and poorly managed expectations may expose some SMEs to risk – ‘When things go wrong, SMEs may experience complex and escalating problems, and may struggle with the complaints and claims processes’.
Government encourages Open and Competitive Markets – 30 November 2015
HM Treasury and the Department for Business, Innovation and Skills (BIS) have jointly published a paper in which they outline their “approach to encouraging open and competitive markets that are free from distortions” across a wider range of business sectors. Some of the issues covered include an extension to the Funding for Lending Scheme, renewed focus on making terms and conditions clearer for consumers to understand and a review of Price Comparison Websites by the Competition and Markets Authority.
Code Compliance Statements – CFD and MFD Members The FLA Code Compliance Statements for 2015 were circulated on 27 November and the deadline for completion is 1 February 2016.
New Eurofinas Chief Executive – Leon Dhaene has been appointed as Director General of Eurofinas and Leaseurope with effect from 2 December. Leon, who has a background in consumer finance and leasing, replaces Tanguy van de Werwe
FCA Updates – November 2015
Consumer Credit Update
Regulation Round-Up
FLA Meetings in December 2015
1 December – Credit Committee
2 December – Legal Committee
7 December – CMC Working Group
8 December General Insurance Group
8 December – AFD’s CEO Group meeting
8 December – Financial Crime Group
9 December – MFD Management Committee
11 December – FLA Vulnerability Steering Group
14 December – AFD Technology and Business Group
14 December – CFD Management Committee
14 December – Secured Lending Group
16 December – Litigation Group