Welcome to this month’s Regulatory Round-Up, which summarises the FCA’s announcements and other regulatory information we have circulated during July.Overview
This month the FCA has published three weighty (and long-awaited) consultations to keep the sector busy well into the Autumn period. These include proposed changes to CONC and new guidance to help firms better manager the risks linked to staff remuneration and incentive policies (deadline 4 October); a draft framework for extending the Senior Managers and Certification Regime to all FCA regulated firms (deadline 3 November) and, earlier today, updates to CONC to clarify what the regulator expects of firms when assessing affordability and creditworthiness (deadline 31 October 2017). Over the next few weeks we will be discussing these papers in detail with both the FCA and members, before submitting our responses.
With regard to creditworthiness, the FCA believes its existing approach (focusing on high-level principles and proportionality) does not require fundamental change and it has no intention of being highly-prescriptive – which the regulator views as risking the return of a ‘tick-box’ culture. Following the High Cost Credit Review, the FCA has decided not to change the HCST credit price cap and further work will now be undertaken looking at the Rent to Own, Home Credit and Catalogue Credit sectors. The next FCA consultation is expected in early 2018.
With four weeks to go before the FCA begins its intensive media campaign announcing the new two year deadline for PPI complaints, firms are busy reviewing processes and resourcing. Lenders have been asked to provide contact information for the FCA’s PPI Hub and the FOS has requested information on profit share and commission levels, so complaints can be dealt with efficiently.
We will be running two Seminars in the Autumn on preparing for the General Data Protection Regulation (10 October) and the extension of the Senior Managers and Certification Regime (7 December – details to follow).
FLA emails issued in July
FCA publishes its regulated fees and levies for 2017/18 (Policy Statement 17/15) – 3 July 2017
The FCA has published Policy Statement 17/15, which gives feedback to CP (CP17/12) and ‘made rules’ on fees and levies for the coming year. The FCA has made use of the underspend for 2016/17 to reduce the MAS levy for firms.
PRA Statement on Consumer Credit – 4 July 2017
The PRA has published a Statement summarising the results of its review of consumer credit lending. This follows the publication (on 27 June) of the Bank of England’s latest Financial Stability Report. Overall, the PRA says it found no evidence that recent growth in consumer credit “has been primarily driven by a material lowering of credit policies or scoring”, and says that information supplied by firms shows that the problems seen in the credit markets prior to the financial crisis are “no longer widely present”. The next update on this PRA review will be made on 25 September 2017.
FCA publishes proposals on staff remuneration and incentives – 4 July 2017
The FCA has published the findings of its review. It is consulting on proposed changes to CONC and new guidance to help consumer credit firms identify and manage the risks arising from staff remuneration and incentive policies and procedures effectively. The consultation period runs until 4 October – we will be responding.
EBA publishes report on consumer data usage – 5 July 2017
The European Banking Authority (EBA) has published a report on the innovative uses of consumer data by financial institutions. The EBA has helpfully concluded that there are currently not sufficient grounds for further industry-specific legislative interventions.
FCA Annual Report Highlights – 5 July 2017
The FCA has published its Annual Report and Accounts 2016/2017. With regard to FLA markets, points of interest in the Report include sections on Vulnerable Customers; PPI; Brexit; Arrears; Senior Managers; Credit Card Market Study; Cyber Resilience; Authorisation and the FCA’s Contact Centre.
PPI update – 5 July 2017
On Monday 26 June 2017, the FCA held the first of two PPI Briefings aimed at helping smaller firms implement Policy Statement 17/3 in the run-up to the implementation of the FCA’s two year deadline for PPI complaints. We circulated a summary of the briefing, together with a list of the FCA’s response to questions raised by FLA members. We will be meeting with the FCA on a regular basis between now and their PPI campaign launch at the end of August and will keep members updated on developments.
Financial Services and Brexit – 6 July 2017
Andrew Bailey, FCA Chief Executive, has given a speech on Why Free Trade and Open Markets in Financial Services Matter during which he outlined the regulator’s Brexit-related work. An additional £2.5m levy on firms has been introduced to fund and resource this work, which includes providing technical advice to Government for the negotiations.
Final FCA guidance for firms on PEPs – 6 July 2017
The FCA have published their final guidance for firms on Politically Exposed Persons (PEPs) under the Money Laundering Regulations. In line with the spirit of the new Money Laundering Regulations a proportionate risk-based approach should be taken to identify PEPs and then apply enhanced due-diligence measures.
FCA and AML Regulations 2017 – 7 July 2017
The Money Laundering Regulations 2017 (MLRs), which came in to force on 26 June, update the UK AML regime to transpose the EU’s 4th Money Laundering Directive. We have provided a briefing setting out specific areas which the regulator wants to highlight.
Government publishes Repeal Bill – 13 July 2017
The Government has published the European Union (Withdrawal) Bill, which will repeal the European Communities Act 1972. Any existing ‘direct’ EU legislation (including Regulations) will form domestic law on and after exit day and any EU Directives which apply before the exit day will continue to apply and be enforced.
FCA publishes further findings into customer understanding in retail banks and building societies – 17 July 2017
The FCA has published its follow-up work looking at how retail banks and building societies assess their customers’ understanding of the products which they have bought (TR17/1).
FCA’s final template letter for proactive PPI mailing – 19 July 2017
The FCA has issued the final version of its letter template, which firms can use as part of their proactive mailing to customers in relation to PPI complaints. Use of the text is not mandatory and firms are free to make their own adjustments but the FCA believes it is appropriate and is not intending to circulate any further versions. The PPI Helpline number included in the letter should only be used on letters sent on or after the campaign launch of 29 August. If you wish to send letters before this date, the FCA has asked that you contact it directly to discuss this further. The FCA has also asked firms to provide contact details it can include for each firm on its PPI Hub. FOS has similarly asked firms to send it information on commission structures and profit share models.
Phishing e-mails targeted at brokers – 20 July 2017
We have been made aware of a phishing scam targeting mortgage brokers and are concerned that similar attempts could be made which could affect other finance sectors including those represented by the FLA. Members who have experience of or information about phishing attacks are invited to contact email@example.com.
Delays in the provision of County Court Orders and Judgements – 25 July 2017
Members have recently reported that they are experiencing very slow turnaround times within the County Court system for the provision of return of goods (ROG) orders. This email invited feedback from members.
Speech by Alex Brazier, Bank of England – 25 July 2017
Alex Brazier, Financial Director for Financial Stability, Strategy and Risk and Member of the Financial Policy Committee at the Bank of England, recently gave a widely-reported speech entitled ‘Debt Strikes Back’ or ‘The Return of the Regulator’? The speech contained a number of positive messages including the observation that Britain does not have a high level of consumer debt – the increase in consumer debt of all types is equivalent to just 1.5% of spending.
Extending the Senior Managers and Certification Regime to all FCA Firms – 26 July 2017
The FCA has published Consultation Paper CP17/25 which sets out how the regulator will apply the Senior Managers and Certification Regime (SMCR) to all FCA-regulated firms. Later this year the FCA will consult on the operational aspects of the new regime, including how existing Approved Persons will transition into it. We will respond to the consultation (by 3 November), following which the Final rules will be published. The new regime is expected to be implemented in late 2018.
FCA seeks views regarding the Office for Professional Body Anti-Money Laundering Supervision – 27 July 2017
The FCA has launched a consultation regarding the government-proposed Office for Professional Body AML Supervision (OPBAS). It usefully shows the FCA’s most up to date AML thinking and reinforces best practice.
Launch of MAS ‘creditor toolkit’ – 28 July 2017
MAS have just launched its ‘Creditor toolkit’ which sets out a framework to assist creditors in working collaboratively with the advice sector to deliver better outcomes for consumers. It identifies 3 ‘strategic’ themes where combined action can deliver a more supportive approach towards consumers:
BACS Call for Input – 28 July 2017
BACS has published a Call for Input on concepts aimed at helping them to ensure they prioritise and deliver changes to the Direct Debit product that meet user needs.
FCA consults on Assessing Creditworthiness in Consumer Credit and starts new web-page on Motor Finance – 31 July 2017
The FCA has published its long-awaited Consultation Paper (CP) Assessing Creditworthiness in Consumer Credit, which seeks to clarify what the regulator expects of firms when assessing creditworthiness and affordability. The FCA believes this is in line with its commitment to improved transparency (as set out in its Mission) and that it will make it easier to supervise the credit markets. We will be responding by 31 October 2017.
FCA Feedback Statement on High Cost Credit – 31 July 2017
The FCA has published a Feedback Statement (FS 17/2) following its Call for Input on High Cost credit in November 2016. It does not propose to alter the HCST credit cap and will undertake further work looking at the following sectors: Rent to Own, Home Credit and Catalogue Credit.
FLA Vulnerability and Debt News – Latest edition attached. To sign up for this Newsletter, please contact Patsy.Calnan@fla.org.uk
FLA meetings in September 2017
6 September – Regulatory Reform Working Group
7 September – Motor Finance Fraud Group
7 September – NaVCIS Review Group
13 September – AFD Management Committee
19 September – Litigation Forum
20 September – FLA Business Finance Code Group
21 September – VAT Group
21 September – CFD Management Committee
21 September – Secured Lending Group
27 September – Independents’ Meeting
27 September – MFD Management Committee
27 September – Credit Committee
28 September – Financial Crime Forum
29 September – General Insurance Group (GIG)
General Data Protection Regulation – Getting over the finishing line – 10 October 2017