Welcome to this month’s Regulatory Round-Up, which summarises the FCA’s announcements and other regulatory information we have circulated during September.Overview
This month the Financial Policy Committee published its latest Statement on consumer credit lending (mainly by the larger banks) and noted that while the quality of lending had improved since the financial crisis, lenders were placing too much weight on the recent performance of consumer credit lending in benign conditions as an indicator of credit quality. In turn, firms were underestimating the losses they could incur in a downturn. In an interview with The Guardian, Andrew Bailey (CEO at the FCA) talked about consumers using credit as a means of smoothing erratic incomes – ‘but the question is how do you structure it in a sustainable fashion’. ‘It needs government involvement’. With regard to the motor finance market, he said ‘I don’t think [PCPs] are irrational at all’.
We held a very successful Fringe Event at the Labour Party Conference discussing what further steps lenders could take to identify and assist vulnerable customers – following publication this year of our two research reports on vulnerability in lending and debt collection. Two of the major points highlighted were the benefits of lenders doing more to share best practice on what works well in this regard and the need for the voluntary sector to work together – so lenders are not having to deal with lots of different charities on vulnerability issues. We will be hosting a similar event at the Conservative Party Conference next week.
We have been discussing the FCA’s consultation on new rules for affordability and creditworthiness assessments with a broad range of lenders as we draft the industry’s response. Some of the key themes are the FCA’s proposed move away from accepting household income (and the retrograde step this presents for family members traditionally referred to as ‘homemakers’ being able to access credit), the disregarding of security and the potential for far more detailed record keeping on individual loans. The FCA wants the new rules to clearly set out the regulatory expectations and so the test is whether they do actually achieve this. There may be a role for industry guidance to plug any gaps.
With the implementation of GDPR only eight months away, firms remain busy with their project plans. Our GDPR Seminar on 12 October is sold out, but there is a waiting list if firms still want to register. The Credit Reference Agencies have been working with the Information Commissioner on a standard Fair Processing Notice which firms can use for shared data. We will circulate this shortly.
FLA emails issued in September
FCA consultation on Retirement Interest-only Mortgages – 6 September 2017
The FCA’s most recent Quarterly Consultation no. 18 includes a proposal to establish a new “Retirement interest-only mortgage”. The FCA has determined that some older customers might benefit from interest-only products that are not currently available because of the way the FCA implemented the Mortgage Credit Directive.
Independent Review of the Funding of Debt Advice – Call for evidence – 11 September 2017
The Money Advice Service has launched an Independent Review of the Funding of Debt Advice, led by Peter Wyman. The review will look at how debt advice is currently provided and how this might change based on how customers want to access debt advice in the future. We have met with the Review Team and emphasised that funding debt advice must be shared widely – especially as council tax and utility bill debts are some of the most common seen by debt advisers.
Draft motor finance fraud best practice and guidance – 12 September 2017
Draft best practice and guidance on combatting motor finance fraud has been circulated for comment, and will be published on the secured area of the FLA website in early October.
PPI Campaign update – 13 September 2017
The FCA has published feedback following the launch of the two year deadline for PPI complaints on 29 August. The regulator is pleased with the launch and coverage to date and believes that the key messages have landed well – with lots of media coverage and web traffic in the first few weeks. Banks have also reported an increase in traffic, but there has been no noticeable increase in CMC activity. All firms are seeing an increase in general consumer enquiries – including those who did not sell PPI. We will continue to monitor the activity prompted by the campaign.
Data Protection Bill and ICO draft guidance on contracts and liabilities – 14 September 2017
The Government has published its Data Protection Bill which, once enacted, will implement the General Data Protection Regulation (GDPR). Amongst the key clauses contained in the Bill are Clause 9, which gives the Secretary of State powers to extend the right to process criminal conviction data beyond an ‘official authority’ – in line with the FLA’s lobbying; Clause 11, which places limits on fees that data controllers may charge; and Clause 13, which provides that a data subject may, within 21 days of being on the receiving end of an automated decision, request a manual intervention.
The Information Commissioner’s Office (ICO) has published draft guidance on contracts and liabilities, the aim of which is to outline to data controllers and processors what they must include in contracts as a minimum to meet the GDPR requirements.
FCA concerns around consumer credit firms’ handling of complaints – 15 September 2017
Following a review of how consumer credit firms approach and deal with customer complaints, the FCA has written to the CEOs of consumer credit firms expressing concerns about material non-compliance – including not providing customers with the required information about the Financial Ombudsman Service (FOS) and failing to provide complainants with a clear explanation of the outcome of the complaint.
Ultimate Beneficial Ownership checks – 15 September 2017
Under the Fourth Anti-Money Laundering Directive (4AMLD), there are requirements to identify and verify any Beneficial Owner(s) (BO) of a business customer where an individual owns or controls more than 25% of the business. This email looks at the use of the Persons with Significant Control (PSC) register and how this might assist firms, set up in 2016, to which all UK companies and trusts are required to submit an annual return declaring their BO’s. However, UK money laundering Regulations and guidance note that firms will not entirely satisfy their obligations by doing this.
Implementation of the Revised Payment Services Directive (PSD2) – 19 September 2017
The FCA has published two documents linked to Payment Services Directive (PSD2), which is due to be implemented by 13 January 2018. Implementation of the Revised Payment Services Directive (PSD2): Approach Document and final Handbook changes outlines the Handbook changes to reflect PSD2; and Payment Services and Electronic Money – Our Approach aims to help firms navigate the payment services and e-money regulatory requirements.
Speech by Jonathan Davidson, Executive Director of Supervision, Retail and Authorisations – City and Financial speech – 20 September 2017
This speech focused on the progress of the FCA’s mission as a conduct and competition regulator, and the design of the Accountability regime, which was introduced for banks and deposit takers in March 2016 and proposals for extending the regime to over 47,000 other FCA-authorised firms. We are holding a Seminar on the Senior Managers and Certification Regime on 7 December – further details will be circulated soon.
FCA publishes findings from their Ageing Population Project – 21 September 2017
The FCA has published an Occasional Paper (OP 31) outlining the findings from a project that explored how the ageing population would impact the Financial Services industry. The full paper can be found here. The paper reviews the public policy implications of having a population which is getting older and the resulting impact on financial services. The document also includes actions which the FCA and industry could take to better support older people.
PM speech on future UK/EU relationship – 22 September 2017
The Prime Minister delivered a keynote speech in Florence on the UK’s future relationship with the European Union. She said she did not favour a new trade framework based on existing models, such as the European Economic Area or the Canadian free trade deals with the EU. Instead, she called for ‘creative solutions’ based on high regulatory standards. The starting point would be that the UK would maintain EU rules on day one of the departure. The FLA’s Brexit Conference will be held on 20 November 2017.
Financial Policy Committee Statement on Consumer Credit – 25 September 2017
The Financial Policy Committee (FPC) has published a Statement summarising recent work looking at consumer credit lending – primarily by the major banks. While the overall quality of consumer credit lending has improved since the financial crisis, the FPC believes lenders are placing too much weight on the recent performance of consumer credit lending in benign conditions as an indicator of credit quality. As a result, they have been underestimating the losses they could incur in a downturn.
Insurance Distribution Directive implementation – Consultation Paper 3 (CP17/33) – 25 September 2017
The FCA has published its latest IDD CP. This consultation follows on from CP17/7 and CP17/23 with further proposals on how FCA plan to implement the IDD in the UK. The IDD replaces the Insurance Mediation Directive and aims to enhance consumer protection when buying insurance (including general insurance, life insurance and insurance-based investment products) and to support competition between insurance distributors by creating a level playing field. At the same time FCA has also released their first Policy Statement setting out their near final rules for their implementation of the IDD.
FLA Vulnerability and Debt News – latest version attached. Please contact Patsy to subscribe to this Newsletter – Patsy.Calnan@fla.org.uk
FLA meetings in October 2017
4 October – Regulatory Reform Working Group
11 October – AFD Risk and Fraud Group
12 October – MFD Strategy Meeting
18 October – MARS Forum
19 October – Collections Forum
24 October – Mortgage Compliance
25 October – AFD Technology and Business Equipment Group
26 October – SAF Steering Group
26 October – North West Group (Grant Thornton, Manchester)
General Data Protection Regulation – Getting over the finishing line – 12 October 2017 Sold Out
Financial Crime Conference – 9 November 2017 – Programme to follow
Extension of the Senior Managers and Certification Regime – 7 December 2017 – Programme to follow