Consumer and Retail Finance – April 2017Print publication
Latest FCA consultations, guidance and updates on future publications, and other sector news including FinTech.
Financial Conduct Authority (FCA)
Jonathan Davidson, the FCA’s Director of Supervision – retail and authorisations, gave a wide-ranging speech at the Credit Summit in London on 30 March 2017. He discussed the three “big themes” which have been the focus of FCA activity since it took over responsibility for consumer credit in 2014: affordability; treatment of customers in financial difficulties; and the risks to consumers inherent in business models. The FCA has almost completed its work on how firms across the market carry out affordability assessments and intends to publish more in the coming months.
Mr Davidson confirmed that the FCA will shortly be publishing a Feedback Statement summarising responses to last year’s Call for Input on the review of retained provisions of the Consumer Credit Act, and outlining how the FCA will be approaching the review. In the FCA’s latest policy development update, the expected publication date for its consultation paper on creditworthiness and affordability in consumer credit is stated “to be confirmed”. The paper had been due for publication in Q1 2017.
The FCA published a number of key documents on 18 April 2017: its consultation paper on “FCA-regulated fees and levies: rates proposals for 2017/18” which is aimed at fee-payers paying FCA fees, Financial Ombudsman Service, Money Advice Service, Pensions Guidance and Illegal Money Lending levies (comments are requested by 9 June 2017); its final Mission document and accompanying Feedback Statement; and its 2017/18 Business Plan. For the first time, the FCA has published its Sector Views along side its Business Plan, highlighting the issues and developments it sees in the sectors it regulates.
The FCA’s sector priorities in relation to retail lending (which includes consumer credit) are set out at pages 70 to 72 of the Business Plan. Cross-sector priorities include: financial crime and anti-money laundering; firms’ culture and governance; treatment of existing customers; and consumer vulnerability and access to financial services. A transcript of the FCA’s Mission Press Conference, discussing the five publications, can be found here.
During the Press Conference, the FCA confirmed that the initial consultation on extending the Senior Managers and Certification Regime to all authorised firms will be launched later this year (it was previously scheduled for Q2 2017).
On 24 April 2017, the FCA published final guidance on the treatment of customers with mortgage payment shortfalls, covering remediation for mortgage customers who may have been affected by the way firms calculate customers’ monthly mortgage instalments. The guidance is primarily aimed at residential mortgage lenders and administrators of regulated mortgage contracts. The FCA expects all remediation programmes to be concluded by 30 June 2018.
The FCA has also updated its guidance on the meaning of “durable medium”, to help firms understand their obligations when using non-paper methods of communication.
The Financial Advice Working Group (FAWG) has published two reports for the FCA and HM Treasury: Rules of Thumb and Nudges: Improving the financial well-being of UK consumers and Consumer explanations of “advice” and “guidance”. As part of their Financial Advice Market Review (FAMR), the FCA and HM Treasury asked FAWG to define some simple rules of thumb and nudges to help people be aware of, and take action on, their financial needs, and to suggest a shortlist of potential new terms for “advice” and “guidance” that would help consumers to better understand these services when they take decisions about their financial future. The FCA is currently consulting on measures to address four of the recommendations from the FAMR’s March 2016 final report.
The FCA has published its “Credit card market study: consultation on persistent debt and earlier intervention remedies” which sets out, among other things, proposals to address persistent credit card debt and require firms to identify customers at risk of financial difficulties. The consultation follows on from the July 2016 credit card market study final findings report and is part of the package aimed at reducing the number of customers with problem credit card debt. Comments are requested by 3 July 2017.
The FCA is also consulting on its approach to applying the Payment Services Regulations 2017 (PSRs 2017), which will replace the Payment Services Regulations 2009 and implement the revised EU Payment Services Directive (known as PSD2). The legislation needs to be in place in the UK by 13 January 2018. The consultation affects:
- existing payment service providers and e-money issuers
- businesses not currently authorised or registered with the FCA that carry on (or intend to carry on) payment related activities and
- businesses that are subject to regulation by the Payment Systems Regulator (PSR).
The PSRs 2017 will also amend the Electronic Money Regulations 2011. The consultation paper proposes a revised Approach Document – a single guidance document – which will set out the FCA’s approach to interpreting and applying both sets of regulations. The paper also sets out proposed changes to the FCA Handbook and Perimeter Guidance Manual. The FCA expects to publish its Policy Statement in Q3 2017, and the final rules and revised Approach Document after HM Treasury finalises the PSRs 2017.
The PSR is also consulting on the proposed approach to monitoring and enforcing compliance with those provisions of the PSRs 2017 for which it has been appointed the competent authority (information on ATM withdrawal charges and access to payment systems and bank accounts).
Responses to both consultations are requested by 8 June 2017.
Finally, the FCA has published its first set of complaints data following the introduction of new rules in June 2016. After PPI, the next most complained about product was current accounts. See the FCA’s press release here.
On 5 April 2017, the Joint Committee of the three European Supervisory Authorities launched a public consultation on draft guidelines setting out what payment service providers should do to detect and prevent the abuse of funds transfers for terrorist financing and money laundering purposes. The consultation closes on 5 June 2017.
On 14 April 2017, HM Treasury published a Regulatory Innovation Plan which covers how financial services regulators are adapting and encouraging new technologies and disruptive business models, and better utilising new technologies to reduce regulatory burdens on business. A key government aim is to ensure the UK supports the development of new business models and disruptive technologies, breaking down barriers to entry and boosting productivity. The government’s vision is for UK financial services to be the most competitive and innovative in the world, supplementing existing services with greater choice and value for consumers. The FCA’s Executive Director of Strategy and Competition recently gave a speech on the next phase of the FCA’s “Project Innovate”.
Mark Carney, Governor of the Bank of England, delivered a speech at the International Fintech Conference 2017 entitled “Building the Infrastructure to Realise FinTech’s Promise”, in which he concluded that Fintech could: deliver significant benefits to households and businesses across the UK and the world; widen access to financial services and bring new sources of credit; and connect customers better with their finances, empowering them more in the process. He also said that new technologies can deliver faster service, greater choice and keener pricing.
Still on the subject of FinTech, the European Commission is seeking input from stakeholders to further develop the Commission’s policy approach towards technological innovation in financial services. Responses to the consultation document are requested by 15 June 2017.
The National Audit Office (NAO) has published a report on Vulnerable consumers in regulated industries. The report focuses on the regulation of four sectors: water, energy, telecommunications and financial services. The NAO says that the services in these sectors are critical for security, well‑being and social participation, which magnifies the impact of potential harm faced by vulnerable consumers. The report focuses on what the four regulators in these sectors are doing, including working with government, to meet their statutory duties and obligations that relate to vulnerable consumers.