Consumer and Retail Finance – August 2017

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Latest from the Financial Conduct Authority, Competition and Markets Authority and other sector news including payments.

Financial Conduct Authority (FCA) and Competition and Markets Authority (CMA)

Earlier this year, the FCA published its “Credit card market study: consultation on persistent debt and earlier intervention remedies” which set out, among other things, proposals to address persistent credit card debt and require firms to identify customers at risk of financial difficulties.  The consultation formed part of a package aimed at reducing the number of customers with problem credit card debt.  A policy statement is expected in Q4 2017.  The FCA has recently written to UK Finance in relation to the proposed voluntary industry agreement to give credit card customers greater control over credit limit increases, details of which were set out in chapter 4 of the consultation paper.

The FCA has published an update with more details on its work on motor finance, which was one of the areas of focus highlighted in its 2017/18 Business Plan.  The FCA is working to identify potential areas of consumer harm in that market.

The FCA is consulting on a further two of the 28 recommendations from the Financial Advice Market Review (FAMR) final report which was published in March 2016.  FAMR is a joint FCA and HM Treasury initiative set up to identify ways of making the UK’s financial advice market work better for consumers.

Firms already subject to the Senior Managers and Certification Regime are reminded that the window for reporting Conduct Rule breaches to the FCA began on 31 August 2017 and ends on 31 October 2017.

The FCA has launched a survey of mortgages in the UK, with research taking place during August and September 2017. The results are due to be published in early 2018.  The FCA says it will use the information to understand more about consumers and how they are managing their mortgages and any engagement with their lenders.

The FCA is consulting on proposed new rules requiring current account providers to publish information on service and performance.  Comments are requested by 25 September 2017.  This work follows on from the CMA’s investigation into retail banking (the final report was published in August 2016).  The FCA is in the process of carrying out its own review of the business models used in the retail banking sector to assess their impact on competition and conduct.

From 2 August 2017, as part of the CMA’s package of retail banking reforms, all banks must have set and publicised a ceiling (or cap) on their unarranged overdraft charges in the form of a monthly maximum charge (MMC), and all providers of unsecured loans and overdrafts to small and medium-sized businesses (for values up to £25,000) have to publish and clearly display the rates they will charge for doing so.  See the CMA blog for further details.  The CMA has issued directions to the Co-operative Bank after it failed to meet the 2 August deadline in relation to the MMC.

Other news

In issue 141 of Ombudsman News the Chief Ombudsman noted that “lenders still aren’t always making the right call in checking people will be able to repay what they owe.” Complaints about consumer credit rose by 89% in the year to April 2017.

Citizens Advice has published a major new report “Stuck in Debt” which examines consumer borrowing and long term consumer debt problems.  Research found that nearly 1 in 5 people struggling with debts has had their credit card limit raised without them requesting it.  Citizens Advice says that poor affordability checks by firms are making people’s financial situation worse.  It says that lenders, the FCA, and the government have a crucial role in helping people stay on top of their debts and getting their finances back on track when they fall into difficulties.  The report’s recommendations include that: lenders should not be allowed to increase a credit limit without a customer’s permission and should offer forbearance to customers stuck in problem debt; they should get rid of unarranged overdraft fees; and debt management plans should be legally enforceable.  See the press release here.

The Advertising Standards Authority (ASA) has upheld complaints about an American Express credit card television advertisement.  The claim “there is a card that could give you 5% cashback on all purchases” was misleading and exaggerated the cashback offer.  See an account of the ASA’s ruling here.

The Payments Strategy Forum has launched a consultation on the future of UK payments, which the Payment Systems Regulator (PSR) describes as “the most radical change to the payments industry since the 1960s.”  See the PSR press release here.

As we have reported previously, the Payment Services Regulations 2017 will implement the revised EU Payment Services Directive (known as PSD2) in the UK.  Firms can apply to be authorised or registered under the new regulations from 13 October 2017.  Information on this and the requirements for firms in relation to PSD2 can be found on the FCA website.

The European Banking Authority (EBA) is developing technical standards and guidelines to supplement PSD2, including recently published guidelines on major incident reporting.  It is currently consulting on draft guidelines on fraud reporting requirements.  Comments are requested by 3 November 2017.

The EBA published a discussion paper on 4 August 2017 on its approach to FinTech, following the mapping exercise it undertook in spring 2017 to gain a better insight into the financial services offered and financial innovations applied by FinTech firms in the EU, and their regulatory treatment.  The EBA proposes follow-up work in these areas: authorisation and sandboxing regimes; prudential risks for credit institutions, payment institutions and electronic money institutions; the impact of FinTech on those institutions’ business models; consumer protection and retail conduct of business issues; the impact of FinTech on the resolution of financial firms; and the impact of FinTech on anti-money laundering and countering the financing of terrorism.  There is a three-month consultation period.

The World Economic Forum has also recently published a report entitled Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential in Financial Services.