Consumer and Retail Finance – February 2017Print publication
Latest from the FCA, CMA and more.
Financial Conduct Authority (FCA)
The Financial Services Consumer Panel has proposed amending the Financial Services and Markets Act 2000 (FSMA) to require the FCA to make rules specifying what constitutes a ‘reasonable’ duty of care owed by financial services providers to their customers. Separately, in a letter to the FCA responding to the consultation on its future mission, the City of London Law Society has set out why it considers that the creation of a directly enforceable duty of care is unnecessary. The British Bankers’ Association has also argued against the potential introduction of a formal duty of care.
In its Handbook Notice 41, the FCA sets out a number of recent changes including the introduction of a new levy on consumer credit firms to recover HM Treasury’s expenses in tackling illegal money lending as required under section 333T of the Financial Services and Markets Act 2000 (introduced by the Bank of England and Financial Services Act 2016). The changes came into effect on 24 February 2017. Further detail and feedback from the FCA’s consultation on these proposals can be found on pages 5 to 7 of the Notice.
The FCA has published a Regulation round-up special issue focusing on its recent consultation on the future funding of the Financial Services Compensation Scheme.
The FCA has confirmed that it plans to consult during Q2 2017 on the extension of the Senior Managers and Certification Regime to all FSMA authorised firms. HM Treasury intends that the regime should start from 2018.
Deutsche Bank was fined £163 million for failing to maintain an adequate anti-money laundering control framework – the largest such financial penalty ever imposed by the FCA (or its predecessor the Financial Services Authority). See the FCA’s press release.
Competition and Markets Authority (CMA)
On 2 February 2017, the CMA published the Retail Banking Market Investigation Order 2017, which implements the package of reforms arising from its investigation into the supply of retail banking services to personal current account customers and to small and medium-sized enterprises in the UK. The CMA’s final report was published in August 2016. See the press release for a summary of the reforms and further detail on the Order.
The CMA has also recently published a guide for payday lenders to a number of the rights and obligations created by the Payday Lending Market Investigation Order 2015, which requires online payday lenders to publish details of their products on at least one price comparison website authorised by the FCA by 26 May 2017; and online and high street payday lenders to provide existing customers with a summary of their cost of borrowing.
In a statement published on 7 February 2017, the Economic Secretary to the Treasury confirmed the government’s agreement to the Law Commission’s recommendations for reforming the Victorian legislation on bills of sale, which allow individuals to use goods they already own as security for loans. The government has agreed to support the Law Commission in drafting legislation to enact the reforms.
The Consumer Finance Association has published its report A Modern Credit revolution: An analysis of the short-term credit market, providing an up-to-date assessment of the short-term credit market and analysing how the market has changed since the introduction of the price cap regulation in 2015.
It has been announced that a new integrated trade body will launch in the summer. The new financial services trade association will merge the Asset Based Finance Association, British Bankers’ Association, Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.
The Lending Standards Board Standards of Lending Practice for business customers will be launched on 28 March 2017.
In the case of Banco Primus SA v Jesús Gutiérrez García on the interpretation of the Unfair Terms in Consumer Contracts Directive 93/13/EEC, the Court of Justice of the European Union (CJEU) provided guidance on the approach national courts should take when evaluating the potential unfairness of terms relating to the calculation of ordinary interest and accelerated repayment in secured loan agreements. Even where a lender has not enforced an accelerated repayment provision, the court is still obliged to assess whether it is fair and may declare it null and void as a result.
In BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG v Verein für Konsumenteninformation the CJEU considered whether information transmitted by a bank to its e-banking customers’ mailboxes on its website met the criteria to be considered as ‘provided’ on a ‘durable medium’ for the purposes of the Payment Services Directive 2007/64/EC.