Consumer and Retail Finance – March 2017Print publication
Financial Conduct Authority (FCA)
The FCA recently published a webpage on debt permission limitations. Full permission firms with the permission of debt adjusting and/or debt counselling with a ‘no debt management’ limitation must now review and, if necessary, vary their permissions. Some firms may be carrying out debt management activities so that the limitation they hold is not appropriate for their business. The FCA has introduced six new debt limitations which may be relevant. See our recent briefing for further details.
Citizens Advice has published a report on the doorstep loan market; the latest in a series of reports looking into how different high-cost credit markets operate and identifying areas where lending regulations could be changed. Policy recommendations are set out at the end of the report. In summary:
- The doorstep loan market needs better regulation, including stronger rules on affordability checks and restrictions on loan refinancing;
- The FCA should use its review of high-cost credit to build on the success of the regulation of payday lending by extending the total cost cap on payday loans to all forms of high-cost credit, providing consistent protection across all high-cost credit markets.
The FCA is reviewing the price cap on high-cost short-term credit and is also looking at high-cost products as a whole. The FCA aims to complete its work in the first half of 2017. It intends to publish the outcome of the review in the summer, and will be announcing the timetable for its work on high-cost credit.
The Select Committee on Financial Exclusion is calling on the FCA and banks to give greater priority to tackling financial exclusion in the UK. See the Committee’s webpage for links to its report and easy read report, evidence and recommendations.
The FCA will also launch its Ageing Population Strategy in the summer. The Strategy will make recommendations about how outcomes for older people can be improved, including whether regulatory settings need further review.
As part of its ‘Smarter Consumer Communications’ initiative, the FCA is proposing changes to the Conduct of Business Sourcebook and the Mortgages and Home Finance: Conduct of Business Sourcebook. The proposals are set out in its Quarterly Consultation No. 16. The consultation paper also sets out proposed changes to the reporting requirements in the Supervision Manual, which will be of interest to, among others, consumer credit firms and those undertaking home finance activity.
The FCA’s latest Data Bulletin includes a focus on insights from the FCA Consumer Contact Centre. In product-specific sectors, the most enquiries received were about consumer credit. The products most enquired about were personal loans, debt recovery and finance agreements.
The FCA has published finalised guidance on loan to income ratios in mortgage lending.
It has also written to firms that operate loan-based crowdfunding platforms, setting out its expectations on facilitating loans to lending businesses.
It is just over a year since implementation of the Senior Managers and Certification Regime (SMCR). The rules regarding regulatory references for Senior Managers and staff in the SMCR came into force on 7 March 2017. The SMCR applies to staff in roles that can cause ‘significant harm’ to either the firm or its customers, including investment and mortgage advisers. As we reported previously, the FCA will consult during Q2 2017 on the extension of the SMCR to all authorised firms.
The FCA has published a summary of HM Treasury’s new investment advice requirements, which it says give regulated firms more scope to provide information to customers on financial products and services. The changes will take effect from 3 January 2018, following an amendment to the Regulated Activities Order. HM Treasury has previously consulted on amending the definition of financial advice for regulated firms.
The FCA is consulting on new guidance for how financial services firms should treat customers who are politically exposed persons when meeting their anti-money laundering obligations. The guidance is aimed at all firms subject to FCA supervision for anti-money laundering purposes. The consultation follows on from one launched by HM Treasury on 15 March 2017 on the draft Money Laundering Regulations 2017. The new regulations will implement the EU’s Fourth Money Laundering Directive. The government intends that the new regulations will come into force on 26 June 2017. The new regime places added responsibilities on lenders and other businesses in the regulated sector regarding record keeping and tracing beneficial owners but also permits lower risk businesses to apply simplified due diligence measures. On 21 March 2017, the Joint Money Laundering Steering Group published proposed revisions to Part I of its guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry, in line with the draft regulations published by HM Treasury.
A two-month consultation is due to launch in April 2017 on FCA-regulated fees and levies: rates proposals for 2017/18, aimed at fee-payers paying FCA fees, Financial Ombudsman Service, Money Advice Service and pensions guidance levies.
Credit Strategy has reported that, in a speech at its recent Credit Summit, the FCA’s Director of Supervision – Retail and Authorisations said, among other things, that the FCA’s supervisory team is looking into the business models and incentives of consumer credit firms.
Competition and Markets Authority (CMA)
As we reported previously, 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 has since published an updated explanatory note after identifying an omission (see the following link).
The Finance & Leasing Association and the UK Cards Association have published a guide for organisations working with indebted customers in vulnerable situations. Vulnerability: a guide for debt collection contains practical, step-by-step guidance explaining how organisations can identify, understand, and better support vulnerable customers.
The new financial services trade association which launches in the summer (merging the Asset Based Finance Association, British Bankers’ Association, Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association) will be named UK Finance.
The European Commission has published an action plan setting out a strategy to strengthen the EU single market for retail financial services.