Consumer and Retail Finance – October 2017

Print publication


Latest from the FCA, including findings from its largest tracking survey on consumers and finance, and other sector news.

Financial Conduct Authority (FCA)

The FCA has published the findings from its Financial Lives Survey 2017, “Understanding the financial lives of UK adults”.  It is the FCA’s largest tracking survey of UK consumers and finance, based on nearly 13,000 interviews.  Further analysis of the survey results will be published in an upcoming “Approach to Consumers” paper.  Selected results were included in the Occasional Paper on the Ageing Population and Financial Services, published last month.  The survey covers a range of financial products and services, including consumer credit, mortgages and retail banking.  The FCA plans to use the data to design new ways of helping and protecting consumers.  The findings include the following:

  • 24% of UK adults have little or no confidence in managing their money;
  • 46% of UK adults report low knowledge about financial matters;
  • 50% of UK consumers currently show one or more characteristics of potential vulnerability;
  • the FCA defines 4.1 million people as being in difficulty, because they have already failed to pay domestic bills or meet credit commitments in three or more of the last six months;
  • 75% of UK adults have had one or more consumer credit products or loans in the last 12 months;
  • 3.1 million UK adults have one or more high‑cost loans now or have had one in the last 12 months, including payday loans and home collected loans;
  • 54% of UK adults with a personal loan give their provider a high satisfaction score and 55% have a high degree of trust in their personal loan provider;
  • 25% of UK adults have been overdrawn in the last 12 months.

The FCA recently announced that it is undertaking a thematic review of the debt management sector, which it expects to complete in Q1 2019.

We reported in the last edition of the Regulatory round-up that the FCA has finalised the revised EU Payment Services Directive (PSD2) requirements and updated its PSD2 webpage.  PSD2 will be implemented in the UK through the Payment Services Regulations 2017, which come into force on 13 January 2018.  On 13 October 2017, the FCA launched its PSD2 Navigator, to help businesses identify the key changes that are relevant to them as a result of PSD2, with links through to further information.  On the same day, the European Banking Authority published final guidelines on the procedures for complaints of alleged infringements of PSD2 by payment service providers.

The recently published Handbook Notice 48 includes certain changes in relation to PSD2, following on from the FCA’s September 2017 PSD2 Policy Statement.  Other Handbook changes include the rules around the scope and operation of Financial Services Compensation Scheme funding.  The changes were consulted on in December 2016 and feedback has now been published in a further consultation paper.  There are also a number of changes to parts of chapter 16 of the Supervision Manual.

The FCA has received an undertaking under the Consumer Rights Act 2015 (CRA) given by PPRO Financial Limited.  The FCA can challenge firms using terms that it views as not being fair and/or transparent within the meaning of Part 2 of the CRA.  This undertaking concerns changes to terms in certain consumer terms and conditions used by the firm in contracts with its prepaid card customers.

In May 2017, the FCA launched its review of the business models used in the retail banking sector, to assess their impact on competition and conduct.  On 25 October 2017, it published a Purpose and Scope paper providing further detail on the aims of its work in this area and the issues it is considering.  These include the role of business model analysis in conduct and competition regulation, the changing face of retail banking and the potential effects of change on retail banking business models.  A project update is expected in Q2 2018.

The FCA has updated the webpage on its mortgages market study.  As the study is still ongoing, the FCA has decided to defer publication of its interim report until spring 2018.  It was originally expected in summer 2017.  A final report, following comments from stakeholders, will be published later in 2018.

Credit rating firm Equifax Limited is being investigated by the FCA following the US cyber security incident in May 2017 that led to the loss of UK customer data.

The FCA has published a Regulatory sandbox lessons learned report.  The regulatory sandbox is part of the FCA’s “Project Innovate”.  It allows businesses to test innovative products, services, business models and delivery mechanisms in a live environment while ensuring that consumers are appropriately protected.  The report reflects on the insights and lessons learned from testing since the sandbox was launched in June last year.

Other sector news

On 24 October 2017, the government issued a call for evidence to gain further insight from the debt advice sector and creditors on how best to design a six-week breathing space scheme for individuals in debt.  The consultation closes on 16 January 2018, although views are sought as soon as possible.

The Consumer Finance Association announced its merger with the BCCA.  It will be the principal trade association representing the short-term lending sector in the UK.

The City of London Corporation commissioned a report into the value of Fintech.  It believes that Fintech is “an evolution of financial services” and that “every business in the sector must engage with it if they are to survive”.