Consumer and Retail Finance – August/September 2019

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Walker Morris risk series stampLatest from the FCA, including extension of Senior Managers and Certification Regime; other sector news.

Financial Conduct Authority (FCA)

On 11 September 2019, the FCA said that it was “stepping up its efforts to ensure firms are aware of what they need to do to prepare for the potential of a no-deal Brexit”. See the press release .

On 20 September 2019, the FCA updated its dedicated webpage for solo-regulated firms on the extension of the Senior Managers and Certification Regime (SM&CR). There are links to a range of resources, including a recent podcast on certification and regulatory references, and a second podcast on the importance of conduct rules. A further podcast considers SM&CR and the importance of achieving a healthy culture in financial services.

In related news, on 5 August 2019, the FCA published the findings of its review into the embedding of the SM&CR in the banking sector. In summary, it found that the industry has made a concerted effort to implement the regime, with most firms taking actions to move away from basic rules-based compliance towards embedding the regime in the organisation.

On 6 September 2019, the FCA published a new webpage on the Directory – the new public register for checking the details of key people working in financial services – setting out how and when firms should submit their data.

On 13 August 2019, the FCA agreed a plan that gives the payments and e-commerce industry extra time to implement strong customer authentication (SCA) under the revised Payment Services Directive (PSD2). At the end of the 18-month period, the FCA expects all firms to have made the necessary changes and undertaken the required testing to apply SCA. It sent out a Dear CEO letter setting out the requirements for SCA in card-not-present e-commerce transactions and has also recently updated its dedicated webpage on SCA. The phased implementation plan was welcomed by UK Finance.

On 1 August 2019, the FCA published an Insight article on ‘Artificial Intelligence in the boardroom’, which discusses how “boardrooms are going to have to learn to tackle some major issues emerging from AI – notably questions of ethics, accountability, transparency and liability. These are not matters that can be ring-fenced in a department, whether that be IT, legal, or customer service – that would be to abrogate boardroom responsibility and to leave an organisation exposed at the very top”.

On 13 September 2019, the FCA reminded firms that they need to register for ‘Connect’ to update their firm details. From January 2020, firms will be required to review and confirm the accuracy of their details annually, in line with their Accounting Reference Date. This will have to be done using Connect.

The FCA has set up an implementation group on proposed changes to responsible lending rules which were consulted on earlier this year. The group was established to enable market-readiness for using proposed responsible lending changes, and to promote the availability of switching options for certain consumers. Summaries of the group’s discussions will be published on this webpage.

Just after the June/July 2019 edition of the Regulatory round-up went to press, the FCA published final guidance to help firms understand whether their crypto-asset activities fall under FCA regulation.

A policy statement to the FCA’s high cost credit review consultation on overdraft pricing remedies is due in Q4 2019.

The FCA was due to issue a response to its consultation on proposed guidance for firms on the fair treatment of vulnerable customers in autumn 2019. This is now expected in the first half of 2020.

A two-month consultation is expected to commence in October 2019 on ‘Regulatory fees and levies: policy proposals for 2020/21’. Feedback is expected in February 2020.

And finally, on 4 October 2019, the FCA will host a webinar on ‘Transforming culture through employee motivation and recognition’.

Other sector news

On 14 August 2019, the government updated its guidance page on information for financial institutions if there is no Brexit deal.

On the same day, the Financial Ombudsman Service (FOS) updated various webpages for consumers on complaints that it can help with in relation to credit and borrowing money, including payday loans and home credit. See this link.

On 21 August 2019, the FOS published data showing the number of complaints it received between April and June 2019. It says that it continues to receive a significant amount of complaints about consumer credit, especially in relation to lending. It is upholding a large proportion of complaints about high cost credit.

The Gambling Commission is consulting until 6 November 2019 on banning or restricting the use of credit cards for all forms of remote gambling. The Commission says it is concerned that consumers experiencing harm might use other forms of borrowing, such as overdrafts and loans, to fund their gambling in lieu of credit cards, meaning that the risks might simply displace to other lending products. It says that it is essential that the financial and gambling sectors work to introduce protections for their customers to mitigate the risks of harm from gambling with other forms of borrowed money.

On 30 August 2019, LINK announced that funding will be made available to protect free access to cash for every high street in the UK. On 5 September 2019, the Payment Systems Regulator (PSR) published the responses to its discussion paper on the LINK interchange fee structure and a summary of its recent roundtable discussion on the future structure.

On 13 September 2019, the European Commission published ‘Frequently Asked Questions: Making electronic payments and online banking safer and easier for consumers’ in relation to the application of PSD2.

The European Banking Authority has published clarifications to the fourth and fifth sets of issues raised by its working group on application programming interfaces under PSD2.

On 1 August 2019, the PSR gave a specific direction to members of the UK’s six largest banking groups to fully implement Confirmation of Payee by 31 March 2020. See the press release for details.

On 6 August 2019, the Current Account Switch Service published a white paper on the savings account market, with research showing that consumers are not receiving the best deals and rates for their savings by staying with the same account.

On 10 September 2019, the PSR published its response to its ‘Data in the Payments Industry’ discussion paper, which was published in June 2018. Among other things, it says it will work with Pay.UK to explore the viability of opening up access to data in the UK’s new payments architecture, which it says could benefit everyone through the development of new products and services, such as anti-fraud and anti-money laundering tools and improved payment reconciliation services. See the press release. The PSR also published the responses it received to the discussion paper.

On 20 September 2019, Pay.UK published an independent report on ‘request to pay’, a communication tool to help businesses and individuals across the UK better manage their money.

On 15 August 2019, the third set of banking customer satisfaction results were published following a survey of thousands of customers. See the press release from the Competition and Markets Authority (CMA) and the FCA webpage which links through to the data.

In related news, the CMA has provisionally decided to vary the Retail Banking Market Investigation Order 2017 and to remove Part 6 relating to unarranged overdraft alerts, given that the FCA is introducing new rules on overdraft alerts on 18 December 2019.