Consumer and Retail Finance – January 2019

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Latest from the FCA, including new findings on high-cost short-term credit market; other sector news.Walker Morris risk series stamp

Financial Conduct Authority (FCA)

On 24 January 2019, the FCA published new findings on the high-cost short-term credit market, drawing on consumer credit firms’ regulatory returns data and the FCA’s Financial Lives Survey 2017. See our recent briefing for details. Also see the press release from Citizens Advice.

On 10 January 2019, the FCA published its annual Sector Views document, analysing the changing financial landscape, resulting impacts on consumers and market effectiveness. Cross-sector themes in this year’s document include: how technology is driving change in financial services; societal changes and their impact on the financial needs of different generations; the potential impact of Brexit; and the macroeconomic environment. The retail banking and payments sector is covered in chapter 2. Retail lending, including consumer credit and mortgage lending, is covered in chapter 3. While the document is not a consultation paper, the FCA says that it would welcome stakeholders’ comments on the themes it has identified, the drivers of change in each sector, and its findings on harm.

The House of Commons Treasury Select Committee published the FCA’s written submission to the Committee’s inquiry into consumers’ access to financial services, launched in November 2018. The table at the end of the submission sets out examples of recent and upcoming FCA vulnerability and access focused work, including: multi-firm work in relation to policies towards vulnerable consumers and a thematic review of debt management, both due to be published in March 2019; planned thematic work on the treatment of vulnerable consumers within non-bank lenders due to begin in April 2019; and a guidance on vulnerability consultation paper due to be published in April 2019.

Other recent submissions to the inquiry include that of the Financial Services Consumer Panel. Among other things, the Panel submits that there should be a new duty of care on financial services firms and that the best outcome for consumers would be to enshrine such a duty in the Financial Services and Markets Act 2000.

On 9 January 2019, the FCA published a letter addressed to the CEOs of all FCA-regulated firms to remind them of their responsibilities relating to the use of financial promotions. See this link.

On 10 January 2019, the FCA published updated guidance for firms on how to fill out their online tariff data forms, used to calculate annual fees for the following financial year.

On the same day, the Treasury Committee published a letter from FCA Chief Executive Andrew Bailey, providing an update on the FCA’s work on the issue of ‘mortgage prisoners’ – those unable to remortgage or switch to a cheaper mortgage rate due to changes in legislation following the financial crash. See the press release.

See our recent briefing for an update on the ‘super-complaint’ lodged with the Competition and Markets Authority by Citizens Advice, calling on the regulator to take action to stop long-term customers being penalised for their loyalty across five essential markets including mortgages. The FCA’s statement can be found here.

The FCA is consulting until 23 April 2019 on proposals to provide extra clarity in relation to some areas of the Senior Managers and Certification Regime (SM&CR), including its application to the Legal Function. The FCA proposes to exclude the Legal Function from the Overall Responsibility Requirement. Among others, this proposal affects banking firms and enhanced solo-regulated firms. The SM&CR will be extended to all solo-regulated firms from December 2019.

After the last edition of the Regulatory round-up went to press, the FCA published its final rules on extending access to the Financial Ombudsman Service (FOS) to more small and medium-sized enterprises (SMEs), larger charities and trusts, and a new category of personal guarantors. The final rules are unchanged from the near-final rules published in October 2018.

In related developments, the House of Commons Treasury Select Committee published the government and FCA responses to the Committee’s October 2018 report on SME Finance. The government does not believe that there is a clear case for bringing SME lending into regulation and it will not pursue the Committee’s recommendations for the introduction of a Financial Services Tribunal. On 19 January 2019, the Chancellor of the Exchequer wrote to the Chief Executive of UK Finance regarding SME dispute resolution, commenting on the voluntary proposals agreed by the banking industry following the recent independent review of the complaints and alternative dispute resolution landscape for UK SMEs (see the UK Finance press release referred to in the last edition).

The FCA published Handbook Notice 62 which sets out recent changes to the Handbook, including: changes to tackle low levels of consumer awareness of and engagement with overdrafts (due to come into force in December 2019 – see the recent overdrafts consultation paper); changes to strengthen the protections for consumers using home-collected credit, catalogue credit and store cards (see the November/December 2018 edition of the Regulatory round-up for details); changes to implement the revised Payment Services Directive (PSD2) and tackle authorised push payment fraud (see the recent policy statement); changes extending FOS jurisdiction to small business complainants (in force 1 April 2019 – see above); and changes extending the Principles for Businesses and certain communication rules to apply to the provision of payment services and the issuance of e-money by certain payment service providers and e-money issuers, and introducing new communications rules for currency transfer services (in force 1 August 2019 – a separate policy statement is awaited).

And finally, the FCA is consulting until 5 April 2019 on proposed guidance on cryptoassets, in order to provide regulatory clarity for market participants. On 20 December 2018, the Treasury Committee published the government and FCA responses to the Committee’s Cryptoassets report. See the press release. A policy statement is expected in summer 2019.

Other sector news

New rules banning harmful gender stereotyping in advertising come into force on 14 June 2019. See our recent briefing on what this means for the financial services sector.

On 25 January 2019, the House of Commons Treasury Select Committee launched a new inquiry into the future of the UK’s financial services post-Brexit.

The latest CBI/PwC Financial Services Survey found that demand for financial services fell for the first time in five years. See the press release.

The Lending Standards Board is working with the Single Financial Guidance Body to conduct an independent evaluation of the implementation process and effectiveness of the Standard Financial Statement. See the press release.

The Advertising Standards Authority upheld a complaint that a television advertisement for consumer credit provider 118 118 Money breached the Broadcast Committee of Advertising Practice Code because it did not feature the credit card’s representative Annual Percentage Rate.

The FOS has been consulting on its strategic plans and budget for 2019/20. It says that the rate of the rise in complaints about payday and instalment loans is particularly pronounced. By the end of 2018/19, it expects to receive more than 200% of the volumes of these complaints than it did in the whole of the previous year – 50,000 cases, compared with the 20,000 it had planned for. In a letter dated 14 January 2019, Richard Lloyd (who carried out an independent review of the FOS and reported on it in July 2018) provided the Chair of the House of Commons Treasury Select Committee with his views on the progress being made by the FOS in response to the review.

A new government taskforce will work with senior figures from the UK financial sector to tackle economic crime. See the press release. The Home Office will commit £3.5 million in 2019/20 to support work to reform the suspicious activity reports (SARs) regime.

The Wolfsberg Group of thirteen global banks has published new guidance on how financial institutions should carry out sanctions screening.

On 17 January 2019, the Bank of England published its quarterly survey of banks and building societies aimed at improving its understanding of trends and developments in credit conditions, covering supply, demand, loan pricing and defaults. It also recently published a quarterly bulletin, looking at whether a cyber attack could cause a systemic impact in the financial sector.

On 9 January 2019, UK Finance announced that it has formally made an application to maintain participation in the Single Euro Payments Area on behalf of the UK financial services and payments industry.

On 24 January 2019, the Payment Systems Regulator published its final terms of reference for a market review into the supply of card-acquiring services. See the press release.

The European Banking Authority updated its guidelines on fraud reporting under PSD2, to reflect editorial changes applied to pages 4, 27, 29 and 30.

And finally, the European Commission is consulting until 8 April 2019 on the functioning of the Consumer Credit Directive, to assess whether it is still fit for purpose.