Consumer and Retail Finance – November/December 2019

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Latest from the FCA, including extension of the Senior Managers and Certification Regime; other sector news.

Financial Conduct Authority (FCA)

On 9 December 2019, the Senior Managers and Certification Regime (SMCR) was extended to around 47,000 firms. By 9 December 2020, solo-regulated firms will need to ensure that:

  • all relevant staff are trained on the Conduct Rules and how they apply to their roles;
  • all staff in certified roles are fit and proper to perform that role and are issued with a certificate; and
  • they submit data to the FCA for the directory of key people working in financial services (the Directory).

Now that SMCR is in force for solo-regulated firms, all regulated financial services firms can start to submit their data for the Directory. See this webpage for submission details.

Walker Morris has published a two-part series of briefings on SMCR, exploring some of the practical considerations and realities for solo-regulated firms [1].

In relation to Buy Now Pay Later products, the rule preventing backdated interest from being charged on repaid amounts came into force on 12 November 2019. See the press release.

The FCA’s rules on overdraft repeat use and competition remedies (including rules on overdraft alerts) come into force on today. See this link. In light of this, the Competition and Markets Authority has decided to vary the Retail Banking Market Investigation Order 2017 and remove Part 6 relating to unarranged overdraft alerts.

The FCA recently met with firms to discuss feedback on Gabriel, its current data collection platform, which will be replaced by a new reporting platform. See the press release. The FCA says that it will communicate in good time before any action is required by firms and other Gabriel users to start using the new system.

Firms are being urged to register for the FCA’s Connect online platform. From January 2020, they 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 responded to key comments from the 2018/19 annual reports of the four statutory panels who advise it on its policies and practices. This includes the Financial Services Consumer Panel, which represents the interests of consumers and small businesses. Operational resilience, which includes resilience against cyber threats, continues to be one of the FCA’s cross-sector priorities. The FCA is consulting until 3 April 2020 on new requirements on the firms it supervises to help strengthen operational resilience. The consultation was the subject of a recent speech delivered by the FCA’s Executive Director of Supervision (Investment, Wholesale and Specialist). A policy statement will be published in autumn 2020.

The FCA updated its cyber resilience webpage to include a link to a new self-assessment questionnaire for firms.

The FCA is consulting until 13 January 2020 on regulatory fees and levies: policy proposals for 2020/21. Chapter 6 invites interested parties to share views on mechanisms for funding free-to-consumer debt advice in the UK.

A six-week consultation on FCA regulated fees and levies: rates proposals for 2020/21 will be launched in April 2020, with a policy statement due in July 2020.

In a speech delivered on 6 November 2019, the FCA’s Director of Innovation spoke about meeting the pace of technological change. Among other things, he referred to the unintended and unwanted consequences that technology and change can have on some of the more vulnerable people in society.

In related news, a new FCA Innovation webpage has been published, bringing together a range of materials and links on this topic.

In another recent speech, the FCA’s Director of Competition spoke about Open Finance, an area of significant interest to the FCA, and the opportunities it provides to businesses, consumers and the regulator. An advisory group has been considering how Open Finance will develop, including the barriers to its development and the ethical and practical issues around data sharing. The group was set up to discuss the potential of extending Open Banking-like data sharing to a wider range of financial products. On 17 December 2019, the FCA published a call for input, asking for proposals on how Open Finance could transform financial services. Advice from the advisory group was also published.

The FCA published the latest mandated and voluntary information from current account providers on current account services, including in relation to speed of service and major incidents. Links to this and other data can be found here.

On 10 December 2019, the FCA published the latest mortgage lending statistics.

A policy statement on changes to mortgage advice and selling standards is due to be published in Q1 2020.

Other sector news

A study by the Office for National Statistics found that total household financial debt rose by £12 billion (11%) in the latest period (April 2016 to March 2018), up from £107 billion in April 2014 to March 2016, with most of the change accounted for by increased hire purchase debt (up by £6 billion) and student loans from the Student Loans Company (up by £7 billion). Total financial debt increased for loans, hire purchase and credit, store and charge card debt. See this link.

The Banking Standards Board published a suite of good practice guidance documents on aspects of SMCR. See the press release.

UK Finance published a blog post with a link through to a paper specifically for those boards struggling to adapt to the changing cyber threat landscape.

The National Crime Agency published a new booklet to provide guidance on the use of Suspicious Activity Report glossary codes and reporting routes.

The Financial Ombudsman Service published a summary and feedback statement following the recent consultation on its future funding. As part of its plans, budget and future strategy consultation for 2020/21 it is now consulting on proposals that 60% of its funding should come from case fees and 40% from its levy in the next financial year (with an aspiration to reach a split in the order of 50:50), and on setting the individual case fee at £650 for all cases closed after 1 April 2020.

On 4 December 2019, the Risk Coalition launched ‘Raising the Bar’ – principles-based guidance for board risk committees and risk functions in the UK financial services sector.

On 5 December 2019, the EU Council and Commission issued a joint statement on “stablecoins”, a new type of cryptocurrency. See the press release.

Seven signatories of the voluntary code of good practice aimed at better protecting customers and reducing the occurrence of authorised push payment fraud have agreed to continue interim funding arrangements for cases of “no-blame” reimbursement to 31 March 2020. This will allow more time to consider alternative recommendations on long-term funding arrangements put forward by Pay.UK in November 2019. See the UK Finance press release for details.

In related news, on 1 November 2019, the House of Commons Treasury Select Committee published a report setting out how “banks must do more for consumers exposed to economic crime”. See the press release.

On 9 December 2019, the European Payments Council issued its 2019 Payment Threats and Fraud Trends Report, which reflects the recent developments concerning security threats and fraud in the payments landscape over the past year.

On the same day, the Finance & Leasing Association published ‘Priorities for 2020 and Beyond’, which identifies “three improvements that the incoming Government must adopt to transform customer protection in the consumer credit market, and strengthen the growth of a sustainable and productive economy”. See the press release.

[1] See Extension of the Senior Managers and Certification Regime: Part 1 and Extension of the Senior Managers and Certification Regime: Part 2