Consumer and Retail Finance – October 2018

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Latest from the FCA and other sector news, including government consultation on debt breathing space scheme.

Financial Conduct Authority (FCA)

The FCA is consulting until 10 December 2018 on proposed guidance to give practical assistance and information to firms preparing Statements of Responsibilities and Responsibilities Maps under the Senior Managers and Certification Regime (SM&CR), which is being extended to all FSMA authorised firms on 9 December 2019.

On 15 October 2018, the FCA published a Dear CEO letter on the affordability of high-cost short-term credit (HCSTC) loans, following an increase in complaints about unaffordable lending (including complaints about a ‘chain’ of loans over an extended period). It says that firms should take prompt action to: assess their lending activity to determine whether creditworthiness assessments are compliant and, if deficiencies are found, take remedial action to ensure on-going lending activity is compliant and consider whether proactive redress may be required; and inform the FCA if they are unable (now or in the future) to meet their financial commitments because of any remediation costs.

Earlier, on 5 October 2018, the FCA published another Dear CEO letter setting out its expectations of debt packager firms providing debt advice and counselling services.

On the same day, UK Finance and the Association for Financial Markets in Europe submitted their joint response to the FCA’s recent consultation on proposals to introduce ‘the Directory’, a new public register for checking the details of key individuals working in financial services. The changes affect all authorised firms in scope of the SM&CR and their employees. See UK Finance’s insight piece FCA Directory – Is it Needed?

The FCA is also consulting until 21 December 2018 on increasing the award limit for the Financial Ombudsman Service (FOS), which sets the amount of compensation the FOS can require financial services firms to pay when it upholds a complaint against them. A policy statement is expected in spring 2019. The FCA recently published near-final rules on extending access to the FOS to more SMEs, larger charities and trusts, and a new category of personal guarantors. Meanwhile, the Chair of the Treasury Select Committee has expressed concerns over the FOS’ review of cases made during the early stages of its reorganisation in 2016.

In a separate but related development, the independent chair of the UK SME Complaints and Resolutions Review commissioned by UK Finance published a report recommending new routes for SMEs to challenge banks without going to court. See the press release.

On 1 October 2018, the government published a joint report from the FCA and the Competition and Markets Authority (CMA) providing an overview of the main achievements and lessons learned from the UK Competition Network’s consumer remedies project. The FCA recently published its Approach to Competition paper, setting out how it promotes competition in UK financial markets.

On 3 October 2018, the FCA published a report of the findings of its thematic review into money laundering and terrorist financing risks in the e-money sector. Electronic Money Institutions are encouraged to review the report, which includes examples of good and poor practice, and consider whether their anti-money laundering and counter-terrorist financing systems and controls could be improved.

On 15 October 2018, the FCA published a Discussion Paper on Climate Change and Green Finance, setting out its proposed approach to climate change-related matters. Comments are requested by 31 January 2019. On the same day, the Prudential Regulation Authority issued a consultation on its expectations for the management of financial risks from climate change. The consultation closes on 15 January 2019. The FCA’s Executive Director of Strategy and Competition discussed the FCA’s developing approach and initiatives in this area in a speech delivered on 19 October 2018.

The Cryptoassets Taskforce, comprising the FCA, HM Treasury and Bank of England, published its final report setting out the UK’s approach to cryptoassets and distributed ledger technology in financial services.

Coming up…

The FCA’s two-month consultation on regulatory fees and levies: policy proposals for 2019/20 is now expected to be launched in November 2018.

Following a recent, short consultation, the FCA is due to publish a policy statement in December 2018 on its approach to final regulatory technical standards and European Banking Authority guidelines under the revised Payment Services Directive (PSD2).

The FCA is expected to publish in January 2019 a policy statement to its consultation on rules and guidance to improve conduct standards and communications in the payment services and electronic money sectors.

Other sector news

The government is consulting until 29 January 2019 on a detailed policy proposal for a breathing space and statutory debt repayment plan. This follows a call for evidence issued by the government in October 2017, to gain further insight from the debt advice sector and creditors on how best to design the scheme. The response to the call for evidence was published in June 2018.

On 4 October 2018, debt charity StepChange published its debt statistics mid-year update. It says that one of the worrying trends is that the proportion of new clients with HCSTC debt (including payday loans) increased in the first half of the year, despite the FCA-imposed price cap, and it seems obvious that there is a need to establish better alternatives. See the press release.

The government’s response to the Treasury Select Committee’s July 2018 report into household finances was recently published. See the Committee Chair’s comments on the response, and the press release from Citizens Advice.

The appointment of three non-executive directors completes the board of the new Single Financial Guidance Body, which is due to be launched in January 2019. See the press release.

On 8 October 2018, the Lending Standards Board published a summary report of progress towards implementation of the Financial Services Vulnerability Taskforce principles and recommendations. Two days later, UK Finance announced a new voluntary Financial Abuse Code of Practice, designed to take forward the Vulnerability Taskforce recommendations. It will be rolled out across the financial services industry over the next 12 months.

The government issued a press release ahead of the Chancellor’s attendance at the International Monetary Fund Annual Meeting on 10 to 13 October 2018, at which he was expected to “herald Britain’s approach to using technology to save customers money, and open up the market to popular new banking apps” and say, among other things, that “Britain will use its world-leading expertise and influence in finance to shape global views towards new financial technology”. Meanwhile, the Confederation of British Industry says that the financial services sector needs a fresh regulatory and tax approach to deal with the challenges and opportunities presented by a rapidly changing technological landscape. See the press release.

On 25 October 2018, HM Treasury published an updated advisory notice on money laundering and terrorist financing controls in higher risk jurisdictions.

The Payment Systems Regulator (PSR) has responded to LINK’s second ATM ‘footprint report’. We reported in the previous edition of the Regulatory round-up that the PSR was consulting until 9 October 2018 on a draft specific direction to LINK to make sure it does all that it can to deliver on the commitments it has made regarding free access to cash, including having suitable arrangements in place to ensure the ongoing availability of protected ATMs. The PSR has now published a summary of the key comments from submissions to the consultation, together with the specific direction.

On 18 October 2018, (formerly the New Payment System Operator) revealed a new name check safeguard called ‘Confirmation of Payee’ which can reduce the risk of payments being sent to the wrong account. This is one of a package of measures being introduced across the industry. We reported in the previous edition that the Authorised Push Payment Scams Steering Group is consulting until 15 November 2018 on a draft voluntary industry code for the reimbursement of victims of authorised push payment scams. See our recent briefing for more details.

And finally, the European Court of Justice has ruled that Article 4(14) of the Payment Services Directive (PSD) must be interpreted as meaning that a savings account which allows for sums deposited without notice and from which payment and withdrawal transactions may be made solely by means of a current account does not come within the concept of ‘payment account’[1]. PSD2, which has replaced the PSD, provides for the same definition of ‘payment account’.


[1] Bundeskammer für Arbeiter und Angestellte (Austria) v ING-DiBa Direktbank Austria Niederlassung der ING-DiBa AG (Case C 191/17)