Consumer and Retail Finance – October 2019

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Latest from the FCA, including overdraft pricing reforms and Senior Managers and Certification Regime; other sector news.

Financial Conduct Authority (FCA)

As part of its high-cost credit review, the FCA published on 2 October 2019 a policy statement setting out rules to make overdraft fees clearer and more transparent. See the press release.

The FCA updated the guidance first published in December 2018 for registered social landlords as part of its high-cost credit review. New legislation means that registered social landlords can now refer tenants, or potential tenants, to some credit activities without requiring FCA authorisation.

On 21 October 2019, the FCA’s Executive Director of Strategy and Competition delivered a speech on the future of regulation. The FCA will be engaging in a public conversation over the coming months and will publish detailed papers including, notably, a consultation on the duty of care. In related news, the Financial Services Duty of Care Bill, a Bill to require the FCA to make rules for authorised persons to owe a duty of care to consumers in their regulated activities, received its first reading in the House of Lords on 29 October 2019.

On 18 October 2019, the FCA further updated its dedicated webpage for solo-regulated firms on the extension of the Senior Managers and Certification Regime (SMCR). It also recently published a new webpage explaining about Form K and the requirements and timetable for submitting it. The form enables firms to tell the FCA which approved individuals they wish to convert from the Approved Persons Regime to corresponding Senior Management Functions under SMCR.

The FCA is consulting until 15 January 2020 on plans to ban commission models that give motor finance brokers/dealers an incentive to raise customers’ interest rates. It is also consulting on minor changes to some of its rules and guidance to ensure that many types of credit broker give consumers more relevant information about commission.

On 14 October 2019, the FCA further updated its webpage on the Directory, the new public register for checking the details of key people working in financial services. All firms other than banks, building societies, credit unions and insurance companies must submit their data between 9 December 2019 and 9 December 2020.

On 28 October 2019, the FCA set out the changes to its mortgage responsible lending rules and guidance, to remove barriers that stop some mortgage customers from finding a cheaper mortgage deal. The changes came into force immediately. See the press release for details.

On 16 October 2019, the FCA published a feedback statement setting out its proposals to improve climate change disclosures by issuers and information to consumers on green financial products and services. See the press release.

On 23 October 2019, the FCA’s Executive Director of Supervision (Investment, Wholesale and Specialists) delivered a speech on turning technology against financial crime. She talked about the pace of change in the financial sector and how “technology, frequently an enabler of crime, can also be a hugely potent tool in the fight against it…if I could leave industry with one message today it would be don’t be afraid to use technology and innovate to keep criminals out”.

Firms can now apply until 31 December 2019 for cohort 6 of the FCA’s regulatory sandbox, which allows businesses to test innovative propositions in the market with real consumers. Among other things, it is particularly interested in receiving applications from firms with propositions that make finance work for everyone, by addressing issues around access, exclusion and vulnerability.

The FCA and the Bank of England recently published a joint report on machine learning in UK financial services.

The FCA published a new webpage on the anti-money laundering and counter-terrorist financing regime in relation to cryptoassets. From 10 January 2020, the FCA will be the anti-money laundering and counter-terrorist financing supervisor of UK cryptoasset businesses under the Money Laundering Regulations 2017. The FCA also published an updated webpage on its work in relation to cryptoassets.

In related news, the World Federation of Exchanges asked the FCA not to ban the sale of crypto derivatives to retail consumers, while supporting the regulator’s desire to better protect vulnerable consumers. See the press release.

And finally, the FCA’s two-month consultation on ‘Regulatory fees and levies: policy proposals for 2020/21’ is now expected to commence in November 2019. Feedback is expected in March 2020.

Other sector news

On 28 October 2019, the House of Commons Treasury Select Committee published its report on IT failures in the financial services sector. Among other things, it says that the current level of financial services IT failures is unacceptable, firms must resolve customer complaints and award compensation quickly, and regulators must act to improve operational resilience of the sector. See the press release from UK Finance, responding to the report.

We reported previously that the Gambling Commission has been consulting on banning or restricting the use of credit cards for all forms of remote gambling. The Money and Mental Health Policy Institute recently announced that it is launching a new project to engage financial services firms with efforts to tackle gambling related harm. See the press release.

In related news, according to a new report published by the Money and Mental Health Policy Institute, banks and building societies could play a crucial role in helping customers avoid money problems, by analysing personal financial data to identify and support people who are struggling. See the press release.

The Creditworthiness Assessment Bill, a Bill to require certain matters to be taken into account when assessing a borrower’s creditworthiness, failed to complete its passage through Parliament before the end of the last session and will make no further progress.

The Goods Mortgages Bill, which the government decided not to bring forward in 2018, is back on the agenda. The Bill, to make provision for a new form of non-possessory security that may be created over goods owned by individuals and to repeal the Victorian-era Bills of Sales Acts, had its first reading in the House of Lords on 21 October 2019.

On the same day, HM Treasury published an updated advisory notice on money laundering and terrorist financing controls in overseas jurisdictions, following the recent publication of two statements by the Financial Action Task Force identifying jurisdictions with strategic deficiencies in their anti-money laundering and counter-terrorist financing regimes.