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Retail Finance round-up - 25 February 2016

Retail Finance round-up - 25 February 2016

  • United Kingdom
  • Financial institutions - Retail finance

25-02-2016

The FCA has published a Call for Input on the review of retained provisions of the Consumer Credit Act 1974 (CCA). The review will consider whether particular CCA provisions remain appropriate, or should be modified, updated or replaced by FCA rules in order to maintain the right degree of consumer protection. The Call for Input will close on 18 May 2016.

There has been a renewed focus on vulnerability this week with the publication by the FCA of a discussion paper on encouraging firms to support the ageing population. In addition to this discussion paper, the FCA will also be undertaking further research and will be working with stakeholders to develop a regulatory strategy that will promote better outcomes for older consumers.  It is envisaged that the strategy will be released in 2017.  The FCA is seeking comments on the issues raised within the paper and the scope of the project by 15 April 2016.

On the theme of vulnerability, the Financial Services Vulnerability Taskforce has published its recommendations for the industry. 

Also of interest this week is the closure of the consultation period for CP15/39 (Rules and Guidance on payment protection insurance complaints) on Friday 26 February 2016. 

Regulatory updates

Industry news

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FCA Call for Input on review of retained provisions of the Consumer Credit Act 1974

On 18 February 2016, the FCA published a Call for Input on the planning phase of its review of the retained provisions of the Consumer Credit Act 1974 (CCA).  The review will consider whether particular CCA provisions remain appropriate, or should be modified, updated or replaced by FCA rules in order to maintain the right degree of consumer protection.

When the FCA took over responsibility for regulating consumer credit in April 2014, some provisions of the CCA were repealed, some were replaced by FCA rules and others were retained. Under the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2014, the FCA is required to review the remaining CCA provisions and report to HM Treasury by 1 April 2019.

The Call for Input seeks initial views from stakeholders on:

  • Whether to prioritise particular provisions for review.
  • Timescales for review (and if certain provisions should be considered earlier).
  • The conduct of the review, including engagement with stakeholders.

The FCA is likely to prioritise those provisions which: 1) provide particular benefits to consumers; 2) are particularly burdensome on firms without commensurate benefit; or 3) are particularly complex.

The Call for Input closes on 18 May 2016.  The FCA will finalise the scope of the review in light of responses and publish an update on progress by Q4 2016.

FCA proposes to issue guidance on enforcing security under the Consumer Credit Act 1974

The FCA is consulting on proposed guidance in respect of the need for default notices under the Consumer Credit Act 1974 (CCA) when seeking to enforce security.

Last year, the FCA published a Policy Statement (CP15/6) containing its proposed changes to its rules and guidance on consumer credit.  In this Policy Statement, the FCA stated that it believed taking or demanding payment from a guarantor would not amount to “enforcement” of security for the purposes of Section 87 of the CCA and as such would not require a default notice.

The FCA has since reconsidered this matter and now believes this position to be incorrect.  It now believes that before requesting or taking payment from a guarantor, the creditor must first serve a default notice to the debtor in accordance with the CCA and provide a copy to the guarantor.

The FCA is consulting on the proposed guidance and inviting views until 18 March 2016. This consultation will be of particular interest to those who accept guarantees or indemnities in connection with regulated consumer credit or hire agreements.

FCA encourages firms to do more to support ageing population

The FCA has released a discussion paper entitled 'Ageing Population'.  The FCA has recognised that the UK’s population is ageing faster than ever before, which means there is an increasing proportion of older consumers. This discussion paper seeks to get firms, consumer groups and other stakeholders views on how the FCA and the industry can work together to address the range of issues older consumers face with respect to financial services.

The FCA believes older consumers’ lives can be made easier by more effective provision of appropriate financial products and services which help them to manage these risks, and, for example, fund longer periods of retirement.  The FCA’s aim is to ensure that consumers have access to products and services that are well-governed and deliver value for money in competitive markets.

In addition to this discussion paper, the FCA will also be undertaking further research and will be working with stakeholders to develop a regulatory strategy that will promote better outcomes for older consumers.  It is envisaged that the strategy will be released in 2017.  The FCA is seeking comments on the issues raised within the paper and the scope of the project by 15 April 2016.

FCA publishes regulation round-up for February 2016

The FCA has published its regulation round-up for February 2016.  This month’s edition focuses on the launch of the FCA’s regional engagement programme - “FCA: Live & Local”.  This aims to give firms greater clarity on how to comply with the FCA’s regulatory requirements and is an opportunity for firms to ask the FCA any questions they may have about being regulated.  The FCA will host events focused on investments, mortgages and general insurance sectors in each region it visits.

A hot topic this month is the Senior Managers and Certification regime, which, comes into force on 7 March 2016.  The new rules aim to restore trust in financial services firms.  Firms that must comply with the regime should make sure they are embedding the rules, including:

  • Ensuring that senior managers and certified staff understand what accountability means for them.
  • Making preparations to certify the fitness and propriety of certified staff before 7 March 2017.
  • Making sure that other financial services staff are aware of the Conduct Rules and how these will apply to their jobs from 7 March 2017.

The FCA also reminds firms of the Innovative Finance ISA (IFISA) that the Government will introduce in April 2016.  This will allow peer-to-peer (P2P) agreements to be included within an ISA tax wrapper.  The FCA’s consultation paper, that was published earlier this month, proposes changes to its rules and guidance on disclosure and advice about P2P agreements.

FCA publishes webinar series for consumer credit firms

The FCA has published its latest webinar for January 2015 in its series entitled “Now you are authorised”.   The webinar series is for newly authorised consumer credit firms and outlines what they can expect from the FCA’s supervision process.

The format of each webinar is a panel answering questions on topics such as:

  • What being FCA regulated means.
  • How to find out what rules and standards apply.
  • Relationship with the FCA once authorised.
  • How to register for GABRIEL (the FCA’s online regulatory reporting system).
  • Reporting and data obligations.

ASA updates its Advertising Code decision procedure: complainants’ evidence

The Advertising Standards Authority (ASA) has updated its procedures it follows in deciding whether an advertiser has breached the UK Advertising Codes.  The procedures aim to ensure that any evidence a complainant has supplied is taken into account and relied on by Council when making a decision about an advertiser. 

Where a complainant supplies evidence in support of their objection to an advertisement, they must now agree for it to be shared with the advertiser, so that advertisers have a fair opportunity to respond in full to the points being made.  For these purposes, ‘evidence’ relates to documentary evidence supplied in addition to the point of complaint (and not the description of the complaint, expression of opinion or interpretation of a claim).

Once the advertiser has supplied their initial response (and provided that the complainant agrees to disclosure), the ASA will make an assessment during the investigation of whether this information is relevant and needs to be disclosed.  If the complainant does not agree, the evidence will not form part of the ASA’s assessment.

Financial Services Vulnerability Taskforce publishes recommendations for industry

The Financial Services Vulnerability Taskforce has published a report outlining best practice recommendations for the industry when dealing with vulnerable customers.

The report details nine principles and recommendations that aim to improve outcomes for customers in vulnerable circumstances:

  • Sensitive, flexible response – when customers seek help and support, firms should treat them sensitively, flexibly and be responsive to their needs.
  • Effective access to support – customers should be able to access practical, jargon-free information and help through the range of communication channels that each firm provides.  They should also be informed about other, external sources of help relevant to their situation.
  • One-stop notice – customers should not need to tell firms about their particular circumstances or characteristics more than once.
  • Specialist help available – customers should have access to specialist support to help make informed choices in light of their individual situation.  Where customers require regular or on-going assistance in such circumstances, firms should consider opportunities to provide dedicated points of contact to support them.
  • Easy for family and friends to support – at their customers’ request, firms should make it easy for a friend or family member to help manage their money.
  • Scam protection – customers particularly at risk of being scammed or financially abused need to be (and feel) protected by their financial service provider.
  • Customer focused reviews – evaluation and monitoring procedures should centre on obtaining a positive outcome for the customer.
  • Industry alignment – the industry should, via the financial services trade associations and other bodies, identify opportunities to collaborate on areas where there is a common agenda and an opportunity to improve the outcome for customers in vulnerable situations.
  • Inclusive regulation – regulators should help financial services firms and the industry achieve better customer outcomes.

BSA publishes mortgage lending and savings statistics for 2015

The Building Societies Association (BSA) has recently published mortgage lending and savings statistics for 2015.  The figures show a healthy increase in gross lending and mortgage approvals on 2014 and continued strong market share despite more intense competition and uncertainty in the market. 

Mortgage lending:

  • Gross lending by building societies was up 8% year on year, with £57billion lent to consumers.
  • Mortgage approvals were up 10% in the year to £57.8 billion - a 26% market share.
  • By number of loans, building society approvals were up 6% in the year, a third of which were to first time buyers.
  • Net lending was down at £15.2 billion (2014: £17.2bn) but building societies’ market share remains strong, accounting for 45% of net lending in the year.
  • At the close of 2015, building societies held mortgages to the value of £265.2 billion -  21% of the UK market.

Retail savings:

  • Retail savings balances increased by £10.4 billion in the year, up marginally from 2014.
  • At the close of 2015 building societies held savings balances of £246.6 billion – 18% of the UK market.

FCA updates PPI webpage with latest refunds and compensation statistics

The FCA has updated its webpage on monthly PPI payouts.  A total of £365.7m was paid in December 2015 to customers who complained about the way they were sold PPI.  This takes the amount paid since January 2011 to £22.5bn.

CML estimates 21% increase in mortgage lending

The Council of Mortgage Lenders (CML) estimates that gross mortgage lending has increased 21% from January last year, up to £17.9 billion.  This is 9% lower than last December, but represents the highest lending total for a January since 2008.

CML’s economist, Mohammed Jamei states that “UK market fundamentals are helping to underpin this recovery, with real wage growth, an improving labour market, competitive mortgage deals, and government schemes all supporting household demand”.

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