FCA’s Clamp-Down on Misleading Financial Promotions
A report published by Loan Talk has revealed the Financial Conduct Authority (FCA) have investigated and taken action in respect of 54 consumer credit promotions, which have been since withdrawn or changed in the recent past.
The FCA have disclosed that they received 72 separate complaints from various firms regarding consumer credit products since July 2015, and the investigations by the FCA led to 54 alterations or retractions, with some cases still ongoing. Despite receiving a lower number of complaints in January 2016, the FCA revealed that month had the highest number of promotions altered or withdrawn at 32.
Complaints and actions of this nature are only expected to grow with the FCA having strengthened their whistle-blowing procedures to encourage the market participants (firms and individuals working in the regulated financial services sector) to alert them (FCA) to any potential regulatory issues or risks. Likewise, consumers being misled or misinformed by the product literature or any financial promotions are encouraged by the FCA to voice their concerns through the consumer helpline.
FCA investigate Lloyds Bank over Handling of Mortgage Arrears
Fair treatment of customers in arrears remains an area of regulatory focus with ongoing review and investigations by the FCA. Lloyds Banking Group has confirmed it is currently under investigation by the FCA who are investigating the group with regards to its mortgage arrears handling.
It follows news earlier this year that Bank of Scotland, part of the Lloyds Banking Group, topped the Financial Ombudsman list of mortgage complaints with over 600 in the second half of 2015. In May, the FCA informed the group that “it was commencing an investigation in connection with the group’s mortgage arrears handling,” Lloyds Banking Group stated in its half-year results for 2016. The statement added that “at this stage it is not possible to make an assessment of the outcome of this ongoing review.”
Lloyds Banking Group also revealed it was awaiting a final decision from the FCA over PPI complaints and provisions, which is expected to be concluded by mid-2018.
The group confirmed it may have to reassess its provisioning if a final FCA decision takes longer than the proposed two years.
Fair treatment of existing customers, especially those who may be facing payment difficulties is a key regulatory priority for the FCA.
Are You Ready to Comply with New Reporting Requirements for AML/ Financial Crime from December 2016?
The FCA have introduced new reporting obligations on firms in relation to their financial crime and Anti-Money Laundering systems and controls with the first such reports required to be completed for the year ending December 2016. They have published a policy statement (PS16/19) on 29 July 2016 summarising the responses received to chapter 6 of the December 2015 Quarterly Consultation Paper No 11, CP15/42 (plus a related addendum) on the introduction of a financial crime reporting rules for firms. This paper contains the final rules and an implementation timescale for the reporting requirement.
FCA received 32 responses from firms and trade associations, which were largely supportive, but most requested further clarification of definitions and the guidance notes. Changes made to the FCA’s original proposal include:
• Excluding pure general insurers and general insurance intermediaries from the
initial implementation of the requirements, with a view to bringing them into scope
at a later date;
• Removing credit unions from the initial implementation so that the FCA can further
consider their approach. The FCA propose to consult on applying this requirement
to credit unions above a proportionality threshold at a later date;
• Amending their approach to allow free-form group-based reporting;
• Assessing the feedback received on the implementation timescales and extending
the submission period to 60 business days.
Appendix 1 to the policy statement contains the text of the Supervision Manual (Financial Crime Report) Instrument 2016, FCA 2016/53, which comes into force on 31 December 2016. The policy statement and Appendix 1 can be accessed through the link below:
FCA’s Comments on Brexit
Delivering a key-note address at the FCA’s Annual Public Meeting on 19th July 2016, the FCA’s new Chief Executive Andrew Bailey said ‘like many organisations the FCA are working hard to respond to the challenges post-Referendum’. He emphasised that the UK remains a member of the EU until such time as things change, and so all of the FCA’s rules continue to apply whether they originate from the EU or not. He also confirmed that the FCA will continue to implement EU legislation until the future is clear, something that is again a legal requirement.
Looking beyond, Mr Bailey welcomed a recent government statement that “the UK will seek access to the single market through the coming negotiations”. He said the FCA will support the Government’s work to put in place new arrangements including new trade agreements with other countries.
My Bailey clarified that, from an FCA perspective, the regulatory objective of ensuring healthy competition in UK financial markets continues to be supported by cross-border trade in financial services. The key to sustained international trade in financial services is robust standards of regulation which can operate simultaneously at both EU and global level. He added that these robust and consistent standards of regulation were already embedded in the FCA rule book and would continue to apply.
Have You Heard From the Regulator About Your Regulatory Permissions? Here’s the FCA’s Commitment to Firms
The FCA published on 22 July 2016 a webpage setting out their commitments to firms during the authorisation process. FCA have said that between 1 April 2014 and 31 March 2016, they received nearly 37,000 applications for authorisation from consumer credit firms. They aim to allocate cases as quickly as possible and have already closed 87% of these applications, 99.6% within the statutory deadline.
They have clarified that “when a firm applies for authorisation their application is allocated to a case officer. The case officer then contacts the firm to introduce themselves and explain how they can be contacted”. FCA have received feedback from some firms and industry bodies that the process could be improved by
more contact from a case officer in the early stages of application and by receiving additional updates on the progress of the firm’s application.
Following this feedback, the FCA have introduced the following commitments to firms applying for authorisation:
• The firm will be told as soon as its application has been assigned to a case officer. All communication about the firm’s application will be handled by this person. If it subsequently proves necessary to assign a firm’s case to a different case officer, it will be told as soon as the change is made;
• All communications from the firm will be acknowledged within two working days;
• A substantive response will be given within 10 working days and, where this is not possible, an update will be sent within the 10 working day period telling the firm when it should expect to receive a substantive response from the FCA;
• The firm will be given clear deadlines when asked to submit additional information;
• The firm will receive an update from the designated case handler on the current status of its case at least once a month.
Debt Providers and Advisors Required to Use New Standard Financial Statement
The Money Advice Service announced on 27 July 2016 that the first Standard Financial Statement (SFS) will go live on 1 March 2017 marking the beginning of a transition period during which creditors and debt advice providers will move to using the new format. This will be the first time that all major debt advice providers, creditors, and other debt bodies will use the same format to assess income and expenditure for over-indebted people, bringing greater consistency to the way finances are considered in debt advice.
The SFS will provide a single set of income and expenditure categories with spending guidelines which will be used across the sector, in a standardised format. A savings category will also be included to help people build financial resilience while repaying their debts.
SFS has started a dedicated website which includes a Factsheet and further information to support and advise debt providers:
Credit Card Market – Regulatory Intervention to Deliver Better Consumer Outcomes
The FCA published on 26 July 2016 the final findings of its credit card market study which sets out a package of measures, including a series of industry led proposals, to help consumers take better control of their spending.
FCA’s further analysis on consumers in problem credit card debt has reinforced their concerns about consumers who are carrying a significant level of credit card debt for a long period. The analysis suggests that firms do not have strong incentives to help customers out of persistent credit card debt.
FCA have concluded that “the feedback received and the further analysis undertaken provides further insight, and will help in designing suitable remedies, but does not materially change their thinking”.
The final findings show that, a) generally, competition is working well for most consumers, b) competition is working less well for higher risk consumers, and c) the FCA are concerned about the scale, extent and nature of problem credit card
debt and firms’ lack of incentives to manage this.
The findings report outlines the package of remedies the FCA are taking forward to address their concerns with the credit card market. Some of these remedies will be delivered through FCA rules, subject to consultation and others through industry agreements or taken forward through supervisory work. The FCA have identified three areas where they intend to consult further before introducing new rules:
• Unsolicited credit limit increases
• Earlier intervention
• Persistent debt
FCA Censure, Fine and Order Jersey Resident to Pay Restitution for insider Dealing
The FCA announced on 15 July 2016 that they have fined Gavin Breeze £59,557 for engaging in market abuse in the form of insider dealing and has also publicly censured him for improper disclosure.
The FCA found that Mr Breeze, who holds several directorships of private companies and is also a non-executive director of one AIM listed business, attempted to sell his entire 8% shareholding in MoPowered plc while in possession of inside information. Had Mr Breeze been successful, he could have avoided a loss of up to £242,000. He also passed the inside information onto another shareholder. In addition to the fine and censure, the FCA have ordered Mr Breeze to pay restitution to the individuals who suffered financial losses as a result of his actions. The individuals who bought Mr Breeze’s shares did so at a higher price than they would have done had the information known to Mr Breeze been publicly available.