Our experts provide their monthly bite size overviews of the major legal and regulatory developments and news for the consumer, asset and automotive finance sectors.
1. Financial Conduct Authority (FCA) clarifies new rules on Guaranteed Asset Protection (GAP) Insurance
In our last article, we referred to the FCA's new requirements for the selling of GAP insurance, which will come into effect from 1 September 2015.
The FCA has since clarified aspects of practical application:
- It is for firms to decide how they evidence the provision of prescribed information and the consumer initiating the conclusion of a GAP sale.
- The new rules apply to GAP contracts which are offered to the customer before 1 September, even if they are not concluded until after this date. The new rules do not apply to GAP contracts sold before 1 September. The sale of the GAP contract is key.
- Free GAP products (to the customer) are to be covered by new rules.
- The prescribed information should be appropriate to the circumstances of the customer and specifically brought to the attention of the customer when provided. For example, the stated premium should be what the customer will be expected to pay once the deferral period has ended and if they choose to purchase the product. So firms will need to consider this when developing their prescribed information materials and processes and timing for delivering the information.
For more information, please see our expert's review of the new changes here.
2. FCA publishes updated Enforcement Referral Criteria
The criteria set out the factors the FCA considers when deciding whether to appoint enforcement investigators. The update follows a review by HM Treasury of the enforcement process. Examples of when the FCA may appoint enforcement investigators include accusations against a firm falsely claiming to be FCA authorised, a firm making misleading statements to induce investments or a firm or person committing market abuse.
The criteria are currently taken into account where the potential outcome of an investigation may be certain disciplinary action or a prohibition order.
When considering enforcement action, the FCA must ask itself, overall, is an enforcement investigation likely to further the FCA's aims and statutory objectives?
In answering this question, the FCA considers:
- The strength of the evidence and the proportionality and impact of opening an investigation;
- What purpose or goal would be served if the FCA were to end up taking enforcement action in the case; and
- Relevant factors to assess whether the purposes of enforcement action are likely to be met.
3. Requirement for firms to notify FCA regarding infringement of competition law
Regulated firms are required to notify the FCA if it "has or may have committed significant infringement of applicable competition law" under new rule SUP 15.3.32R. This is following the FCA's publication of its Policy Statement 15.18.
Such firms must make a notification as soon as they become "aware, or have information that reasonably suggests that a significant infringement has, or may have occurred."
4. FCA publishes the results of its study into customers who suffer unauthorised transactions
The FCA defines an unauthorised transaction as a "payment made from a customer's account without their consent".
The report highlights the legal and regulatory responsibilities of firms with regard to unauthorised transactions, as well as focusing on customers' experiences. In particular, the report considers how firms treat customers in vulnerable circumstances. The results of the study can be found here.
5. Competition and Markets Authority (CMA) produces final Guidance on Unfair Terms
The CMA has published the guidance in order to assist those who will be affected by the changes that the Consumer Rights Act 2015 (CCA 2015) will bring in from 1 October 2015. For more information on the new act, please see our previous alert.
Three different forms of guidance have been produced: Short Guidance, Intermediate Guidance and Detailed Guidance.
As their titles suggest, each provides an overview at a different level of how and when the unfair terms may apply and the various tests contained within the CCA 2015.
The Guidance can be found by following the links below.
6. FCA finalises the rules for complaints handling
Policy Statement 15/19 sets out final rules on complaints handling which can be found here.
The new proposals for financial services firms will mean that firms will have longer to resolve complaints on a less formal basis. Firms will now have three days to address a consumer's complaint and resolve it.
The FCA's intention behind the rules is to enable firms to resolve more complaints first time instead of complying with current one day targets for doing so.
In addition, firms will have to report all complaints to the FCA, including those handled by the close of three business days after receipt by the firm.
7. Court of Appeal decision in the case of Northern Rock Asset Management Plc (NRAM) v McAdam and Hartley
The Court of Appeal considered a case of non-implementation of requirements under section 77A of the Consumer Credit Act 1974.
The Court of Appeal, Civil Division, held that borrowers who took out unsecured loans under agreements that incorrectly stated that these loans were regulated under the CCA are not entitled to the protection of the Act which applies to regulated loans. Unregulated agreements do not contractually incorporate the provisions of the CCA allowing customers certain rights and remedies.
For our full review of the decision, please see our previous alert "Unregulated agreement remains unregulated despite representation and warranty to the contrary".
8. Ministry of Justice publishes 2014/2015 Claims Management Regulator Annual Report
The report published this July covers the key developments, progress and achievement made in claims management regulation over the past year.
In addition, it sets out priorities for the following year, including nuisance calls and unsolicited marketing, financial products and services claims, personal injury claims and unauthorised activity.
A full copy of the 2014/2015 Claims Management Regulator Annual Report is available here.
9. Council of Ministers reaches agreement with European Parliament on the Insurance Distribution Directive (IDD)
The final compromise of the IDD (previously known as the Second Insurance Mediation Directive (the "IMD II")) has been published. It will now be submitted to the European Parliament for a first vote at reading.
The IDD updates the 2002 Insurance Mediation directive (IMD) which provides the current framework for regulating insurance brokers, agents and other intermediaries in the EU. The European Commission states that the IDD will improve customer protection, giving them greater choice and information when buying insurance products.
Following adoption by the European Council, member states will have two years to transpose the IDD into domestic law.
For more information see the European Commission's press release.
10. Update on proposed Pre-Action Protocol for Debt Claims (PAP)
A new sub-committee of the Civil Procedure Rule committee has been set up to revise proposals to introduce a new PAP.
The Committee includes representatives from the debt advice and creditor sectors. We expect the revised proposals will be published for consultation later this year.
11. Firms to create and maintain a register of People with Significant Control (PSCs)
The Companies Act 2006 has been amended by section 81 of the Small Business, Enterprise and Employment Act 2015. This requires all UK companies (except publicly traded companies) to create and maintain a register of individuals who have beneficial ownership in, and significant control over, them.
Significant control means those who ultimately own or control more than 25% of a company's voting rights or shares, or who otherwise exercise control over the company and its management.
The register will be available for public inspection via Companies House.
For further information from our experts, please see our alert "More regulation for UK companies: changes to the Companies Act 2006".
In case you missed them, here are other relevant links to recent issues covered by our experts.