Regulatory round-up - July 2015

14 July 2015

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.

This month's update covers the following:

  1. FCA considers whether additional guidance is needed following Plevin v Paragon Personal Finance Ltd
  2. FCA published its Quarterly Consultation Paper:
  3. New requirements for selling Guaranteed Asset Protection (GAP) Insurance
  4. New requirements for compliance with EU Alternative Dispute Resolution (ADR) Directive (DISP)
  5. OfCom introduces new rules for non-geographic telephone numbers
  6. New guidance for Consumer Credit Firms published by the FCA
  7. New guidance for Consumer Credit Permissions from FCA
  8. FCA calls on firms to deliver information to consumers in a smarter, more effective way
  9. FCA concludes that debt management firms are failing most vulnerable consumers
  10. Fourth Anti Money Laundering Directive takes effect
  11. 2015/2016 Consumer Credit Periodic Fees
  12. ICO agrees approach for reporting irremediably unenforceable credit agreements
  13. Draft Data Quality Reference Guide sets out best practice

1. FCA considers whether additional guidance is needed following Plevin v Paragon Personal Finance Ltd

Following the Supreme Court's 2014 decision in Plevin, the Financial Conduct Authority (FCA) is currently considering if any extra rules and/or guidance are required to assist with the impact of the Supreme Court's decision regarding Payment Protection Insurance (PPI) complaints. Our analysis of this decision can be found here.

The FCA will collect evidence on current patterns in complaints on PPI and use this to ascertain whether the current method meets the FCA's objective of securing appropriate protection for customers. A preliminary view is expected later this summer.

2. FCA published its Quarterly Consultation Paper:

The FCA published its Quarterly Consultation Paper in June this year.

The paper includes proposals, amongst others, for amendments to the Mortgage (MCOB) and Training and Competence (TR) sourcebook as well as amendments to several sections of the Handbook regarding the Consumer Rights Act.

For more information, please see the paper.

3. New requirements for selling Guaranteed Asset Protection (GAP) Insurance

On June 10, the FCA published its final policy statement on GAP insurance. This included the FCA's final version of the new rules for the sale of GAP insurance.

The new requirements will come into effect from 1 September 2015 and will apply to all firms selling GAP insurance in connection with the sale of a motor vehicle (i.e. add-on GAP).

Please see the FCA's policy statement on this subject for more information.

We have also written an exclusive article for Motor Finance on these new requirements which we will circulate once published.

4. New requirements for compliance with EU Alternative Dispute Resolution (ADR) Directive (DISP)

From 9 July 2015, businesses covered by the Consumer Credit Act and falling within the jurisdiction of the Financial Ombudsman Service must comply with the EU ADR Directive.

Businesses will need to, as a minimum, mention the Financial Ombudsman Service (FOS) by name on their website and provide a link to the FOS' website.

The directive applies to business-to-consumer contracts as well as businesses lending to micro-enterprises (i.e. enterprises employing fewer than 10 people and which have a turnover or annual balance sheet not in excess of 2 million euros (approximately £1.6 million).

For further information please see the Alternative Dispute Resolution Directive Instrument 2015.

Our analysis on the new rules can be found here.

5. OfCom introduces new rules for non-geographic telephone numbers

As of 1 July 2015, changes have been introduced by OfCom with the aim to reduce the scope of customers to be confused at the cost of calling non-geographic service numbers starting 08, 09 or 118.

OfCom now requires that phone providers make clear the cost of any access charge via either terms and conditions or phone bills. In addition, service provides must now make clear the cost of any service charge in their communications to customers.

6. New guidance for Consumer Credit Firms published by the FCA

The FCA has launched "Understanding Consumer Credit Information" for firms in an attempt to clear up common misconceptions surrounding the FCA's rules on creditworthiness and affordability.

7. New guidance for Consumer Credit Permissions from FCA

The FCA has also provided guidance as to what consumer credit permissions a firm may need in order to become regulated.

8. FCA calls on firms to deliver information to consumers in a smarter, more effective way

The FCA has published a discussion paper, entitled Smarter Consumer Communications, addressing the need to deliver information more effectively to consumers. The paper challenged firms to provide more innovative and engaging communications and suggested using videos and infographics as ways to present information clearly to customers in a way which they will understand.

The FCA is collecting feedback on the paper by 25 September 2015.

For more information, please see the discussion paper.

9. FCA concludes that debt management firms are failing most vulnerable consumers

The FCA released a press statement asserting that the debt management sector is still one of the highest risk consumer credit sectors. In particular, the FCA commented that the quality of advice provided by fee-charging debt management firms was substandard. It found that "Free-to-customer" firms were of a higher standard but nevertheless, believed there was much more to be done.

The FCA found that some firms fail to have clear and effective policies in place to identify and deal with the most vulnerable - a minimum requirement of the FCA.

If a firm wishes to continue to provide debt management services, they must go through the assessment process for FCA authorisation. Specifically, firms must demonstrate they treat customers fairly and meet all consumer credit rules. During assessment, the FCA will also consider the level of fees charged by debt management firms.

For more information, please see the FCA's press release on this issue.

10. Fourth Anti Money Laundering Directive takes effect

On 5 June 2015 the Official Journal of the EU adopted the Directive and it took effect from 26 June.

It applies to banks, auditors and accountants, among others, as well as any other businesses involving making or receiving cash payments for goods which are worth at least 10,000 euros, regardless of how and when the payment is made.

One of the key requirements introduced by the Directive is for EU countries to launch central registers which record the ultimate 'beneficial' owner of businesses.

Such central registers will likely facilitate regulators and prosecutors jobs of identifying those in breach of anti-money laundering regulations.

EU Governments have until 25 June 2017 to implement the Directive.

11. 2015/2016 Consumer Credit Periodic Fees

In June, the FCA published its final consumer credit periodic fees which affects all fee payers.

There has been no change in fees and levies from 2014/2015. For further detail, please see the FCA's policy statement on this subject.

12. ICO agrees approach for reporting irremediably unenforceable credit agreements

In late 2014, the decision in Grace v Blackhorse meant that it is a breach of the Data Protection Act 1998 for lenders to report debtors who fail to make payments of irredeemably unenforceable debts as defaults to credit rating agencies (CRAs), without also stating that the agreement is unenforceable.

The Information Commissioners Office (ICO) has now agreed an approach to reporting such agreements. A Notice of Correction ought to be recorded and contain the following wording: "Please note that this default relates to an agreement which is deemed to be irremediably unenforceable under the Consumer Credit Act".

13. Draft Data Quality Reference Guide sets out best practice

The Steering Committee on Reciprocity has set out the draft Guide. This sets out the best practice for the quality of information shared for the purposes of reporting to credit reference agencies.

The ICO will use the Guide when considering complaints made to it about the quality of data shared by firms via credit reference agencies.

The ICO is considering whether to make the guide available to the public.


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