Our finance experts provide the first in a series of 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 confirms its approach to improving individual responsibility and accountability in the banking sector
The Financial Conduct Authority (FCA) has published a report explaining how it will implement the Senior Managers Regime (SMR) and has provided further detail regarding the its plans for the Certification Regime (CR) and new Conduct Rules.
The SMR aims to encourage a clear allocation of duties to key decision-makers and reinforce their individual accountability through rigorous initial and ongoing assessment of their fitness and propriety.
The CR will require relevant firms to assess and certify at least annually the fitness and propriety of employees deemed capable of causing significant harm to the firm or to any of its customers or those that could risk the integrity of financial markets.
The new regimes are also underpinned by a new set of Conduct Rules, applying to most staff within relevant firms.
For more information, see the full guidance report and the full consultation paper on strengthening accountability in banking.
2. Government introduces new consumer hire and hire purchase agreements legislation
Under this new legislation, the limited permission regime is now extended to include all broking of consumer hire and hire-purchase agreements.
The legislation came into force on 24 March 2015. It applies to the broking of consumer hire or hire-purchase agreements from and including 24 March 2015, subject to the firm not taking part in any other regulated activity that requires full permission.
3. FCA now open to accept applications from second charge firms for regulated mortgage permissions
The Mortgage Credit Directive (MCD) comes into force on 21 March 2016. On that date, all second charge mortgages will be transferred from the consumer credit regime to the mortgage regime.
From this date, lenders, administrators and intermediaries must be authorised and hold the correct mortgage permissions in order to engage in second charge mortgage business.
Applications can now be made via the FCA website.
4. Instalment Credit Exemption now in force
The Financial Services and Markets Act 2000 (Miscellaneous provisions) (No.2) Order 2015 came into force on 18 March 2015.
This amends the exemption in relation to instalment credit. Now, a credit agreement is exempt where:
- it is a borrower-lender-supplier agreement;
- it is without interest charges; and
- it is repayable in 12 or fewer instalments within a 12-month period.
5. Consumer Rights Act receives Royal Assent
On 26 March 2015, the Consumer Rights Act received Royal Assent. The Act introduces a new short-term right to reject goods which are not of satisfactory quality without deduction for use and without the consumer needing to accept a repair or replacement.
- Hire-purchase agreements are covered by the Act.
- What is considered "satisfactory" is determined by what a reasonable person would think satisfactory.
- Businesses have until 1 October 2015 to implement the new framework to their consumer contracts.
The Department for Business, innovation and Skills (BIS) has published guidance for firms.
6. Moorhouse fined £159,300 for failures regarding its telephone sales.
The FCA fined Moorhouse Group Limited (Moorhouse) for failing to put in place systems and controls to ensure customers were given the right information. As such, customers were at risk of buying the wrong products and not having the right insurance cover.
The decision highlights the need for firms engaging in insurance broking via telesales to have consistent and effective quality assurances processes in place to monitor telephone sales and ensure customer data is recorded correctly.
Subsequent reviews emphasised that sufficient details about each product must be provided to customers in good time, well before completion of sale.
7. CMA publishes draft Payday Lending Market Investigation Order
The Competition and Markets Authority (CMA) published its draft for consultation on 1 May 2015.
The draft paper aims to address the failure by payday lenders to compete on price. Under the Order, payday lenders will be prohibited from supplying payday loans unless:
- The lender has published information on an FCA authorised payday loan comparison website; and
- Customers are provided with a summary of the cost of borrowing.
The draft order also sets out further compliance obligations.
The CMA invites comments on the draft order by 1 June 2015.