Regulatory round-up - November 2015

27 November 2015

Wragge Lawrence Graham & Co's regulatory experts provide their monthly bite size overviews of the major legal and regulatory developments and news for the consumer, asset and automotive finance sectors.

FCA publishes response to CMA high-cost, short-term credit market investigation

The Financial Conduct Authority (FCA) has responded to the report by the Competition and Markets Authority (CMA) addressing competition concerns within the high-cost, short-term credit market. It is also consulting on proposals to amend the consumer credit regime as a result. The FCA has proposed a number of additional standards for price comparison websites.

The FCA is now seeking comments on the value of quotation searches in the high-cost, short-term credit market and for comments on the issues and risks associated with the use of quotation searches across consumer credit markets generally.

Other areas which the consultation touches upon which may be of interest to the wider consumer credit market include:

  • Credit broking/lead generation;
  • Measures to allow consumers to 'shop around' without affecting their credit rating, such as quotation searches;
  • The use of real-time data sharing to enable informed credit assessments; and
  • Improved disclosure on the costs of borrowing.

Further details on the FCA's response can be found here.

Acting FCA boss speaks on the future of regulation

On 22 October Tracey McDermott, acting CEO of the FCA, spoke on the theme of 'The Future of Financial Services Regulation' at the City Banquet.

Ms McDermott highlighted the intensity and volume of regulatory activity in recent years, which she felt was not sustainable for either regulators or the industry and which was acting as a barrier to creativity, innovation and competition. She stressed the importance of developing a sustainable approach to regulation which is not locked in step with economic cycles, and thus breaking the 'regulate, de-regulate, repeat' cycle.

The full text of the speech can be read here.

CPRC calls for further input on Pre-Action Protocol for Debt Claims

Back in September 2014 the Civil Procedure Rules Committee (CPRC) consulted on a draft Pre-Action Protocol for Debt Claims. Detailed feedback from the FCA resulted in a revised Pre-Action Protocol (PAP) being produced, on which the CPRC is now requesting further input.

Amendments made following the first consultation include reducing the amount of paperwork that creditors are required to provide to debtors at the pre-action stage. The draft PAP now provides that some information will be provided to debtors in or with a letter before claim, with further information being available on request.

An information sheet would also be provided to debtors, setting out in plain English their rights and obligations under the PAP, alleviating concerns that providing a full PAP would be burdensome and costly and that is was drafted in language that debtors were unlikely to engage with or understand. Generally, the proposed PAP has now been simplified and clarified in response to the comments.

The deadline for responses to the Ministry of Justice is 11 January 2016.

Updated guidance on money laundering and terrorist financing controls in overseas jurisdictions

HM Treasury has produced revised guidance superseding any previous advice on the subject of money laundering and terrorist financing controls in overseas jurisdictions. This provides updated guidance on which jurisdictions should be considered high risk thus requiring enhanced due diligence measures, as well as those which appropriate actions should be taken to minimise associated risks (possibly including enhanced due diligence measures).

The updated guidance can be found here.

FCA announces new whistleblowing requirements

The PRA/FCA has announced new rules on whistleblowing to take effect in September 2016. It will not affect all finance firms, but will act as non-binding guidance on all firms.

Relevant firms will have to put internal whistleblowing arrangements in place to handle all types of disclosure, tell UK-based employees about the FCA and PRA whistleblowing services, and present a report on whistleblowing to the board at least annually.

See the policy statement here.

FCA seeks views on interim findings on Credit Card Market

The FCA has published its interim report into the Credit Card Markets. The report does not contain any great revelations, but it notes that higher risk consumers are less well served and are less likely to switch providers due to the impact on credit ratings caused by multiple credit searches.

By and large however, the FCA found that there was healthy competition between providers and that the flexibility provided by credit cards was valued by consumers. Clear evidence was found of consumers switching between credit cards.

Interim remedy proposals were put forward around two key areas:

  • shopping around and switching - the FCA suggested a range of ideas to mitigate the problem of complex deals preventing consumers from shopping around to find the best deal; and
  • on affordability and problem debt, the FCA considers that more could be done by the market.

The interim report is available here.

Call for input on competition in the mortgage market

The FCA has undertaken the first step on its review of whether there are any barriers to competition in the mortgage sector by publishing a call for input. Any stakeholders on the range of factors of regulated or unregulated providers are invited.

The closing date for submissions in 18 December, with a feedback statement intended for Q1 2016.

More information can be found here.

HM Treasury and the Ministry for Justice launch CMC call for evidence

HM Treasury and the Ministry for Justice have launched a call for evidence for a fundamental independent review of how Claims Management Companies (CMCs) are regulated. The opinion remains within the industry that certain CMCs are creating a social nuisance through unsolicited calls and texts and thus tarnishing the reputation of the industry, and additionally fuelling a high number of purely speculative claims.

The FCA has put forward concerns highlighting that regulation is required to cover a number of areas of dubious practices by certain CMCs:

  • Lists of template and non-specific allegations of mis-sales;
  • Ignoring of firms' responses and simply passing the complaint onto Financial Ombudsman Service after eight weeks;
  • Misrepresenting the complainant on the questionnaire;
  • Misuse of customers' information from databases, including mass breaches of the Data Protection Act;
  • Misleading advertising- including website advertising and all other forms of electronic media;
  • Unauthorised businesses.

FCA responds to waiver issue in PPI complaints handling

The FCA has produced a response to the possibility of a waiver of time limits for handling certain PPI complaints related to 'Plevin' PPI issues.

In it, the FCA sets out its position stating that the existing DISP requirements provide firms with sufficient flexibility, in that they give firms the option to explain why they cannot provide a final response where there is a good reason for not doing so.

For more information on the Plevin case, see our analyses "The Supreme Court rules on unfair relationships - where does that leave us?" and "Non-disclosure of commission renders relationship unfair".

Government to replace Approved Persons Regime with extended Senior Managers and Certification Regime (SM&CR)

The Government has decided to extend the Senior Managers' and Certification Regime to all financial services firms.

Tracey McDermott said that this was an important step in embedding personal responsibility throughout the industry. The regime was introduced by the Financial Services (Banking Reform) Act 2013 and requires firm to submit documentation on the scope of the responsibilities of senior management, and makes it a statutory requirement for senior manager to prevent regulatory breaches in their areas of responsibility.

HM Treasury also said that this would reduce the opprotunty for 'regulatory arbitrage' by appyling the same standards across the banking and so-called 'shadow-banking' sectors.

For more information please see here.

FCA updates

The FCA has published its usual updates on consumer credit and regulation for October 2015.

In case you missed it...


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.