18Dec

Task Force Looks at Nuisance Cold Calls

Government task force looks at issue of nuisance calls

The Government’s task force has examined what more can be done to tackle the problem of nuisance calls, and has now presented its findings.

This autumn, the Government has already announced it is to change the law so that enforcement action can be taken for calls that simply cause annoyance, rather than the authorities having to prove distress or inconvenience has resulted before fines are imposed.

Measures recommended by the task force include:

  • Increasing the maximum fine to £500,000, or to 20% of turnover for claims management companies (CMCs) who handle payment protection insurance claims
  • Asking the Information Commissioner’s Office (ICO) to devise approved wording that firms can use to opt customers in or out of marketing calls
  • Conducting an awareness campaign to ensure firms know their responsibilities
  • Being able to hold individual company directors accountable. In some ways, this would be similar to the approach of the financial regulator, the Financial Conduct Authority, which can take action against both authorised firms and key individuals within the firm.

The ICO recently fined Devon-based CMC EMC Advisory Services Ltd, but many campaigners suggested that the penalty of just £70,000 provided little deterrent to other firms.

Many cold calls continue to be from firms offering to help with personal injury claims or mis-sold financial products. But increasing numbers of unsolicited calls are being made by firms offering solar panels, household insulation or free pension reviews. The ICO says it received 15,000 complaints about nuisance calls in November 2014 alone, and has had over 100,000 complaints in the whole of 2014.

A survey by consumer organisation Which? showed that four out of five people have received unsolicited calls at home, and that around one third of these people have been ‘intimidated’ by the communications. Which? executive director Richard Lloyd is chairman of the task force.

Mr Lloyd said:

“Consumers have suffered nuisance calls and texts for far too long. They are often confused or misled by requests for consent to being contacted, so today we set out recommendations to introduce tougher rules and more action from businesses, the regulators and the Government. Only through concerted and coordinated action will we put people back in control of their data and help bring this modern day menace to an end.”

Ed Vaizey MP, Minister for Culture and the Digital Economy, said:

“For too long nuisance calls have plagued consumers, often at very inconvenient times of the day and in some cases leaving vulnerable people like the elderly too scared to answer the phone. That’s why we’re determined to tackle this scourge through the first ever nuisance calls action plan.“

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

18Dec

FCA Report on Failings in Annuity Market

FCA reports on failings in the annuity market

The Financial Conduct Authority (FCA) has revealed its concerns about the annuity market, as it publishes both a market study and a thematic review into the issue. The regulator says that annuities can be a good option for those with modest sized pension pots and cautious attitudes to risk, but also says that many pensioners’ annuity income is restricted because they either do not shop around, or they fail to obtain an enhanced annuity that could take into account their medical situation.

The executive summary of the market study says “that competition in the retirement income market is not working well for consumers.”

As a result of the market study, the FCA has announced a number of initial proposals. If it later wishes to make any formal changes to its rules it will conduct a consultation at that time. The proposals include:

  • Providers to be forced to tell customers what level of annuity they could receive by shopping around, i.e. using the ‘open market option’.
  • The development of a ‘pensions dashboard’, making it easier for customers to see details of all their retirement savings in one place

The thematic review revealed that many firms were failing to inform customers that they could shop around, and in particular were failing to inform customers that enhanced annuities for certain medical conditions could be available with other providers. It is estimated that customers who are eligible for enhanced annuities, but who purchase standard annuities, are losing out on up to £175 of retirement income per year.

The majority of the firms visited in the review will now be required to complete remedial work, under the supervision of the FCA.

The FCA assesses firms offering annuities against four key ‘consumer outcomes’:

  • Whether customers are actively encouraged to shop around
  • Whether customers are given sufficient information about the existence of guaranteed annuity rates or market value reductions in their existing pension contract
  • Whether customers are informed that they may be eligible for an enhanced annuity, and the benefits of these products
  • Whether customers are informed of the different types of annuity available, e.g. joint names, single names, escalating and guaranteed

Annuity sales have already fallen ahead of the April 2015 introduction of new freedoms as to how pension income is taken.

Christopher Woolard, director of policy, risk and research at the FCA said:

“The Budget reforms are a game changer for the retirement income market.  People will be given more choice and many will want some support to ensure they make the right decisions for them. The Government’s new Guidance Guarantee, with the standards we have already proposed is a vital part of this, now firms need to play their part. We want to see firms improving the way they communicate with their customers.  In order for the pension reforms to work and for people to have trust and confidence in the products they are buying firms need to act now.”

Some commentators have predicted that an annuities mis-selling scandal is coming, the scale of which could even exceed the payment protection insurance saga.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

15Dec

Announcements to Personal Financial Planning in Autumn Statement

Autumn Statement issues regarding annuities and ISAs explained

As well as a raft of announcements about economic growth predictions, deficit reduction targets and infrastructure projects, the Government’s December 2014 Autumn Statement contained a number of announcements relevant to personal financial planning.

April 2015 really will bring about something of a pensions revolution. The latest announcement from the Chancellor of the Exchequer, George Osborne MP, was that annuities will be able to be passed on to beneficiaries tax free if the planholder dies before age 75. This brings annuities into line with previous announcements on income drawdown.

Spouses and civil partners will be able to inherit their partner’s Individual Savings Account (ISA) on death, and retain the contract’s tax advantages. The surviving partner’s ISA allowance in the tax year in which the death occurs will remain unchanged, so someone inheriting a £20,000 ISA can still use their own allowance of £15,000 on top of this. Anyone whose spouse died on or after the day of the Statement can benefit from the change.

The ISA allowance will also rise to £15,240 for the 2015/16 tax year.

Most homebuyers will be cheered by the radical changes to stamp duty. The present system involves a homebuyer paying a percentage of the entire property price in duty, known as a ‘slab’ system. This means that a £230,000 home will attract duty at 1%, i.e. £2,300; while a £270,000 home is taxed at 3%, i.e. £8,100. The new system will involve a system of graduated tax bands, similar to the income tax regime.

According to Mr Osborne, 98% of UK properties will attract less duty under the new system. The exceptions are properties valued at £937,500 or above (apart from those between £1 million and £1,250,000). The new bands are:

  • The first £125,000 will attract no duty
  • The portion between £125,001 and £250,000 will be taxed at 2%
  • The portion between £250,000 and £925,000 will be taxed at 5%
  • The portion between £925,001 and £1.5 million will be taxed at 10%
  • The portion in excess of £1.5 million will be taxed at 12%

This means that a £270,000 home will have duty of £3,500.

It is reported however that these stamp duty thresholds are likely to remain frozen for five years, meaning that duty will rise if house prices rise.

The personal income tax allowance (the amount on which no tax is paid) will rise to £10,600, while the higher rate threshold will increase to £42,385.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

15Dec

MOJ Issues Regulation Bulletin to CMCs

MOJ issues regulation bulletin to CMCs

Fines, fees, advertising standards and Legal Ombudsman procedures are just some of the issues covered in the Ministry of Justice (MoJ)’s December 2014 bulletin on claims management regulation.

Concerns have been raised in the past that claims management companies (CMCs) have been able to avoid enforcement action by cancelling their authorisation before the MoJ has completed its investigations into their alleged misconduct. However, for all alleged breaches of the rules that took place on or after December 9 2014, a CMC that is under investigation will be prevented from cancelling its authorisation unless it obtains the specific consent of the MoJ to do this.

The implementation date for the new fines regime has been confirmed as December 29 2014. From this date, the MoJ will have the power to impose fines of up to 20% of turnover on CMCs who are guilty of misconduct. Guidance on the fines system will be published shortly.

Further information will also be provided in the near future regarding CMCs coming under the jurisdiction of the Legal Ombudsman. This much delayed event is finally set to happen on January 28 2015. From this date, customers of CMCs who are dissatisfied with the company response to their complaints can refer the matter to the Ombudsman, who can order the company to pay up to £30,000 in compensation.

The MoJ has published a consultation paper regarding the fees to be paid by CMCs in the 12 months to March 2016. This consultation ended on December 18 2014. The MoJ is proposing an increase in the standard application fee from £1,400 to £2,000.

The proposed annual regulation fees are as follows:

  • (Annual) turnover of under £5,000 – £200
  • Turnover of £5,000 to £14,999 – £350
  • Turnover of £15,000 to £24,999 – £500
  • Turnover of £25,000 to £74,999 – £650
  • Turnover of £75,000 to £88,889 – £800
  • Turnover of more than £88,889 – either 0.9% of turnover, capped at £100,000; or 0.9% of turnover up to £1 million, 0.8% of turnover between £1million and £5 million and 0.75% of turnover above £5 million, all with no cap

The ‘uplift’ – the additional amount paid by CMCs who handle financial services claims – will remain unchanged at 0.145% of turnover from financial services activities.

Fees for funding the Legal Ombudsman service will be:

  • Turnover of under £5,000 – £75
  • Turnover of £5,000 to £14,999 – £150
  • Turnover of £15,000 to £24,999 – £250
  • Turnover of £25,000 to £74,999 – £340
  • Turnover of £75,000 to £163,636 – £540
  • Turnover of more than £163,636 – 0.33% of turnover up to £1 million, plus 0.22% of turnover between £1 million and £5 million, plus 0.18% of turnover above £5 million, all subject to a cap of £40,000.

All CMCs should expect to be asked in February 2015 for their annual turnover figures for the 12 months to November 30 2014.

Finally, CMCs are reminded of the Advertising Standards Authority (ASA) Codes of Practice. Companies can be held to account by the ASA for breaches of these codes, and the MoJ can also take enforcement action, which from December 29 will include the power to impose fines, as explained above.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

12Dec

Pensions Guidance Cost Reduction

Advisers to bear reduced burden for pensions guidance

The Financial Conduct Authority (FCA) has proposed a significant reduction, from 30% to 12%, in the proportion of the costs of the Government’s pensions guidance to be paid by financial advisers.

One option, outlined by the regulator in its July 2014 consultation paper, was for financial advisers to pay 30% of the costs of the new guidance scheme. 28% would be paid by deposit takers, 19% by portfolio managers, 17% by insurance companies and 6% by investment managers. Another possible option saw firms in all five groups each meeting 20% of the cost.

The rationale for this proposal was that financial advisers were likely to benefit from the guidance scheme as pensioners receiving the rather basic guidance of Citizens Advice or The Pensions Advisory Service would then be keen to find out more and seek formal advice. But many within the advisory community questioned just how realistic this idea was, especially given that advisers charge advice fees, and the guidance can be accessed free of charge as many times as the customer wishes. An FCA spokesperson appeared to acknowledge this, by saying:

“We accept the point made by respondents that financial advisers will only benefit if, after using the guidance service, consumers seek advice from regulated financial advisers. We also accept it is clearer that product providers in the other fee blocks are more likely to benefit as the monies released through greater pension flexibility will be distributed amongst them.”

A new proposal now reveals plans for advisers to pay just 12% of the costs, while the other four groups will all pay 22%. Firms with annual income below £100,000 will not pay any of the costs.

The advisory community has given a generally lukewarm response to the revised proposal, with many suggesting that even 12% is too much to pay.

Chris Hannant, director general of the trade association, the Association of Professional Financial Advisers, described the reduction as “a big step forward,” but also commented:

“In our view this is not the end of the story. We believe this allocation still over-estimates the benefit advisers are likely to see as a result of the guidance service. We will therefore be making sure HM Treasury and the FCA monitor carefully how many people take up the guidance, and what they go on to do next. If the figures show regulated advisers are not benefiting from the guidance service, then we will be pressing the FCA for a further reduction in advisers’ share of the bill.”

Personal Finance Society chief executive Keith Richards made the case for advisers not to have to pay any of the costs of the guidance, in saying:

“Advisers should not pay any more than they currently do. The significant marketing budget enjoyed by the Money Advice Service should be redeployed to fund the guidance guarantee.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

08Dec

New Rules for Credit Brokers

New rules for credit brokers to be introduced in less than one month

The Financial Conduct Authority (FCA) has announced that a series of new rules for credit brokers will be introduced from January 2 2015.

Unusually, the FCA has chosen to introduce these rules without conducting a consultation beforehand. The regulator believes it is justified in taking this step because of the very real need to protect customers from detriment.

The FCA said it had forced seven brokers to stop accepting new business, while three have been referred for enforcement action and a further 23 are under investigation.

Complaints about credit brokers to the Financial Ombudsman Service (FOS) have soared in recent months, and there have been a number of stories in the media about brokers’ activities. The FOS received 13,348 complaints about these firms in the period April to October 2014, compared to 6,376 in the entire 12 months to March 2014.

Practices these firms are said to have engaged in include: taking fees without consent, failing to provide customers with loans, passing customer details to other brokers without consent (sometimes these other brokers also charge their own fees), falsely implying that they lend money and sending unsolicited marketing messages.

Brokers operating in the payday loan market are said to be responsible for a large proportion of these issues.

From the start of 2015, new obligations for brokers of all forms of unsecured credit will include:

  • To state their legal name in all advertising and other communications with customers. If they choose to state any trading names, this must be in addition to their legal name
  • To state prominently in all communications that they are a broker and not a lender
  • To make clear the amount of the fee to be charged (or an estimate if an exact figure is not possible), together with details of when and how the fee will be collected
  • To give customers a 14 day cancellation period when applying for a ‘distance’ contract (one arranged without face-to-face interaction between broker and customer)
  • To report to the FCA on a quarterly basis regarding their web domain names

If firms do not carry out each of the first three steps listed above, they will be forbidden from collecting fees or asking for payment details from customers. The information must be provided to the customer in a durable medium, such as on paper or via email, and the firm must wait for the customer to confirm receipt of this information before any fees are taken.

The FCA will consult on these new rules and on other matters related to consumer credit in January 2015, so it is possible that some of these rules could be amended at that stage.

Martin Wheatley, chief executive of the FCA, said:

“The fact that we have had to take these measures does not paint this market in a particularly good light. I hope that other firms will take note that where we see evidence of customers being treated in a blatantly unfair way, we will move quickly to protect consumers from further harm.”

Citizens Advice said that complaints made to it about credit brokers had more than trebled in the period July to September 2014, when compared to the same period in 2013. Its chief executive, Gillian Guy, said:

“The FCA are right to impose enforcement action and new rules as this market needs a radical clean-up of bad practice. We are concerned about unacceptable marketing and the way customers data is traded. Many are struggling to get refunds as claims go ignored and people struggle to track down the companies involved.”

Ms Guy also revealed that her organisation knew of one customer who had fees taken from their account by 19 different brokers.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

05Dec

FCA Publishes 2015 Pension Standards Guidelines

FCA publishes pension guidance standards

In late November 2014, the Financial Conduct Authority (FCA) announced the standards which Citizens Advice (CitA) and The Pensions Advisory Service (TPAS) will need to follow from April 2015 when delivering the Government’s free pension guidance. This Guidance Service will be launched at the same time as pensioners become able to access their entire defined contribution pension funds as cash, with the first 25% of each withdrawal tax free and the remainder taxed at their marginal income tax rate.

CitA (which will deliver face to face guidance) and TPAS (which will deliver telephone guidance) will not themselves be regulated by the FCA, but it will be the FCA’s responsibility to supervise the guidance given by these bodies.

The way the FCA supervises CitA and TPAS will be similar to its existing supervision of regulated firms, in that tools such as data analysis, sales monitoring and mystery shopping may be used. The regulator can recommend steps the providers should take to ensure compliance and to rectify breaches, but will not have any formal enforcement powers, and will need to make the Treasury aware of any serious issues it identifies.

The new standards will include:

  • The service offered must be consistent across all delivery channels, i.e. whether the guidance is sought via telephone, online or face-to-face, the level of guidance customers receive should be the same
  • After being asked to provide information on their financial circumstances, customers can be made aware of applicable options for taking retirement income, and their advantages and disadvantages; and can be signposted to a directory of financial advisers and/or product providers where appropriate. However, CitA and TPAS staff will not be able to recommend specific advisers or providers, or recommend specific options for taking retirement income
  • A record of the guidance session must be provided to the customer in a durable medium
  • Staff delivering the guidance will not need to hold any professional qualifications, but will need to have ‘the necessary skills, knowledge and expertise’.
  • The organisations must exercise ‘due skill, care and diligence’ in delivering the guidance
  • The organisations must communicate with customers in a way that is ‘clear, fair and not misleading’
  • The organisations must have sufficiently rigorous systems & controls to ensure that they comply with the standards
  • The organisations will need to have documented complaints procedures which specifically relate to the Guidance Service, and will need to signpost customers to the availability of these procedures. They will also need to maintain sufficient records of complaints received and how they were handled. However, the FCA will not lay down detailed rules as to how CitA and TPAS should handle complaints.

It can be seen that many of the above are similar to FCA principles and key rules for regulated firms.

Pension providers will be required to recommend that customers use the Guidance Service before they take benefits from their plan.

Christopher Woolard, director of policy, risk and research at the FCA said:

“Any decision about your pension has far-reaching consequences that often cannot be reversed. The pensions’ landscape will fundamentally change from April 2015 so it is important that people get support to enable them to make the right choices about what to do with their retirement fund.

“We want this to work well for consumers and industry and I believe that the standards and rules we have published today strike that balance. They will give consumers confidence in the quality of the service they will receive and provide certainty to those tasked with delivering it from April next year.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

03Dec

Only Half of Wonga Customers Received Owed Compensation

Wonga leaves customers waiting for compensation

In June 2014, payday lender Wonga announced that it would compensate around 45,000 customers for the ‘distress and inconvenience’ caused by sending them debt collection letters which purported to come from law firms, firms which in fact did not exist.

All affected customers should have received a £50 payment, with higher amounts being awarded in special circumstances. Yet in mid-November 2014, the firm admitted that only just over half of the affected customers had received their compensation.

Appearing before the House of Commons’ Treasury Select Committee (TSC), Wonga’s chief credit officer, Nick Brookes, said only 27,000 offers of compensation had so far been sent. Of the 5,000 who had already responded, 99% had accepted their offer. Mr Brookes suggested that many of these customers had changed their contact details and were proving difficult to trace.

Andrew Tyrie MP, chairman of the TSC, said:

“The 18,000 customers who received misleading letters from ‘fake’ law firms but who have yet to be contacted by Wonga are evidence that a lot more work is needed to change the industry’s culture, as with so much of banking.”

Regarding the fact that less than 20% of those who had received the letters had replied, Joanna Elson, chief executive of financial charity the Money Advice Trust, suggested that many people were scared to open letters from Wonga, fearing that the communication may instead be another attempt to recover unpaid debts.

Wonga has committed to a number of changes to its business practices since Andy Haste took over as chairman in July 2014. Measures include ceasing to use the elderly ‘puppet’ characters in the firm’s advertisements, removing their name from children’s Newcastle United replica kits, and agreeing to write off £220 million of debt from some 330,000 customers on the grounds that the loans would not have been granted under new affordability criteria.

There is no indication at present that the regulator, the Financial Conduct Authority (FCA), is prepared to act over the delays. However, it has acted in the past over compensation delays. In February 2013, the Financial Services Authority (the FCA’s predecessor) fined Lloyds Banking Group £4,315,000 for delays in paying compensation to customers for mis-sold payment protection insurance (PPI). The previous month saw a £113,300 fine for Co-operative Banking Group for placing PPI complaints on hold in the face of instructions from the regulator not to do so.

Payday lenders continue to attract close scrutiny from the FCA. Action has also been taken against Dollar Financial and The Cheque Centre, and from January 2015, payday loans will be subject to a charge cap – loans cannot be subject to interest of more than 0.8% per day and no borrower can be asked to repay more than the amount of the loan.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.

01Dec

Advertising body to look at pre-watershed payday ads ban

Lawmakers have asked an advertising watchdog to examine the case for banning payday loan advertisements from being shown on television prior to the 9pm watershed. The House of Lords, which is currently debating the Consumer Rights Bill, has called on the Broadcast Committee of Advertising Practice (BCAP) to look into the matter. BCAP has promised to do so and has said it will report early in 2015; indeed the watchdog had already said back in June 2014 that it would be conducting a general review of payday loan advertising.

BCAP’s Code of Practice includes rule 1.2:

“Advertisements must be prepared with a sense of responsibility to the audience and to society,” and rule 5.9: “Advertisements must neither directly exhort children to buy a product or service nor encourage them to ask their parents, guardians or other persons to buy or enquire about a product or service for them.”

Payday lenders are also subject to the financial promotions rules of the regulator, the Financial Conduct Authority. These rules include:

  • Not stating or implying that credit is available to all applicants regardless of their status and personal circumstances
  • Disclosing the Annual Percentage Rate when the promotion contains other financial information, or provides an incentive to take out credit
  • Including a health warning – ‘Late repayment can cause you serious money problems’ on promotions

Matthew Reed, chief executive of the Children’s Society, said: “Our research shows that children are routinely being exposed to advertising that makes high-risk, high-cost loans seem fun or normal. And the majority of British parents support a pre-watershed ban.

“Children should learn about borrowing and debt from their school and family – not from irresponsible payday loan advertising which encourages families to fall into problem debt.”

There were almost 17,000 responses to the Society’s call for members of the public to lobby House of Lords members over this issue.

Children cannot of course take out payday loans. But the concerns in this area are twofold, firstly that children will pester their parents to take out loans to spend on toys, treats etc; and secondly that the industry is encouraging the next generation to consider borrowing as a normal activity. A poll by consumer finance website Moneysavingexpert.com showed that one in three under 10s had repeated payday loan advertising slogans, and 14% had asked their parents to take out a loan.

Concerned that its promotions may be attractive to children, the UK’s largest lender, Wonga, has ceased to use the elderly ‘puppet’ characters in its advertisements, and has arranged for their name to be removed from children’s Newcastle United replica kits. Yet no other large lender has so far made a similar move.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.