Competition authority releases report on use of consumer data

The Competition and Markets Authority (CMA) published a report in June 2015 regarding how firms collect and use customer data.

The report finds that both firms and consumers can benefit from effective use of data by firms. The firms themselves can improve targeting of consumers for marketing purposes, can improve service and prevent fraud. Consumers can gain from a more personalised service and can receive promotional material that is likely to be more relevant to them.

Many consumers do not understand how firms collect data, and fear it could be misused. However, the CMA says it has found evidence of some firms taking steps to raise awareness of privacy controls, and developing new tools to allow customers to manage their personal data more effectively. It suggests that firms could be encouraged to compete with each other on the effectiveness of their data controls. In the modern age, firms are increasingly likely to collect consumer data via their use of the internet or social media.

All firms need to process personal data in line with the Data Protection Act, and with the eight principles laid down by the data protection watchdog, the Information Commissioner’s Office. The forthcoming introduction of the European General Data Protection Regulation is expected to impose new requirements on firms – this legislation is still being drafted by the various bodies of the European Union.

The CMA urges firms to ensure that their customers know when and how personal data is collected from them, and how this data is then used.

Alex Chisholm, the CMA’s Chief Executive, said:

“As the use of consumer data increases, consumers are benefiting across a wide range of markets, including through improved services that offer more flexibility, greater choice between providers and more information to find better prices.

“However we also found widespread concerns about how such data is collected, incomplete awareness amongst consumers and hence a fragile level of trust – all of which has the potential to undermine benefits in future.

“As our report finds, consumer data markets are becoming increasingly relevant across the full range of our work. We wish to see greater transparency to ensure consumers can choose to continue to benefit from the collection and use of their data in efficient and competitive markets.”

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.


Advertising watchdog’s new guidance on payday loan adverts

The Broadcast Committee of Advertising Practice (BCAP), which writes advertising codes of practice that are used in adjudications by the Advertising Standards Authority (ASA), published new guidance on payday loan advertising in early June 2015. This guidance came into effect immediately, so all payday lenders and brokers that market themselves via broadcast media should take note of it, even though it does not specifically introduce any new rules, nor does it bind the ASA in any way regarding future adjudications on payday loan advertising.

The guidance focuses around the issue of trivialisation – advertising that fails to reflect the serious nature of borrowing money and taking on an obligation to repay the loan within a specified timeframe. Firms need to think carefully before using any form of cartoon, jingle or humorous song in their adverts.

BCAP’s guidance also makes it clear that it is inappropriate to suggest that a payday loan is suitable to supplement regular expenditure, to address long-term financial difficulties or to fund luxury or discretionary spending. Regarding the last of these, the guidance lists holidays, weekends away, shopping, restaurant meals and socialising as inappropriate reasons for encouraging consumers to take out payday loans.

Instead, it strongly suggests that the most likely reason someone would need a payday loan would be to meet an unexpected, one-off bill, such as expenditure relating to domestic maintenance and repairs. “It helped out as my boiler was broken and I was two weeks away from pay day” is one of the phrases BCAP suggests firms could use in their advertising.

Adverts should also not place undue emphasis on the speed with which a loan can be provided, or on how easy the application process is. The guidance warns against using phrases such as “It’s fast, easy, and there’s never a credit check”, and “Money within 24 hours of valuation.” Instead, it suggests using phrases such as “Loans are subject to status and affordability.”

Finally, the guidance warns firms not to encourage consumers to disregard the representative APR (RAPR), which is always a high figure with payday loans.

BCAP also intends to commence a consultation, prior to the end of July 2015, regarding the times at which payday loan TV advertisements are scheduled. However, its recent review of TV advertising did not find substantial evidence to suggest that adverts are targeting children and encouraging them to ask parents to take out loans. Nevertheless, the BCAP press release reminds firms that they cannot broadcast any material that might encourage children to act in this way. Firms are also asked to think carefully about when adverts are shown. Many industry commentators, as well as the House of Commons Business, Innovation and Skills Committee, have suggested that the law should be changed to prevent payday loan advertising being shown prior to the 9pm watershed.

The ASA has previously banned a number of payday loan adverts that: suggested loans were suitable for supplementing regular expenditure, suggested they could be used for luxury spending, encouraged consumers to disregard the RAPR, or used inappropriately light-hearted content.

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.


Treasury to consult on introducing new requirements regarding pension freedoms

As it becomes clear that some pensioners are unable to fully benefit from the Government’s new pension freedoms, the Chancellor of the Exchequer has announced that a consultation on this issue will commence in July 2015.
Standing in at Prime Minister’s Questions for an absent David Cameron, Chancellor George Osborne told the House of Commons in mid-June 2015 that:
“People who have worked hard and saved hard all their lives should be trusted with their own money. But there are clearly concerns that some companies are not doing their part to make those freedoms available. We are investigating how to remove barriers and we are considering now a cap on charges.”
A key issue in the consultation will be the level of exit penalties which some providers impose when a customer wishes to transfer their fund to another provider. The Government has suggested that legislation to limit the size of these exit penalties could be introduced following the consultation. Older pension plans may have exit charges of as much as 20% of the fund value.

The consultation will also examine ways of making the switching process faster and easier.

Sometimes transferring the fund to another provider is the only way to benefit from the freedoms in full. Friends Life has already said that it is unable to offer the full range of freedoms, and that its customers are unable to make ad-hoc withdrawals from their fund, or take out flexi-access drawdown products. Unless Friends Life customers switch to another provider, their only options are to take out a conventional annuity, or to withdraw the entire sum in one go.

A few days before the Chancellor’s appearance in the Commons, the Secretary of State for Work and Pensions, Iain Duncan-Smith, made some choice remarks on the subject in a piece for the Daily Telegraph. Mr Duncan-Smith reminded providers that: “It is their money that you hold, not yours,” and referred to firms “dragging their feet.”

An exchange of letters between Harriett Baldwin, the economic secretary to the Treasury, and Martin Wheatley, chief executive of the regulator the Financial Conduct Authority, has also been published.

Ms Baldwin called on the FCA to ensure that barriers were not placed in the way of customers wishing to transfer their pension savings, and questioned whether failing to make the process simple could lead to a breach of the Treating Customers Fairly principle.

In his reply, Mr Wheatley promised that his organisation would examine how frequently exit charges were being levied, and at what level; and also said that the issue of creating barriers to switching would be looked at.

Although the previous Government trumpeted its pension freedoms as being available to all, the Government actually has no powers to compel Friends Life or any other provider to offer the full range of options to its customers.

The stance being taken by some providers also has implications for financial advisers, who may now need to consider whether to advise their clients to switch their pension fund to another provider if the existing provider is not offering the full range of pension freedoms.

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.


Citizens Advice reports reduction in payday loan problems reported to it

National advice charity Citizens Advice (CitA) has reported a significant fall in the numbers of people contacting it with issues regarding payday lending.

CitA helped with 5,554 payday loan problems in the first quarter of 2015, a 45% reduction from the figure of 10,155 in the equivalent period in 2014. The first quarter of 2014 saw payday loan related queries to the organisation reach their peak.

CitA believes that the reduction is due to the introduction of additional regulation by the Financial Conduct Authority (FCA) in April 2014, the enforcement action the FCA took against some lenders and the introduction of the price cap in January 2015. It welcomes the reduction, but calls on the regulator to continue to subject the payday loan sector to a high level of scrutiny.
CitA also urges the FCA to make monitoring of logbook and guarantor loan firms a priority, as it has evidence that the business practices of these firms are harming borrowers.
It says that many logbook loan customers report that they are being charged high interest rates and fees; and speaks of aggressive attempts being made to collect monies owed. It reports the case of one customer who had her car re-possessed at the roadside, leaving her stranded and unable to retrieve her personal possessions from the car.
Guarantor loan firms are said by CitA to be failing to carry out sufficient affordability checks on the guarantor, or to make clear to the guarantor the extent of their obligations. One firm is also said to have sent text messages to a guarantor’s young child asking for payment.
In its press release on the subject, CitA also revealed one statistic from a report it will publish later in June. It says that one quarter of payday loan customers would have been able to borrow from their bank (via an overdraft) had they approached them instead. The study will also reveal that payday loan customers are attracted by the ability to apply online and by the speed with which funds are provided.
CitA has campaigned on the issue of payday loans for some time, and has previously reported on lenders conducting inadequate affordability checks, and on inappropriate use of Continuous Payment Authority.
Citizens Advice Chief Executive Gillian Guy said:
“Irresponsible high-cost lenders are sentencing people to a life in debt. The drop in the number of problems reported to us about payday loans is good news for consumers and demonstrates the impact a strong stance against irresponsible lending can have on people’s lives.
“It is important to remember that it is not just payday loans that have blighted people’s finances. Other high cost lenders like guarantor or logbook loans are also causing havoc with people’s finances.
“Following concerns raised by Citizens Advice the regulator and Government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies. With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye.”
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.


Adviser trade body calls for FCA to be sensible over fees, the long stop and MIFID II

With regulatory costs and the general regulatory burden for authorised firms rising all the time, one of the main trade associations for financial advisers has requested that the Financial Conduct Authority (FCA) applies common sense in a number of areas.

The first area about which the Association of Professional Financial Advisers (APFA) is concerned is the size of the FCA’s budget. The Association has called for the regulator’s budget to be frozen for the next two years. For the 2015/16 financial year, this budget has increased by 8% from the previous year, and most advisory firms have seen a 10.2% increase in their annual FCA fee. This comes at a time when firms have seen significant increases to the levies payable to fund the Financial Services Compensation Scheme and Money Advice Service, and have also had to pay the levy for the Government’s Pension Wise guidance service for the first time.

Regarding its long standing campaign to introduce a long stop – an over-riding time limit on how long after the advice a complaint can be considered – APFA reports that 76% of members who replied to a survey are in favour of a fixed 15 year time limit from the time the advice is given. 10% favour some form of insurance system to cover costs of complaints, 8% want the time limit to be set at different levels for different products, and 6% believe that the 15 year time period should only start once the firm’s liability for the advice has ended.

76% of advisers thought there would be a cost benefit to clients from introducing a long stop – at present many firms are facing higher professional indemnity insurance bills as a result of the lack of a long stop, and are being forced to pass on these costs to clients via higher advice fees. 83% of respondents believe there would be no client detriment from the introduction of a long stop.

APFA says dialogue with the FCA is continuing on the long stop issue.

The Association has also responded to concerns that the FCA may soon instruct firms to record all conversations with clients, possibly extending to face-to-face meetings as well as telephone calls. The European Union’s Markets in Financial Instruments Directive (MiFID) II comes into force on January 3 2017, and it has been suggested that the Directive will require advisory firms to record conversations as a tool to combat market abuse. APFA believes that market abuse issues primarily apply to stockbrokers, and that its members would have very little opportunity to engage in this practice, calling the issue “irrelevant” in the case of financial advisers. It has thus called on the FCA to refrain from “gold plating the rules”, and instead to “pursue a common sense approach to help firms at no risk to consumers.”

However, APFA welcomes the less onerous definition of independent advice being proposed under MiFID II.

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.


The Insolvency Service announces plans to make the bankruptcy petitions process easier

The Insolvency Service has announced that it is to withdraw the requirement whereby debtors who petition for bankruptcy online need to obtain the approval of an insolvency practitioner.

Before the end of 2015, the Service will take on the role currently carried out by the courts of making bankruptcy orders on petitions by debtors.

The new powers have been granted to the Service under the Enterprise and Regulatory Reform Act 2013.

Speaking at the annual conference of the Institute of Chartered Accountants in England and Wales’ Insolvency and Restructuring Group, Sarah Albon, inspector general and chief executive of the Insolvency Service, said that the new system would make the process easier, and reduce the burden on the legal system. She promised “easier access to bankruptcy and the removal of the need to attend court, an experience which many find incredibly stressful.”

Ms Albon also said:

“Once the provisions are implemented, an individual seeking the protection of bankruptcy will follow a new process. They will complete an online application and submit their application to the newly created office of the adjudicator, rather than to the court.”

“As a result of the changes, the court will only be involved in a minority of cases where an individual applies for bankruptcy. These will be cases involving an appeal or a post-order application. In this way, much valuable court time will be freed up.”

In June 2015, The Insolvency Service also announced that it had disqualified three directors of a claims management company that specialised in claims for mis-sold payment protection insurance and unenforceable credit agreements. Swansea-based Consortium Technology Ltd is said to have received a total of £12 million from customers for services which were never provided.

Inaccurate statements and omissions were made in numerous cold calls and unsolicited marketing emails. Consortium also took upfront fees from its customers, but failed to refund these as promised when claims were unsuccessful. It failed to inform customers of the complexity of the process for getting credit agreements voided, and did not tell them that this could only be achieved via a court order.

Amrinder Patwal was disqualified for 12 years, Nicholas Harle for 10 years and Victoria Skivington for four years.

Susan Macleod, Chief Investigator at the Insolvency Service, said:

“These disqualifications send a clear message to other directors that, if they make misleading statements to customers, fail to deliver services which have been paid for or fail to refund money as promised, their conduct will be investigated by the Insolvency Service and they will be removed from the business environment.”

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.


Consumer body launches online tool to report nuisance calls

Consumer group Which? has launched an online tool aimed at making it easier for consumers to complain about nuisance calls and texts. Claims management companies and payday lenders and loan brokers are often cited as being responsible for a sizeable proportion of these unwanted communications.

Which? says that only 24% of people know how to go about complaining about a nuisance call, so has launched this new tool in response.

The tool asks consumers to provide information such as:
• Whether they consented to receiving the call or text
• The date and time of the communication
• Whether it was received on a landline or mobile phone
• The name of the provider of the telephone service
• The number on which the communication was received
• The type of communication (normal phone call involving conversation, recorded message, silent call or text)
• The content of the message (e.g. Payment Protection Insurance claims management, accident claims, payday loans, double glazing)
• The name of the caller and their phone number
• Any additional information the consumer wishes to add

Which? then promises to forward the matter to the appropriate regulator.
Which? has campaigned for tougher action to be taken against companies for some time, via its Calling Time campaign. Its taskforce reported to the Government on this issue in December 2014, but since then, it says some 61,500 complaints about nuisance calls and texts have been made to the information watchdog, the Information Commissioner’s Office (ICO). It adds that only 2% of people that received nuisance calls go on to complain about them.
The law has recently been tightened so that the ICO can now fine companies simply if calls cause ‘annoyance or inconvenience’, whereas previously it had to demonstrate that the company’s actions had caused material distress. However, Which? is now calling for company executives to be held personally accountable if their organisation breaks the law, and for more companies to publicly commit to tackling the problem.
Which? executive director, Richard Lloyd said:
“Despite a clear action plan from the nuisance calls task force, it’s disappointing that so many unwanted calls and texts are still being received. People are sick of being bombarded with nuisance calls that invade their privacy and waste their time.
“The Government knows what’s required to tackle nuisance calls, so we need to see more sustained action, with senior executives held to account, to help put an end to this everyday menace.”
Companies must not call or text anyone who has indicated that they do not wish to receive marketing communications. They should not call anyone who has registered with the Telephone Preference Service.
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.


Adviser jailed for conning elderly customer

Former financial adviser Iain Sarvent has been jailed for three months and eight years after defrauding an elderly customer of the sum of £90,000. He pleaded guilty at Preston Crown Court to one theft charge and three fraud charges.

Mr Sarvent was an adviser at Barnsley-based Stonehaven Financial Services from October 2006 to October 2013.

He struck up a friendship with the unnamed 68 year old woman, persuading her to set up a joint bank account with him, and to give him power of attorney over her affairs. This meant he was able to avoid questioning from the bank about the sums he was withdrawing from the joint account and transferring to his own account.

Mr Sarvent used the funds to buy a BMW (although here £20,000 of the £26,000 purchase price was subsequently refunded to the woman), to set up an estate agency business with his wife and to pay for restaurants and holidays.

The woman also purchased Mr Sarvent’s parents home at £10,000 more than market value, after acting on his advice, before Mr Sarvent started living there rent free without her knowledge. She was also advised to make a number of property-based investments and took out a number of mortgages, mortgages she now needs to repay in her retirement. Mr Sarvent’s daughter was also able to live in a property at well below market rent as a result of her father’s dealings.

Referring to his debts of over £50,000, prosecuting counsel Nicholas Courtney said:

“Iain Sarvent was a man in a financial mess who was happy to let the woman fund his lifestyle, believing she could afford to do so and probably intending he could repay her one day.”
Defence barrister Sarah Smith said:
“He was deluded at the time in that he believed this was a genuine business plan and that it would succeed. He was desperate. He was a man who was in financial dire straits and was using the opportunity to access the funds. The business started legitimately but he understands he has completely destroyed the trust and friendship that was placed in him. He will never work in the financial sector again.”
Passing sentence, Judge Robert Altham said:

“These are mean and distasteful offences committed against a friend in breach of trust.”

The judge also pronounced:

“Part of the means you used to work your way into her trust is that you had acted as a financial adviser – someone she thought she could trust – but also a friend. Betrayal of a friend in this way is a particularly shameful sort of dishonesty. The hybrid of the two shows you to be an utterly cynical man.”

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.


Lloyds receives record retail fine for PPI complaints deficiencies

Financial regulator the Financial Conduct Authority (FCA) has fined Lloyds Banking Group £117,430,600 for issues regarding its handling of payment protection insurance (PPI) complaints.

The fine, which is the largest the FCA has ever imposed for retail conduct failings, includes Bank of Scotland and vehicle finance provider Black Horse Finance, which are part of the Group, as well as Lloyds Bank.

The central issue was that Lloyds complaint handlers were relying on an ‘over-riding principle’ that its PPI sales process had been compliant and robust, and that this assumption was clouding their judgement on individual complaints – in some cases customers’ personal experiences of the sale were dismissed, or complaints were not fully investigated. In its Final Notice, the FCA has published a copy of an internal Lloyds document from 2012, which makes reference to “embedding [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][an] innocent until proven guilty culture”. Firms are not entitled to take this stance when investigating regulatory complaints. This echoes the June 2013 report by Times undercover journalist James Dean, who was told to work on the assumption that Lloyds had not mis-sold PPI when he obtained a role in the bank’s complaints handling unit.

The FCA also believes that the bank’s policy on contacting customers was inadequate. A number of complaints were rejected after complaint handlers tried without success to contact customers and obtain their recollection of events. Complaint handlers were not provided with recordings of sales calls. The FCA Notice says that customers were generally contacted at their preferred times, but back in 2013, the Times investigation alleged staff were encouraged to call customers during normal office hours in the hope they would not be available.

The FCA cites the example of Ms B, who complained that PPI had been added to her loan without her consent. After being unable to contact her by telephone on three occasions, the complaints handler closed the complaint and wrote:

“I have not found any evidence to support her allegation. I also believe that as the sales process was robust that the customer would have had the cover explained to her fully, been informed that it was optional and her consent would have been required in order to sell her the policy.”

Complaint handlers were also not informed of certain issues relating to the way Lloyds sold PPI. These included the fact that some customers had PPI added without their explicit consent. The Times went further, and said that complaint handlers were made aware that some salespeople had ticked the ‘yes to PPI’ box on application forms, but that they were still to regard the presence of this tick as definitive evidence that the customer wanted PPI.

The FCA decided to investigate Lloyds when it became aware that their uphold rate on PPI complaints had fallen significantly – from 82% in March 2012 to 26% in October 2012. The Times investigation revealed that Lloyds management were telling their complaint handlers that the majority of customers would not take the matter further if the bank rejected their complaint.

Lloyds will now re-assess each of the 1.2 million affected complaints, covering the period March 2012 to May 2013. It has set aside £710 million to cover compensation for these complaints, part of its overall PPI compensation reserve of more than £12 billion. The process of re-assessing the complaints and paying the compensation will be overseen by a Skilled Person appointed by the FCA.

António Horta-Osório, chief executive of Lloyds Banking Group, said:

“In 2011 Lloyds led the industry in starting to redress customers who had been mis-sold PPI”.

However, the relevant period for this fine did not commence until March 2012.

He added:

“Whilst our intentions were right, we made mistakes in our handling of some PPI complaints. I am very sorry for this.”

Mr Horta-Osorio will forfeit £350,000 of his bonus as a result of the fine, and his fellow executives will forfeit a further £2.3 million.

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.


Eight convicted for running unauthorised scheme and lying to FCA

Following a prosecution initiated by the Financial Conduct Authority (FCA), eight men have been convicted for their part in running an unauthorised collective investment scheme.

The participants have collectively received immediate prison sentences of 26 years, after some 110 investors lost a total of £4.3 million in the scheme.

The scheme was operated through Plott Investments Ltd (later known as Plott UK Ltd), European Property Investments (UK) Ltd and Stirling Alexander Ltd.

The companies offered investors the opportunity to purchase agricultural land, with a promise that its value would rise significantly. Investors were duped into paying vastly inflated prices for the land, and none of the investors ever saw a return on their investment. In some cases, the companies did not actually own the land they were offering.

The sentences handed out to the participants were:

• Scott Crawley – eight years imprisonment
• Dale Walker and Ross Peters – five and a half years imprisonment each
• Aaron Petrou – five years imprisonment
• Daniel Forsyth – two years imprisonment
• Brendan Daley – a 15 month jail sentence, suspended for two years, plus four months under an electronic curfew
• Ricky Mitchie – four months imprisonment, suspended for 18 months

Sentencing of Adam Hawkins has been adjourned.

Mr Petrou and Mr Peters pleaded guilty, and received 30% reductions in their sentences as a result, while the others were convicted by a jury.

Mr Forsyth’s sentence includes an additional 15 months in jail for lying to the FCA during a compelled interview. Otherwise, the offences for which the men were convicted included conspiracy to defraud, possession of criminal property and carrying on regulated activities without FCA authorisation.

Mr Walker, the solicitor to the scheme, personally received £900,000 of the proceeds of the scheme into his bank accounts.

Six of the men – Mr Walker, Mr Forsyth, Mr Petrou, Mr Peters, Mr Crawley and Mr Daley – have been disqualified from acting as a director.

Passing sentence, Judge Leonard QC said the scheme was:

“a subtle and cruel fraud.”

Georgina Philippou, acting director of enforcement and market oversight at the FCA, said of the case:

“The FCA will take strong action, through both the civil and criminal courts, against those who operate illegal investment schemes and those who assist them like solicitors. People put their homes and retirements at risk on the back of promises of high returns that were never going to be realised. The severity of the sentences shows how seriously the courts view this kind of offending.”
The two lessons to be learnt from this case are: firstly that FCA authorisation is required to carry out regulated activities, and secondly that firms and individuals must be totally open and honest in all dealings with the FCA.

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.

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