29Jul

New FCA chief outlines current issues in his first speech

A number of hot topics in the regulatory landscape were covered by Andrew Bailey in his first speech since taking the helm at the Financial Conduct Authority (FCA). The regulator’s chief executive was addressing his organisation’s Annual Public Meeting on July 19.

In the consumer credit section of his speech, he referred to the unacceptable practices uncovered during the thematic review of payday lenders’ debt collection methods. He said that many firms had since made changes, and that he hoped all firms would make similar improvements. Mr Bailey also said the FCA was currently assessing the applications of debt management firms wishing to upgrade to full permission from interim permission.

Inevitably, Mr Bailey mentioned the Senior Managers & Certification Regime, which is already in force in the banking sector and which will be rolled out across the industry in 2018. The Regime will make firms responsible for verifying the fitness and propriety of their senior management. The FCA chief described the Regime as “the beginning of a new era of increased individual accountability”, before adding:

“[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”][The new rules] will hold individuals working at all levels within relevant firms to appropriate standards of conduct and ensure that senior managers are held to account for misconduct that falls within their area of responsibility.”

Regarding payment protection insurance (PPI), Mr Bailey promised to issue a response “shortly” to the recent consultation regarding a possible deadline for making a mis-selling claim.

Next, he described the area of retirement provision as “the biggest single challenge ahead in the provision of financial services in this country”. He spoke of the measures the FCA has introduced since the advent of the pension freedoms, such as requiring providers to give risk warnings to clients, and proposing a cap on pension exit charges.

As regards the FCA’s competition objective, he reminded his audience that the regulator had named and shamed firms offering the lowest savings interest rates, and was also proposing new ways of improving the way credit card firms deal with customers in severe debt trouble – at present card providers often find that these customers are very profitable and thus have little incentive to assist them.

Mr Bailey then turned his attention to enforcement issues, and commented that, in the last year, the FCA had imposed its largest fine for retail conduct failings when it fined Lloyds Banking Group £117 million for PPI complaints handling deficiencies. It has also imposed its largest anti-money laundering fine in recent months as well, when Barclays was fined £72 million.

Inevitably, the issue of the referendum result came up in his speech. Mr Bailey highlighted that European directives continue to apply for the present at least, and expressed the hope that the UK could retain access to the European single market in the future, as in his words “healthy competition in UK financial markets is supported by cross-border trade.”

Finally he said that the FCA was working on producing a mission statement, which he described as “vital to enable effective public accountability and in doing so to establish a stronger public understanding of the role of the FCA.” This mission statement is expected to be published in autumn 2016, following a public consultation.

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.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

27Jul

Mortgage brokers warned about FOS stance on failing to discuss protection

Mortgage brokers have been warned to pay due attention to all clients’ protection needs, or risk having complaints upheld by the Financial Ombudsman Service (FOS) and hence needing to pay compensation.

The comments were made by Kevin Carr, chief executive of Protection Review, an organisation set up to provide expert analysis of the protection and health insurance sector. Speaking at his organisation’s recent conference, Mr Carr said that FOS representatives had warned him about this issue, especially with regard to how clients affected by long-term sickness could continue to pay their mortgages.

Mr Carr also commented:

“Some advisers don’t know when to introduce protection – some maybe try to sell it at the wrong time – others will argue customers aren’t that interested and PPI has put them off, while some advisers will blame a lack of knowledge, with products perceived to be complex and constantly changing.”

Mr Carr gained support from Mark Graves, the sales director of advice network Sesame, who said:

“From a network’s perspective, if you don’t complete adequate notes to say the client was informed about the need to take out income protection, then you’re vulnerable to claims further down the line.”

Mr Graves went on to say it was a “dereliction of duty” if a mortgage adviser failed to highlight the need for a mortgage borrower to effect appropriate insurance.

Teresa Fritz, a member of the Financial Services Consumer Panel who was at the conference, questioned whether some customers were even aware of the existence of permanent health insurance and similar products.

Firms who hold mortgage permissions cannot be forced to sell protection products if they do not wish to. However, at the very least, mortgage brokers should highlight the importance of having the right protection in place, and strongly suggest that clients purchase this elsewhere.

Insurances mortgage borrowers could have in place include:

• Buildings insurance – to ensure that the security for the mortgage (i.e. the home) is covered against severe damage
• Life insurance – who would pay the mortgage if the named borrowers died?
• Critical illness insurance – with all the worry that comes with a serious illness, knowing that the mortgage would be paid off provides some level of peace of mind
• Payment protection insurance – to cover payments for a year or more if the client suffers loss of income due to being unable to work due to accident, sickness or unemployment
• Short-term income protection – to cover payments for a few years if the client suffers loss of income due to being unable to work due to accident or sickness
• Long-term income protection (permanent health insurance) – to cover payments until the client recovers from a long-term illness, or for the rest of the mortgage term if they remain ill

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.

26Jul

Insurance director fined and banned over money handling issues

Timothy Philip has been fined £60,000 and prohibited from carrying out roles involving handling of client and insurer money in the future. The Financial Conduct Authority (FCA) also imposed a fine of £2,632,000 on Towergate Underwriting Group, the firm of which Mr Philip was a director.

Insurance intermediary firm Towergate not only accumulated a combined shortfall of £12.6 million in its client money and insurer money accounts, but in addition this shortfall went undetected for a number of years owing to the firm’s inadequate systems and controls. The failings at the firm lasted for a period of eight and a half years from June 2005 to December 2013.

When a shortfall was finally noticed in May 2013, it took Towergate six months to rectify it – a clear breach of FCA rules which require shortfalls to be corrected on the day client money calculations are carried out. The firm also failed to notify the FCA of the issues at this stage.

Some of Towergate’s money transfers were in breach of the firm’s agreements with insurers, while others were not correctly recorded in the firm’s accounting records. The lack of proper records led to a £2,130,000 transfer between the client and insurer accounts being made twice, as the firm was unaware of having made the payment.

Mr Philip had specific responsibility for the client and insurer money accounts, and on four occasions he instructed or approved withdrawals without following the documented processes and procedures. He also failed to identify and manage risks resulting from the firm’s money handling operations. The FCA has thus concluded that he is not a fit and proper person.

The FCA’s rules require firms to ring-fence client money. As a result of Towergate’s failure to do so, the firm actually accumulated an additional £1,450,000 of interest in its main company bank accounts.

Although Towergate and similar firms are not yet subject to the Senior Managers & Certification Regime, this episode suggests that the era of the FCA holding individuals to account for shortcomings in their area of responsibility has already arrived.

Mark Steward, Director of Enforcement and Market Oversight at the FCA said:

“We have issued repeated warnings to the industry on the importance of complying with client money rules which are designed to ensure that client money is adequately protected in the event of a firm failing.  There can be no excuses given these warnings and the stakes involved. In addition, the firm’s failings placed insurer money at risk of loss.

“Senior management are ultimately responsible for ensuring that firms are following our rules and it is very clear that Mr Philip failed in that regard, falling well below the standards we require.”

Press reports suggest Towergate came close to running out of cash during 2015.

Towergate’s chairman is former Financial Services Authority boss John Tiner, although he was not connected with the firm at the time of the wrongdoing.

Reacting to the enforcement action behalf of Towergate, Mr Tiner said:

“While this issue is historic, isolated, and had no financial impact on any clients or insurer partners, it does not excuse the fact that the company failed to live up to the high standards we expect of ourselves at Towergate and we deeply regret it occurred.

“The company fully accepts the conclusions reached by the FCA, and the board is pleased that the regulator has recognised the company’s transparency and assistance throughout the process. Since identifying the issue, we have made a number of fundamental changes to our governance and control environment.

“The FCA findings allow us to close the matter, and maintain our focus on continuing to build a better business.”

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.

 

23Jul

FCA director speaks about conduct and culture

On July 12 2016, Jonathan Davidson, Director of Supervision – retail and authorisations at the Financial Conduct Authority (FCA) spoke at the 2nd Annual Culture and Conduct Forum for the Financial Services Industry. He emphasised a number of important points regarding the regulator’s role in supervising the conduct and culture of firms.

He began by saying that:

“The role of all leaders is to encourage a culture of personal responsibility and impress upon all staff the value of good culture to the health of the firm and the financial services industry more widely.”

Firms should also take careful note of the way the speaker defined ‘culture’ within firms. He described this as:

“The typical, habitual behaviours and mindsets that characterise a particular organisation. The behaviours are the ‘way things get done around here’; they are the way that we act, speak and make decisions without thinking consciously about it.”

Mr Davidson said he believed cultural failings were a major factor in episodes such as the payment protection insurance mis-selling scandal and the manipulation of LIBOR and the foreign exchange markets, saying that “some in the financial sector had mindsets that divorced themselves from the impact of their actions on their clients.”

The FCA director said his organisation measured culture by looking at behavioural patterns that exist within firms, and then considering what management is doing to shape these behaviours.

Next, he listed four areas in which senior management can determine the culture of an organisation:

• ‘Tone from the top’ – is corporate culture regularly discussed at length in board meetings? What steps are management taking to encourage staff to take personal responsibility for their actions?
• The firm’s policies and procedures – here cited the example of remuneration structures that encourage mis-selling as an example of a poor culture
• The narratives being circulated within the firm – by ‘narratives’ Mr Davidson said he meant “the tone of strategies, business plans and mission and value statements.”
• The capabilities of an organisation – education is required if firms and staff are to alter their behaviours

Mr Davidson then turned to the Senior Managers & Certification Regime (SM&CR), which will be implemented in all areas of financial services in 2018, and which is already in force in the banking sector. He said that “the regime provides clarity around who has responsibility for what and ensures they can do the job”, before adding “we want senior individuals to feel genuine responsibility, and be held accountable for, the decisions they make and oversee.” He said the FCA was “on the whole … pleased with how firms have approached the regime.”

The three ‘essential ideas’ underpinning SM&CR that he mentioned were:

• That senior managers were accountable for their own personal decisions
• That senior managers took reasonable steps to ensure decisions made by staff in their business area were appropriate
• That senior managers understood they needed to ensure that staff in their area of responsibility met the necessary standards of conduct and competence

Mr Davidson concluded by saying:

“Culture and behaviour will change permanently for the good if it is chosen and not imposed, if the industry itself takes responsibility for delivering the standards it aspires to and that society is entitled to expect.”

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.

21Jul

FCA publishes annual report

Another warning to payday lenders about how their regulatory burden has increased, and a confirmation that a response to the payment protection insurance (PPI) claims deadline consultation will be issued before the end of the year are both included in the Annual Report of the Financial Conduct Authority (FCA).

The foreword by chairman John Griffith-Jones speaks of how his organisation has been able to change the regulatory landscape for payday lenders, when he comments:

“By taking a marketwide approach to regulating firms’ conduct we also deliver fundamental changes to the way many sectors, such as payday lending, now operate.”

Here Mr Griffith-Jones is likely to have in mind the new rules on affordability and credit checking payday lenders must follow, and the caps on the levels of interest they can charge.

His report also reminded firms that although the country voted to leave, the UK is still a member of the European Union (EU) at the present time. Firms therefore need to continue to comply with all regulatory obligations that are derived from EU legislation, and to continue to prepare as before for the introduction of forthcoming EU regulations and directives.

Like Mr Griffith-Jones, outgoing chief executive Tracey McDermott makes mention of the Senior Managers & Certification Regime in her statement. Ms McDermott says this new Regime “seeks to deliver a step change in individual accountability.” It was introduced in the banking sector in 2016 and will apply to the entire financial services industry from 2018, and imposes new requirements on firms to ensure that individuals in senior positions are fit and proper.

Ms McDermott then turned her attention to the FCA’s enforcement activities for the 12 months to March 31 2016. She said that:

“We have continued to take tough action where required – imposing penalties of £884.6 million on firms and individuals, banning 24 individuals and seeing jail sentences totalling 32 years and nine months’ imprisonment handed down to individuals we have prosecuted.”

She also said that the FCA had forced 23 firms to set up redress schemes to compensate customers during the year, delivering a total of £334 million in compensation for customers. 134 firms were required to amend or withdraw financial promotions after the regulator’s intervention.

Regarding PPI, the report highlights that during the 12 month period, the FCA imposed its largest fine to date for retail banking failings, when it fined Lloyds Banking Group £117 million for failing to handle PPI complaints fairly. Regarding the possible introduction of a deadline on when a PPI complaint can be made, the report says:

“Our consultation closed in February 2016. As we anticipated, we received a high volume of responses from a wide range of stakeholders. We are considering these and undertaking additional research. We will publish our findings and set out next steps in 2016.”

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.

20Jul

FCA bans payday loan firm and its director

For the first time the Financial Conduct Authority (FCA) has banned a key individual from a payday lending firm. Andrew Barry Hart has been prohibited from carrying out any regulated activity, and the firm of which he was sole director, Wage Payment and Payday Loans Limited, has had its interim permission cancelled. The firm used the trading names Payday Overdraft, Wagepayday and Doshloans. The FCA concluded that Mr Hart’s actions demonstrate that he lacks integrity.

Both decisions are to be appealed to the Upper Tribunal.

The regulator found serious issues with Mr Hart and his firm in a number of areas, including:
• Taking repayments in excess of the agreed amounts
• Misleading customers, such as by falsely stating on attempts to collect missed payments that the company had a legal department
• Pressurising clients in arrears into repaying, such as by threatening legal action when none was intended. The firm also failed to issue default notices in the format prescribed by the FCA’s rules
• Not complying with regulatory requirements on credit and affordability checks – not all customers were asked to provide proof of income, in many cases no affordability assessments were carried out, and the affordability assessment procedure he provided to the FCA was in the words of the regulator’s Decision Notice a document “which appears to have been created only a short time before being provided to the Authority”
• Not complying with regulatory requirements on use of Continuous Payment Authority (CPA) – as no records were kept of when CPA was used, there was nothing to prevent staff from making multiple attempts to collect payments in this way
• Incorrect information on loan agreements, such as the information regarding applicable interest rates
• Not taking adequate measures to protect sensitive customer data it was entrusted with, including scanned copies of payslips, bank statements, identity documents and documents used for proof of address such as utility bills
• Inadequate record keeping
• Inadequate complaint handling – there was no documented complaints procedure and no records were kept of complaints received
• Unsatisfactory staff training, especially regarding their knowledge of the rules on how to deal with customers in arrears

All payday lending firms should take note of the reasons why Mr Hart and Wage Payment have been prohibited.

Mr Hart made a number of representations to the FCA. These included an allegation that the regulator “has shown no flexibility and provided no assistance to Mr Hart which could have helped him to run the business compliantly.” Saying this actually made things worse for Mr Hart. The FCA says that the fact he thought the FCA’s role was to provide compliance services to authorised firms gives rise to further concerns over his competence.

He also claimed that he has been made a “scapegoat” and that other firms whose conduct has been worse have been allowed to make changes and continue trading. The FCA responded by saying that other payday lenders against whom action has been taken have been willing to take steps such as acknowledging their failings, agreeing to pay redress, changing policies and procedures and replacing senior management.

Saying that no complaints had been received since 2014, and only one since 2010, also did not help Mr Hart’s case, as the FCA says it believes that he is unable to recognise complaints and has therefore failed to act appropriately in response to expressions of dissatisfaction received more recently.

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.

18Jul

MOJ bans packaged bank account CMC

The Claims Management Regulator at the Ministry of Justice (MoJ) has acted to remove the permission of Elland, West Yorkshire-based claims management company (CMC) Reactiv Media Limited. Reactiv offered claims management services regarding potentially mis-sold payment protection insurance and packaged bank accounts; and regarding unfair bank charges.

Some of the rules that Reactiv has breached are different from those seen in many of the MoJ’s recent enforcement actions, although once again a claims company has been held to account over its marketing practices. The company failed to comply with the following sections of the Conduct of Authorised Persons Rules 2014:

• Client Specific Rule 1c) – all information given to clients must be clear, transparent, fair and not misleading
Client Specific Rule 1e) – if a CMC advises a client to pursue a case, it must be in the client’s interest to do so
• Client Specific Rule 4 – CMCs cannot engage in personal cold calling, such as touting for business door-to-door or stopping passers-by. All other marketing conducted via telephone, email, fax or text must comply with the Code and associated guidance published by the Direct Marketing Association (DMA)
• Client Specific Rule 7 – a CMC can only use the term “no win no fee” as set out by the Code of Advertising Practice (CAP) HelpNote. This document states that companies must qualify their use of this term should the client potentially have to pay other costs such as disbursements, indemnity insurance or fees for not pursuing a case with their CMC

In May 2014 the data protection watchdog the Information Commissioner’s Office (ICO) imposed a fine of £50,000 on Reactiv Media, for making unsolicited marketing calls to individuals registered with the Telephone Preference Service. Press reports suggested the company made multiple calls on the same day to disabled people, and on one occasion called the work mobile of an emergency services operative. The fine was subsequently increased to £75,000 after the company made an unsuccessful appeal to the First-Tier Tribunal, and the Tribunal decided that the original punishment was too lenient.

Tribunal Judge Chris Hughes said of the company:

“The evidence shows a culture of denial and minimisation of the breach, weak governance of the company and a tendency to blame others rather than accept responsibility.
“The evidence is overwhelming that the company carried on its business in conscious disregard of its obligations.”

After the ICO fine, the practices the company was still using were exposed by the Channel 4 documentary Dispatches. The undercover reporter found evidence of Reactiv touting for business under the guise of wishing to conduct a survey with a potential client. John Mitchison, Head of Legal and Compliance at the DMA, described the practices uncovered by the programme as “a clear breach of the Data Protection Act – they are disguising the intent of the call and people’s data is not being collected fairly.”

In April 2016, the Daily Telegraph reported that the company had refused to pay the ICO fine and was continuing to avoid it by putting itself into receivership. Meanwhile, Reactiv’s operations were being run through Flip It Marketing, newly set up by Reactiv director Tony Abbott.

Reactiv was expelled from membership of the DMA back in April 2014 for breaches of the organisation’s Code.

The trading names used by Reactiv included:

• Consumer Helpline
• www.packagedbankfees.co.uk
• www.claimingbankfees.co.uk
• www.mybankfees.co.uk
• www.bankmoneyback.co.uk
• www.packagedbankrefund.co.uk
• www.mis-sold-bank-accounts.co.uk
• Mr Bank Claim
• Mrs Bank Claim
• Bank Fees Refund

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.

15Jul

FCA launches call for input regarding crowdfunding rules

As the market for both loan-based crowdfunding (peer-to-peer lending) and equity-based crowdfunding continues to grow, the Financial Conduct Authority (FCA) has issued a call for input regarding possible changes to the rules that firms active in this area need to follow.

A call for input is not the same as a consultation paper, in that the regulator does not propose specific new rules. In this call for input paper however, the FCA has outlined plans to impose new requirements in a number of areas. A formal consultation paper may follow at a later date.

As regards peer-to-peer (P2P) lending, the areas on which the FCA wishes to receive ‘input’ include whether:

• The introduction of the P2P ISA has led to more ordinary retail investors becoming active in this area, and whether this carries a risk of clients not understanding the risks involved with the investments
• There are new or emerging risks in the sector that firms’ existing systems and controls might not be able to cope with
• Firms who engage in pooling of investments should be subject to the same requirements as asset managers who operate regulated pooled investment funds
• Additional disclosure requirements should be introduced, such as the need to publish default rates on platform websites
• The rules regarding P2P financial promotions should be tightened or loosened
• P2P firms should need to verify that investors understand the risks involved, similar to the existing requirements for investment-based crowdfunding

For investment-based crowdfunding, the FCA wishes to receive input on whether:

• New rules should be introduced regarding management of conflicts of interest – the FCA notes that firms may have a commercial incentive to make available as many projects as possible to investors, but that offering a large number of projects could mean due diligence is compromised
• The due diligence rules should be strengthened in general
• The client classification requirements are sufficient – at present firms must assess whether a client is high net worth, experienced or sophisticated
• The introduction of Intelligent Finance ISAs gives rise to a need for additional risk warnings to be provided to the client

The call for input closes on September 8 2016.

In the meantime, firms active in the crowdfunding market should note that all applicable FCA rules remain unchanged.

Christopher Woolard, director of strategy and competition at the FCA, said of the exercise:

“The crowdfunding market is an innovative and growing sector and one which we see as part of promoting effective competition. We introduced rules in 2014 to ensure consumers were protected without preventing the market from enhancing competition through expansion and innovation.

“Since then the market has grown rapidly and we want to explore concerns that have been expressed about developments in some aspects of the market. We believe now is the right time to consider whether our requirements remain appropriate and that we have the right rules to support the development of this dynamic market by ensuring consumers are adequately protected.”

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.

13Jul

FCA issues IT outsourcing guidance for firms

In early July 2016, the Financial Conduct Authority (FCA) issued a finalised guidance paper entitled ‘Guidance for firms outsourcing to the ‘cloud’ and other third party IT services’. With many firms making increasing use of technology in delivering financial services, its content needs to be carefully studied, and firms need to consider whether they need to alter existing practices and procedures in light of the guidance.

Oxford Dictionaries defines cloud computing as:

“The practice of using a network of remote servers hosted on the internet to store, manage and process data, rather than a local server or a personal computer.”

The regulator says it sees “no fundamental reason why cloud services (including public cloud services) cannot be implemented, with appropriate consideration, in a manner that complies with our rules”.

Risk management issues are at the heart of much of the guidance. If a firm outsources to the cloud, who determines how the service is provided – the authorised firm or the cloud provider? In these circumstances, where is data stored and how secure is it?

As with any other form of outsourcing, the authorised firm can never delegate responsibility for compliance to a third party service provider. The FCA will always hold the authorised firm accountable for the failings of third parties which it uses.

Firms must inform the FCA whenever they enter into an outsourcing arrangement which meets the regulator’s definition of either ‘critical’ or ‘material’.

According to the guidance document, “an operational function is regarded as critical or important if a defect or failure in its performance would materially impair the continuing compliance of a common platform firm with the conditions and obligations of its authorisation, its other obligations under the regulatory system, its financial performance, or the soundness or continuity of its relevant services and activities”.

Material outsourcing is “outsourcing services of such importance that weakness or failure of the services would cast serious doubt upon the firm’s continuing satisfaction of the threshold conditions or compliance with the Principles for Businesses “.

Some of the many factors the FCA says firms should consider when outsourcing include:

• Is there a genuine business case for outsourcing the function?
• Sufficient due diligence should be carried out on the third party to ensure that any decision to outsource would not increase the level of operational risk the authorised firm is exposed to
• The risks the firm identifies must be documented, together with details of how these risks will be mitigated
• There must be a detailed formal written contract in place with the third party, setting out what the third party is expected to do and where the responsibilities of the authorised firm and the outsourcing provider begin and end
• Whether UK law or the law of any other state will apply to the outsourcing agreement
• The contract with the third party must cover the issue of who is responsible for rectifying breaches and other adverse events
• The authorised firm must have a ‘data residency policy’ with the outsourcing provider, which explains in which jurisdictions the firm’s data can be stored, processed and managed
• A senior individual should be assigned responsibility for monitoring the performance of the outsourcing provider on a day-to-day basis, and this should be someone with the skills and experience to carry this out effectively
• The third party should allow the authorised firm access to its business premises, with reasonable notice, to allow the authorised firm to carry out its monitoring activities. The right of access should also be extended to the FCA or another regulator if necessary
• What would happen if the outsourcing provider failed, or was unable to carry out the outsourced function at any time due to a business continuity issue?
• What is the authorised firm’s exit plan should it wish to end the arrangement?

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.

11Jul

CMC fined over data sourcing issues

The Claims Management Regulator at the Ministry of Justice (MoJ) has imposed a £50,000 fine on Birmingham-based financial services claims management company (CMC) UKMS Money Solutions Limited.

Like so many of the companies against which the regulator has taken action, UKMS was in breach of General Rule 2 of the Conduct of Authorised Persons Rules 2014, which deals with ensuring referrals, leads and data have been obtained in accordance with the regulator’s rules and applicable legislation; and also requires companies to maintain appropriate records and audit trails.

They also failed to comply with Client Specific Rule 1c, which requires all information given to clients to be ‘clear, transparent, fair and not misleading.’

In November 2015, UKMS was fined £80,000 by the data protection watchdog, the Information Commissioner’s Office (ICO), for sending more than 1.3 million spam texts regarding payment protection insurance claims. It is unclear from the MoJ’s enforcement notice if their fine relates to the same issue.

UKMS conducted a large scale marketing campaign in spring 2015, which resulted in 1,442 complaints to the ICO and/or to the 7726 spam text reporting service.

The ICO decided that UKMS had breached Regulation 22 of the Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECR). Companies cannot send marketing texts unless the recipient has explicitly agreed to receive them, and including an opt out option within the text message is not sufficient. The only permitted exception to this is where the person’s contact details have been obtained “in the course of the sale, or

negotiations for the sale of a product or service.” In these circumstances, a company can send the individual marketing information about similar products and services. The company must also give the person a simple means of opting out of electronic marketing communications both at the time the information was collected, and when each marketing communication is sent.

This action follows the ICO’s recent actions against three companies, all in the Manchester area.

The most startling case was that of Altrincham-based Advanced VOIP Solutions Ltd, who were fined £180,000. The company made large numbers of automated calls regarding insurance, packaged bank accounts (PBAs) and flight delays. Even if customers followed the instructions in the call to opt out of receiving future calls, the calls continued, with some households reporting as many as 50 calls a day.

Central Manchester-based Quigley & Carter Limited was fined £80,000 for sending thousands of unsolicited texts regarding PBA claims. This company relied on third party firms to send its texts, however one of the third party firms it used, Help Direct UK Limited, has itself been fined by the ICO in the past. The MoJ and ICO have both reported many instances of companies attempting to deflect blame for their marketing practices to introducers, list brokers and other third parties.

Bury-based Central Compensation Office Ltd was not fined, but was issued with a Stop Now order by the ICO after making live marketing calls to individuals registered with the Telephone Preference Service. If the order is breached, a criminal prosecution could follow. The company trades as Industrial Workers Office and National Advice Clinic.

CMCs should also note that although PECR was a piece of European legislation, its provisions have been incorporated into UK law. The vote to leave the European Union does not affect PECR in any way, and the legislation will remain in force unless the UK Government decides to repeal it.

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.

Posts navigation