Annuity sell off plans scrapped by Government

The Government has announced that it will no longer be introducing a secondary annuities market – a system whereby consumers could exchange an existing annuity for a cash lump sum. It says that it would not be able to guarantee an appropriate level of consumer protection were the scheme to be introduced.

When the Government first announced new freedoms regarding the ways retirees could access their pension savings, people already receiving annuities were excluded, i.e. they had no option but to continue receiving a sometimes poor-value annuity.

George Osborne MP then later announced plans to allow around five million existing annuitants to sell their annuities to providers in exchange for a lump sum from April 2017. It would appear however that Mr Osborne’s successor as Chancellor, Philip Hammond MP, is less keen on the idea.

The Government press release says that “many firms have shown they are willing to allow customers to sell their annuities, but the government is clear that there will be insufficient purchasers to create a competitive market.”

Press reports suggest that the decision of one of the UK’s largest brokers, Hargreaves Lansdown, not to facilitate deals in the secondary annuity market, dealt a fatal blow to the Government’s proposals. Insurers Standard Life, Royal London and Aegon had all indicated they were unlikely to enter the market.

Many consumers could also have faced high charges for cashing in an annuity.

The Economic Secretary to the Treasury, Simon Kirby MP, said:

“Allowing consumers to sell on their annuity income was always dependent on balancing the creation of an effective market with making sure consumers are properly protected.

“It has become clear that we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited.

“Pursuing this policy in these circumstances would put consumers at risk – this is something that I am not prepared to do.”

In any case, industry experts were in almost total agreement in saying that cashing in an annuity would only be appropriate for a small number of people.

Douglas Anderson, a partner at pension consultancy Hymans Robertson, said:

“While some retirees may feel a sense of disappointment as they feel trapped in a product they didn’t want to buy, in reality, getting value for money from cashing in annuities would have been a tall order.”

Rob Yuille, head of retirement policy at the Association of British Insurers, also welcomed the news, as he said:

“This is the right decision for the right reasons. The industry has consistently supported the freedom and choice reforms, but we agree with the Government that the secondary annuity market came with considerable risks for customers, including from unregulated buyers.

“We have highlighted the challenges involved and worked constructively with the Government to try to solve them, but consumer protection has to be the priority.”

Paul Green, director of communications at Saga, expressed his disappointment as he commented:

“This is a surprising announcement. The initial decision to give people the power to sell their annuity was borne from pension freedoms introduced last year and the desire that all retirees could enjoy them. The cancellation of the secondary annuity market quashes that notion.

“There will be many pensioners who will be sorely disappointed – thousands of people who receive minimal income from annuities they were forced to buy would have benefitted from a way to sell their annuity. Indeed, research carried out by Saga found that 58 per cent of people who wanted to sell their annuity were receiving such a small income they could do nothing meaningful with it. It looks now that there will be no way for them to turn that meagre income back into a lump sum.”

The announcement appears to have taken a few people by surprise – only two weeks earlier the Financial Conduct Authority was still conducting a consultation on how it would regulate the secondary annuity market.

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.


FCA imposes cancellations for not submitting consumer credit return

Between October 13 and 20 the Financial Conduct Authority (FCA) cancelled the permission of ten firms or individuals with consumer credit permissions, all because the firm in question did not submit the Consumer Credit Return (CCR).

The firms / individuals concerned were:

• Midland Motor Company
• Clackmannan Car Centre Limited
• Mark Samuel Motors Limited
• Motor Spot Limited
• Luke Andrew Mills
• Select Motor Company Limited
• Samlet Car Sales Limited
• Excel Leasing Limited
• Danes Autos Limited
• FC Group Limited

The FCA considers that failing to submit a CCR is not only a breach of Principle 11, which requires authorised firms to be open and co-operative with the regulator, but also that firms which fail to submit this return cannot be considered ‘fit and proper’ to operate in financial services. When logging in to the FCA’s GABRIEL system, firms can view a list of what regulatory returns they need to submit, how often they need to submit them and when they are due, and firms must make absolutely sure that all deadlines are met.

As can be seen from the names of the firms listed above, many of those who failed to submit the return are in the motor trade, and financial services would not be their main line of business. Nevertheless, all authorised firms must submit regulatory returns to the FCA on time, and all information in these returns must be complete and accurate. The CCR requires authorised firms to supply a range of financial and non-financial data about their activities during the reporting period. No matter how awkward or time consuming a firm finds it to complete an FCA data return, this is quite simply just one of those tasks that needs to be done. Firms needing guidance with completion of regulatory returns are advised to seek professional advice.

A persistent refusal to submit a regulatory return will inevitably lead to the firm losing its permission to carry out financial services activity. The FCA is also likely to impose the ultimate sanction in any of the following instances, all of which it will also regard as a breach of Principle 11:

• Failing to pay fees and levies due to the FCA, or to Pension Wise, the Money Advice Service, the Financial Ombudsman Service and the Financial Services Compensation Scheme
• Failing to inform the FCA of a change of address
• Not providing necessary information to allow the FCA to conduct a monitoring visit
• Not replying to any other FCA communications

The CCR comprises the following sections, and firms are expected to complete all sections relevant to their particular credit permissions:

• CCR001 – relating to a firm’s financial data
• CCR002 – relating to a firm’s business volumes
• CCR003 – for lenders
• CCR004 – for debt managers
• CCR005 – for firms that have permission to hold client money and other client assets
• CCR006 – for debt collectors
• CCR007 – for limited permission firms for whom financial services is not their main business
• CCR008 – for credit brokers
• CCR-Complaints – relating to a firm’s complaints data

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.


FCA says new rules on packaged bank accounts have improved standards, but firms have more work to do on sales and complaints handling

The Financial Conduct Authority (FCA) has suggested that some aspects of the packaged bank account (PBA) market are now delivering better outcomes for customers, but that firms could still improve their complaint handling. In October 2016, the financial watchdog published its thematic review into various aspects of the PBA market.

Many claims management companies have been active in the area of PBA mis-selling claims in recent years. PBAs are bank accounts where the customer pays a monthly fee in exchange for receiving a number of benefits, such as travel insurance, breakdown insurance or insurance for electronic gadgets. However, there have been a number of cases of customers being sold PBAs where they cannot claim on the associated insurances, or where they were either told by the firm that there was no alternative to a PBA, or were ‘upgraded’ to a PBA without their knowledge or consent.

In response to some of these concerns, since 2013 firms selling PBAs have been subject to new rules. They must now establish whether applicants would be eligible for each of the individual insurances offered under an account before selling it. Firms must also issue annual eligibility statements to account holders confirming whether these customers remain eligible to claim on the various insurances.

Since the introduction of these rules, the FCA says eligibility checks for travel insurance have improved, but firms could still improve their checks in relation to other insurances offered with PBAs, such as gadget insurance and motor breakdown cover. Depending on the type of cover, eligibility checks might need to cover a customer’s age, state of health, status as a UK resident or otherwise, and the age of a customer’s electronic gadgets.

The FCA also says that some firms can improve their complaint handling standards. It found that only 44% of mis-selling complaints received by firms resulted in a fair outcome for the customer, and that in only 22% of mis-selling complaints did the firm follow its own policies and procedures correctly.

Uphold rates for PBA complaints at the Financial Ombudsman Service (FOS) have fallen sharply in recent years. In the year to March 31 2014 the FOS upheld 77% of PBA complaints, in the year to March 2015 it was 33% and in the year to March 2016 only 14%. However, figures for the most recent quarter of the 2016/17 financial year suggest that the uphold rate has risen again to 23%. The actual number of PBA complaints being made to the FOS continues to rise sharply.

In summary, the FCA review says that “we continue to believe there is a place in the market for packaged bank accounts, as they can provide good value and convenience for customers. Through our review, we have identified some areas of good practice, particularly the customer-centric approaches generally adopted by firms. However, we observed some practices in our review samples which, if they were replicated more widely, would indicate that firms are at risk of failing to meet our requirements. Firms have more to do to ensure customers are treated fairly, both when they take out a packaged bank account and when they complain.”

All firms that were involved in the thematic review have received individual feedback from the FCA. Other firms in the PBA market are now expected to read the review and make changes to their sales and complaints practices as required. The regulator also says it will publish a further review in the future which will look at firms’ handling of more recent complaints.

Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, said:

“We continue to believe that there is a place in the market for packaged bank accounts, as they can provide good value and convenience for consumers.

“But we expect these products to be sold fairly and for customers to have the information they need to make an informed choice. And customers should not have to complain to the Ombudsman to get a fair outcome if things go wrong.”

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.


Interest-only Mortgages: is this the next mis-selling scandal?

Payment protection insurance (PPI) has become the most mis-sold financial product in the history of UK financial services. Other products have previously been mis-sold on a large scale, such as mortgage endowments and interest-rate swaps. Inevitably, some are asking, what will be next?

Interest-only mortgages have been suggested as a candidate. Many claims management companies (CMCs) are already active this area.

Interest-only mortgages involve the borrower making monthly repayments of the interest accumulated during the mortgage term, while the capital balance remains at the original level. Borrowers have historically repaid the capital balance from the proceeds of a savings plan. However, as the housing market boomed, increasing numbers of customers saw the opportunity to effect an interest-only mortgage without a repayment plan, believing they could rely on property prices continuing to rise, so that selling their home in the future would inevitably provide sufficient funds to repay the loan.

According to data from Lloyds Banking Group, the average UK house price in the fourth quarter of 2012 was £160,814, down from a peak of £200,623 in the third quarter of 2007, representing a fall of 20 per cent over five years. This has left many people’s plans to repay their interest-only mortgages from the sales of their properties in tatters. Before the property crash, even respected economists believed that property prices could only continue to rise.

CMCs are currently inviting customers to make mis-sold mortgage claims if any of the following apply:

  • They were not recommended to have a repayment plan in place
  • They were recommended a mortgage even though the combined cost of making the interest repayments and saving to meet the cost of repaying the capital was unaffordable
  • They were not advised to regularly review their repayment arrangements to ensure they were on track to provide sufficient funds

A large proportion of the PPI claims have been made against the major high street banks and a few other companies. While the banks undoubtedly sold interest-only mortgages, a number of these claims are likely to be made against small mortgage brokers who recommended interest-only to their clients.

It has been suggested that many interest-only mortgage claims are likely to be unsuccessful because in many cases, the mortgage documentation contained a prominent reminder to the borrower that they were required to make arrangements to ensure the loan was repaid. Nevertheless, lenders and brokers would do well to remind their clients with interest-only mortgages of their repayment obligations.

There may still prove to be large numbers of successful interest-only mortgage claims, but most commentators agree that making a claim for this product is likely to have a lower success rate than for PPI, where the independent Financial Ombudsman Service (FOS) has upheld a significant majority of complaints received.

However, whereas most PPI claims involve relatively small sums – with the average payout around £3,000 – any successful mis-sold mortgage claims are likely to involve much larger amounts.

Under the Financial Services Authority’s Mortgage Market Review, from February 2014, mortgage sellers will be forbidden from recommending interest-only mortgages unless the borrower has a clear repayment strategy in place, such as a savings plan.



FCA to consult on mortgage payment shortfall remediation guidance

The Financial Conduct Authority (FCA) is consulting on introducing new guidance on how firms should deal with customers who are in arrears on their mortgage. The guidance specifically relates to how customers should receive compensation as a result of previous unfair treatment.

The regulator has acted after finding that a number of mortgage lenders and administrators have been automatically adding arrears amounts to the mortgage balance, a practice known as capitalisation. This has the effect of increasing a customer’s monthly payments, increasing the length of time it takes them to clear the arrears and possibly incurring extra fees as well.

The FCA says it believes that automatically capitalising the arrears is both a failure to treat customers fairly and a breach of its rules. MCOB 13.3.2AR (6)(1) says that:

“A firm must consider whether, given the individual circumstances of the customer, it is appropriate to treat the payment shortfall as if it was part of the original amount (but a firm must not automatically capitalise a payment shortfall where the impact would be material).”

Capitalisation should only take place where the firm has decided that it is the most appropriate option for a customer in arrears, and where the customer has given consent for this to occur. The FCA acknowledges that sometimes automatic capitalisation takes place due to the way a firm’s computer system works, but adds that this cannot be used as an excuse for carrying out the practice where it is inappropriate to do so.

The FCA estimates that at least 750,000 customers may have been disadvantaged by use of automatic capitalisation. It has worked with an industry working group to provide a new remediation framework that firms can use to pay redress to affected customers, and is now consulting on this proposed framework.

The regulator says it will continue to monitor the way firms treat customers in arrears, and that enforcement action could follow for those that fail to comply with its rules and to treat customers fairly.

The guidance consultation closes on January 18 2017.
Jonathan Davidson, Director of Supervision – Retail and Authorisations at the FCA, said:
“Even if inadvertent, automatic capitalisation of arrears can lead to poor customer outcomes and firms need to put this right, and make sure the practice stops.
“Customers do not have to take any action at this stage, as firms will contact them directly. Firms should start identifying affected customers immediately and not wait until the finalised guidance is published.
“To prevent similar issues to this one occurring in the future firms need to ensure that all systems are reviewed when considering the implications of a rule change.”

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.


FOS chief urges firms to issue client-specific suitability reports

FOS chief urges firms to issue client-specific suitability reports

Caroline Wayman, the chief executive and chief ombudsman at the Financial Ombudsman Service (FOS), has urged advisory firms to tailor their suitability reports to the circumstances of individual clients, and not to rely exclusively on standard letter templates.

As an example of something which could be omitted from a suitability report, she highlighted firms who were including information about products not taken out in their reports. For example, if a client is recommended to invest in a unit trust, it is not necessary for the report to describe the features of other investment products which may have been possible alternatives, such as investment trusts and investment bonds.

On this subject, Ms Wayman said:

“It creates a greater risk that people will not read them and not get the information they need. The first thing to think about is how to help the customer get the information they need. The chances of us getting involved are so much less if people know [what product] they have got.”

Ms Wayman highlighted annuities and unregulated collective investment schemes as products about which a lot of complaints have been made in recent years.

The FOS chief also revealed that her ombudsmen are being asked to do shifts on the reception desk, dealing with enquiries from consumers who walk into the FOS offices. She also drew firms’ attention to the series of roundtable discussions her organisation is conducting in order to listen to concerns advisers have about the FOS. Holding these roundtable sessions was one of the recommendations made by the Financial Conduct Authority (FCA) and the Treasury’s Financial Advice Market Review.

Trade association the Association of Professional Financial Advisers is shortly to publish a guide for its members on the subject of suitability reports. The Association is currently discussing the issue of suitability reports with both the FCA and the FOS.

Many financial advice firms that produce long suitability reports say they do so to defend themselves against having complaints upheld by the FOS.

A desire to produce a robust defence document should the FOS be asked to adjudicate on the case often over-rides any thoughts of producing a more concise document that a client would be more likely to read, in spite of the well-known requirement for firms to treat their customers fairly.

However, given that the FOS makes adjudications on what it believes is ‘fair and reasonable’, it was always questionable whether they would be swayed by one sentence on page 30 of a 40 page report as evidence that an issue had been covered with the client.

According to the FCA, the only information that needs to be included in a suitability report is:

• The client’s aims and objectives
How the recommendation meets these aims and objectives
A balanced view of the main features and risks of the recommended products
• Whether advice was offered in all areas, or whether focused or limited advice was offered
• Reference to any need areas not addressed
A like-for-like cost comparison where the adviser is recommending that a new product is taken out to replace a new one

There has never been a requirement to include the following in a suitability report:

• Basic personal information about the client, such as their age, income and occupation
• Information that is available in other documents, such as the firm’s client agreement, or the key features document or illustration
• Detailed information about the recommended product providers
• Comprehensive descriptions of the features of products that were not recommended

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.


FCA publishes thematic review of annuity sales practices – no industry-wide issues identified but some firms to pay redress and to be referred to Enforcement

The Financial Conduct Authority (FCA) has published its thematic review of the non-advised annuity sales market. The regulator says it has found no evidence of widespread mis-selling – the main concern was that firms may be failing to inform customers of the availability of an enhanced or impaired life annuity, and that customers who would have been eligible for one of these products were purchasing a standard annuity instead.

However, some firms have been asked to conduct a past business review and pay redress to customers where appropriate, and these firms are also being investigated by the FCA’s Enforcement Division. The FCA says that there appears to be a greater risk of customers purchasing the wrong product where the sale is conducted via telephone.

Standard Life has admitted it is one of the firms at which concerns were identified.

General areas of concern identified in the review include:

• Telephone sales staff are sometimes heavily reliant on call scripts, and are unable to tailor the conversation to the requirements of individual customers, or to answer their queries satisfactorily
• Some customers were not being made aware a higher income could be obtained by shopping around, while some sales staff were downplaying the level of additional income that could be obtained by doing so
• Some firms that do not offer enhanced annuities were not informing customers of the existence of this type of product

An enhanced annuity pays out more per year than a standard annuity because the customers who qualify for enhanced annuities are less likely to live to an advanced age, perhaps because they smoke or have a certain medical condition. An impaired life annuity is a special type of enhanced annuity for customers whose life expectancy is severely limited due to their current state of health, and these products provide an even greater annual income.

The scope of the review was very broad – the FCA assessed seven firms that collectively account for around two-thirds of the annuity market. 1200 sales made by these seven firms over a seven-year period were reviewed. This means that the firms asked to conduct a past business review could end up paying redress for sales made as far back as 2008.

As mentioned above, only seven firms were assessed as part of this review. However, the FCA says it has also ordered certain other annuity providers to conduct a review of their sales process. All firms in the annuity sector have been asked to consider the review findings, and the FCA also invites any consumer who feels they may not have been fully informed about the availability of enhanced annuities to contact their provider and discuss their concerns.

Megan Butler, director of supervision – investment, wholesale and specialist at the FCA said:

“Annuities play an important role in providing an income for retirement. It is important that consumers get the right information at the right time in order to make the right decision for their retirement.

“While we have found particularly poor behaviour at a small number of firms, there is no evidence that firms have systemically failed to provide customers with the information required by our rules. Firms, particularly those outside our sample, should look at the report we have published today and consider whether they can make improvements.”

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.


FCA cancels payday lender’s interim permission, bans director and refuses application to conduct regulated business

The Financial Conduct Authority (FCA) has confirmed its prohibition of Andrew Barry Hart, who is now unable to carry out any role in financial services. Mr Hart becomes the first senior manager from a consumer credit firm to be banned since the FCA took over as consumer credit regulator.

Mr Hart was the sole director of Wage Payment and Payday Loans Limited (WPPL). As WPPL now has no-one authorised to carry out controlled functions, the payday lending firm has been stripped of its interim permission and its application for full authorisation has been refused.

The FCA originally gave notice of its intention to impose these sanctions in July 2016, but at that time Mr Hart and WPPL announced their intention to appeal to the Tribunal. That appeal has now been withdrawn.

The FCA believes that Mr Hart lacks both integrity and competence. 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 being included on loan agreements, such as the information regarding applicable interest rates
• Not taking adequate measures to protect sensitive customer data it was entrusted with. The firm did not have appropriate arrangements for handling documents such as: 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

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

“There is no place in an FCA-regulated consumer credit market for firms like WPPL or senior managers, like Mr Hart, who lack the requisite integrity and competence to ensure customers are treated fairly and all relevant regulatory obligations are met. We will continue to use our powers to protect consumers and tackle firms who cross the line and senior managers whose failures have caused or contributed to the firm’s failures.”

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.


FCA director speaks on ‘getting regulation right’ in crowdfunding

Christopher Woolard, Director of Strategy and Competition at the Financial Conduct Authority (FCA), spoke at the LendIt Conference on the issue of how to regulate the rapidly evolving crowdfunding sector.

Whilst acknowledging that a call for input on changes to crowdfunding regulation has been launched, Mr Woolard began by emphasising that the FCA’s principal objectives remain the same: promoting competition, protecting consumers, and enhancing the integrity of UK markets.

Mr Woolard commented:

“[These objectives] still underpin the logic for the creation of a crowdfunding regime in the UK and what we want to see emerge in this market as a regulator. We want a sector that has capacity to be innovative, for viable firms to challenge established players and business models, without putting consumers at unacceptable risk.”

The FCA director then encouraged firms to see the positive side of what might appear to be an onerous authorisations process, by saying:

“Having a gateway that effectively manages risk helps ensure consumers have confidence in the sector and that all firms are on a level playing field.

“Although it may not feel like it at the time, the gateway is also good for a firm. Where we challenge your business model, pose questions about risks or ask for further information, we are helping to get you on a stronger footing, and hopefully make you better prepared for regulation in the future.”

Mr Woolard revealed that 12 firms had received full authorisation to conduct loan-based crowdfunding activities as of September 30 2016. 39 firms were still operating under interim permission and a “significant number” of new firms were also seeking authorisation to conduct this activity.

He then began to address the issue of the FCA’s review of the crowdfunding rules by saying:

“We are also very conscious that authorisation acts as a deliberate barrier to entry. The question we always have to ask ourselves from a competition perspective is whether the regulations we have in place are proportionate and working appropriately, which is another reason for the post-implementation review.”

According to Mr Woolard in the next section of his speech, key issues firms need to consider include:

• Whether institutional investors are being treated more favourably in investing than retail investors, and whether such a policy meets the FCA’s Treating Customers Fairly principle
• As products such as the Innovative Finance ISA are launched, more retail customers are likely to be attracted to crowdfunding
• Customers must clearly understand the nature of their investments, and how they might perform
• Firms must ensure they do not respond to an increase in demand by lowering their underwriting standards

His most uncompromising remarks came near the end of the speech when he said:

“If you hold deposits like a bank then you should not be surprised if we expect you to be regulated like a bank. We want innovation, but we will not compromise on market integrity or consumer protection.”

Mr Woolard concluded by saying that the FCA expects to issue a feedback statement on the crowdfunding review before the end of the 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.


Wonga forced to pay refunds after double charging customers

A system error at the UK’s largest payday lender, Wonga, resulted in 7,000 customers having a loan repayment taken twice. The issue affected the lender’s Flexi loans, which are repaid in three monthly instalments, rather than its core payday loan product.

Some customers reported having as much as £600 extra taken from their account. The firm has promised to refund all affected customers in full, including an allowance for any additional fees incurred as a result, but some people have already reported being unable to pay essential bills as a result of the glitch. The situation could be made worse for some customers as the refund payments may take several working days to appear in their bank account.

Wonga said that this was the first occasion on which this problem had occurred, and added in a statement:

“We experienced an internal system error on Friday morning which resulted in Flexi Loan payments being debited twice from some customers.

“We notified all those affected and took action to credit the right amounts back to customers on Friday. We apologise for the inconvenience caused.”

The regulator, the Financial Conduct Authority (FCA), has not issued any form of statement on the latest issue affecting the firm. However, it is sure to be aware of the issue and to be monitoring the firm’s response.

Authorised firms of all types and sizes need to devote appropriate resources to their IT systems. They need to ensure their systems work effectively and are safe and secure. The various companies of the Royal Bank of Scotland banking group have experienced a number of IT glitches in recent years, the most serious of which led to a £42 million fine from the FCA after customers were unable to access banking services for an extended period.

Payday lending firms are of course also under great scrutiny from the FCA. In June 2014, 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.

The firm also agreed 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.

Most recently, in September 2016, smaller payday lender CFO Lending was forced to pay £34.8 million in redress by the FCA. The regulator uncovered a litany of issues concerning the firm’s treatment of customers, such as taking repayments without the customers’ permission; using continuous payment authority to collect outstanding payments even where it had reason to believe that the customers concerned were in financial difficulty; failing to engage properly with customers experiencing repayment problems, such as refusing reasonable repayment plans suggested by customers; and sending threatening and misleading letters, texts and emails to customers.

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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