28Feb

Barclays and Lloyds still expect June 2019 PPI deadline

When the Financial Conduct Authority (FCA) announced that it was delaying its latest announcement regarding payment protection insurance (PPI), many media outlets reported that it was unlikely that the regulator would go ahead with its proposed date of June 30 2019 for imposing a PPI claims deadline, or time-bar. The media instead suggested that a date later in 2019 was now more likely.

However, the 2016 annual reports of two of the UK’s largest banking groups, both published in February 2017, suggest that the banking sector is still working on the basis that the deadline will be in June 2019.

The annual report of Lloyds Banking Group says:

“The Group’s current PPI provision reflects our interpretation of the Financial Conduct Authority’s (FCA) consultation paper regarding a potential time bar of the end of June 2019 and the Plevin case.”

(The Plevin case was a landmark court judgement which is expected to pave the way for a new wave of PPI claims from people alleging that they were not informed of the commission payment that the firm who sold the policy would receive.)

Lloyds made additional provision of £1 million for PPI compensation during 2016, taking its total PPI redress provision to £17 billion. The bank has indicated that it does not expect to need to increase its PPI provision further.

The annual report of Barclays Bank says:

“We are also working to put legacy conduct issues behind us and the FCA’s proposed deadline of the end of June 2019 for PPI complaints, although not yet confirmed, is a significant development.”

Barclays also made additional PPI provision of £1 billion during the year, taking its total to £8.4 billion. It says that £2 billion of this remains to be paid.

Royal Bank of Scotland made additional provision of £601 million for PPI during 2016. This takes its total PPI compensation reserve to £4.9 billion, and says in its annual report that £3.7 billion of this had been paid out by the end of 2016.

HSBC, the other one of the ‘big four’ UK banks, has set aside a total of £3.7 billion to settle PPI claims.

The total amount set aside by banks and other financial institutions to pay PPI compensation has topped £40 billion. Latest FCA figures show that £26 billion of this has already been paid out.

A definitive announcement from the FCA on a PPI claims deadline is still awaited. In the two years before any deadline is imposed, the big four banks and 14 other firms that sold the most PPI will need to fund a £42 million marketing campaign, designed to alert consumers to the deadline and to prompt them to consider making a claim if they have not already done so.

The Lloyds annual report also reveals that the Group made additional provision of £1.085 billion during 2016 for other conduct related issues: £280 million for packaged bank account compensation, £261 million in respect of arrears-related activities on secured and unsecured retail products, £94 million related to insurance products sold in Germany, and £450 million for other conduct risk provisions.

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.

24Feb

PPI monthly redress amounts holding steady in latest FCA figures, as total passes £26 billion

Latest figures from the Financial Conduct Authority (FCA) show that £242.1 million in payment protection insurance (PPI) compensation was paid out by the UK’s financial institutions during November 2016.

This means that monthly PPI payout amounts per month have largely held steady since May last year. For every month between May and November, the total paid in compensation to victims of mis-selling was somewhere between £223.7 million and £266.8 million. These amounts are however lower than the £400 million or more which was paid out every month between February and April 2016.

The payout figures, based on information supplied by 23 firms that are collectively responsible for 95% of the PPI complaints, also show that the total paid in compensation by the UK’s financial institutions since the start of the PPI saga has passed £26 billion.

The figures for the actual number of PPI complaints being received are also not falling as significantly as previously. In both the second half of 2015 and the first half of 2016, there were around 930,000 new PPI complaints made, according to FCA data obtained from firms. Complaint figures for the second half of 2016 have not yet been published by the FCA.

PPI complaints being received by the Financial Ombudsman Service (FOS) between April and December 2016 totalled 121,557. This means that the final total for the 2016/17 financial year is unlikely to be much lower than the 186,994 PPI complaints the FOS received in the entire 12 months to March 31 2016.

So, in summary, while both payout amounts and volumes of new PPI complaints are lower than those seen four or five years ago, in recent months there has been little change in the figures.

PPI complaints could yet increase again as a deadline for making a complaint looms. Whilst £26 billion has been paid out in compensation to date, the UK’s banks and other sellers of PPI have collectively set aside some £40 billion to pay compensation.

A formal statement from the FCA is still awaited, but it is expected that, later this year, the regulator will announce that a deadline for making a PPI claim will come into force in late 2019. Firms and consumers will be given two years notice of the deadline being introduced, time for the FCA to conduct a publicity campaign to alert consumers to the need to make a claim swiftly. The campaign will be funded by 18 firms that sold the most PPI.

At the same time as it confirms the PPI deadline, the FCA is also expected to announce that PPI claims can be made on the grounds that the firm failed to disclose to the customer the existence of a large commission payment.

Until the FCA acts however, it remains business as usual in the PPI arena, with customers invited to complain to the firm that sold their PPI if they believe they have a case for mis-selling, and to then refer the matter to the FOS if they feel the complaint was not handled effectively.

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.

22Feb

MOJ issues details of its fourth quarter 2016 enforcement action

The latest enforcement bulletin from the Claims Management Regulator at the Ministry of Justice (MOJ) shows that the Regulator is stepping up its supervision of firms. The MOJ visited 303 claims management companies (CMCs) between October and December 2016, having visited 487 in the previous two quarters combined.

The final quarter of 2016 saw the MOJ cancel the licences of 22 companies. It has now withdrawn authorisation from 102 companies since the start of the financial year in April.

14 new investigations started during the fourth quarter, almost as many as the 15 investigations commenced in the entire six-month period from April to September.

Regarding financial CMCs, the MOJ cancelled the authorisation of two companies during the quarter, and varied the authorisation of two more:

• Scarlet Marketing Services was prohibited for irregularities over fees, and for making misleading marketing calls that implied the company was connected with the Government
• JAS Financial Advisory was prohibited for, amongst other issues, failing to co-operate with the Legal Ombudsman. The Ombudsman was compelled to publish a statement regarding its concerns that the company was not refunding fees as promised, and was not investigating complaints correctly
• Theclaimteam.com had its licence varied for making misleading and high-pressure sales calls
• Thomson Legal had its licence varied over issues regarding fees and contracts

Six more financial CMCs were warned, investigations into 14 companies in this sector are ongoing and seven new investigations were started.

The only fine imposed by the MOJ during the fourth quarter of 2016 was to MG Financial, which was hit with a £3,000 penalty after it failed to ensure leads from third parties had been correctly obtained.

Six companies were warned regarding the sending of nuisance calls and texts, 12 investigations regarding this issue are ongoing and five new investigations were started.

In the personal injury claims arena, 16 companies were formally warned, and others were given advice regarding the referral fee ban that has now been in force for some time. The MOJ is working with the police and other agencies to try and tackle criminal activity amongst personal injury CMCs. The bulletin also highlights the MOJ’s concerns over the rise in holiday sickness claims – the regulator has previously said it is concerned that holiday sickness CMCs are approaching potential clients in person, or are failing to obtain consent before targeting individuals with direct marketing material.

The MOJ has also successfully prosecuted ACA Long Eaton Ltd and Adeel Karim for conducting claims management activity without authorisation, and both parties have now been fined by the courts. During the quarter, five companies were investigated due to suspicions they were conducting unauthorised activity, and 28 companies had their websites closed.

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.

21Feb

Express Gifts to pay redress over useless insurance after FCA intervention

Online and direct marketing personal shopping firm Express Gifts Ltd is to pay £12.5 million in compensation after selling insurance policies to customers that the Financial Conduct Authority (FCA) described as being of “little or no value.”

Between January 2005 and May 2015, Express Gifts sold an accidental damage and theft insurance policy under the names Property Insurance and Purchase Protection Insurance.

The regulator says Express Gifts has now agreed with them that the insurance was of extremely limited value, as the items being insured were mainly items of clothing, for which consumers do not normally take out insurance.

Express Gifts will now contact all 330,000 customers who are due compensation, to explain the process for refunding the premiums they paid, plus interest.

Express Gifts is one of the two main divisions of its parent company Findel plc.

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

“It is good news for consumers that Express Gifts has reached agreement with us that this insurance was of low value to customers. It is important that firms offer value for money.

“We expect firms to identify where insurance products of little or no value have been sold to customers and take appropriate action. There is a responsibility on firms, whether they are responsible for the design or the distribution of these products, to ensure the products offer value for their customers.”

The news release on the firm’s website is headed ‘We found a problem, now we are fixing it!’. The news item highlights that it was the firm who identified the potential issues with the insurance, by saying:

“Through our own review we have identified concerns with this insurance, which was sold through the Ace and Studio brands, and have notified the FCA. We concluded, along with the FCA that the insurance did not provide adequate value to customers. Therefore, together with Assurant General Insurance Limited and ANV (which is now part of AmTrust at Lloyd’s) who were at various times the underwriters of the insurance, we wish to put customers back in the position that they would have been in had they not purchased the insurance.”

This episode has echoes of other cases of mis-selling, where consumers have been sold insurance that is of little use to them. For example, payment protection insurance was often sold to the self-employed, or to those with medical conditions, whose ability to claim on certain sections of the policy was severely restricted. The various insurances offered with packaged bank accounts were also sold to many people who were unable to claim, or who would have had no need for the insurance.

As Mr Davidson’s concluding remarks indicate, the onus is on FCA authorised firms to ensure that they design products in the interest of their customers. Where things go wrong, and inappropriate products are sold, the firms are expected to take action and pay any compensation that is due.

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.

20Feb

Citizens Advice highlights concerns over practices of doorstep lenders

National advice charity Citizens Advice (CitA) has submitted a report to the Financial Conduct Authority (FCA) highlighting its concerns over doorstep lending firms.

CitA says it believes more than 1.3 million people in the UK use doorstep loans, borrowing on average around £500 each time. These loans usually involve a collector visiting their home each week to collect payment. The charity said it was contacted by 23,000 consumers in 2016 who were seeking help with issues related to doorstep loans.

CitA has three main concerns with the activities of doorstep lending firms:

• Intimidating debt collection practices – the press release mentions:
o A man whose lender called on the day his son died, but still refused to leave until a family member had visited an ATM to withdraw cash to make the repayment
o A woman who was pursued for repayments while in hospital being treated for a stroke
• Inadequate affordability checks
• Putting pressure on those already struggling with debt repayments to take out additional loans

FCA rules say that the two key elements of a creditworthiness assessment are the customer’s ability to make the required repayments over the term of the agreement and the potential for the customer’s commitments under the credit agreement to have an adverse impact on their financial situation.

An affordability assessment should go beyond whether the customer can afford the repayments. They may be in a position to make repayments, but if doing so would have a significant adverse effect on their financial situation, then the proposed credit is unlikely to be suitable.

Firms should also note that the need to act in customers’ interests and treat them fairly applies just as much in a debt collection situation as in any other dealings with customers.

In the report to the FCA, the charity makes a number of recommendations, including:

• A charge cap on doorstep loans and other forms of credit, similar to that which currently applies to payday loans
• New guidance fir firms on assessment of affordability, to ensure responsible lending
• A limit on the number of times a doorstep loan can be re-financed – again a limit on this already applies to payday loans
• A review of the collection methods used by doorstep lenders
• An outright ban on doorstep loans being sold via cold calling
• A requirement for consumers to be informed of the commission amounts doorstep lenders receive for collecting repayments

Citizens Advice Chief Executive Gillian Guy, said:

“Some doorstep lenders are putting people at risk of escalating debts with their irresponsible actions.

“The personal nature of doorstep loan selling and debt collection can put customers in a vulnerable position. Our evidence shows some lenders are taking advantage of that relationship and causing serious harm to borrowers by turning up unannounced or putting clients under pressure to repay or take on more debt.

“It’s important there is strong regulation of high cost credit markets to make sure companies put the needs and interests of consumers at the heart of their services. The FCA’s intervention drastically reduced problems in the payday loan market – we now want to see similar protections introduced for consumers using other high cost credit products, including doorstep loans.”

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.

17Feb

PPI uphold rate falling according to latest FOS figures

The Financial Ombudsman Service (FOS) has issued details of the complaints it received between October 1 and December 31 2016. During this quarter, the FOS received 70,908 new cases, of which 36,065 (51%) concerned payment protection insurance (PPI). Whilst this is well below the 100,000 or more PPI cases per quarter that the FOS was receiving at one time, the product still accounts for a significant number of complaints by any measure.

Current account complaints are now in second place, with 4,014 new complaints received during the quarter (6% of the total). Packaged bank accounts (PBA) are the third most complained about product, with 3,785 cases (5% of the total).

However, when we look at the figures for the full 2016/17 financial year to date, i.e. since April 1 2016, PBAs are well ahead of current accounts in second place.

It was another busy three months for payday loan complaints, with 2,529 new complaints taking the total for the three quarters of the 2016/17 year to date to 7,810. This is already well in excess of the 3,168 payday complaints received in the whole of 2015/16.

Car and motorcycle insurance, personal pensions, catalogue shopping, debt collection and pet insurance are other areas where the final 2016/17 total is likely to be higher than that for the previous year.

When we look at the proportions of complaints being upheld by the FOS in each area, then we notice that the uphold rate for PPI is falling. 66% of PPI complaints were decided in the customer’s favour in 2015/16, but in 2016/17 to date this is only 54%, and in the last quarter the uphold rate is 44%. This may suggest that many of the most obvious cases of mis-selling have already been considered.

The payday loan complaint uphold rate is 59% in the last quarter and 56% in the whole of 2016/17. Whilst this is lower than the equivalent figure of 66% for 2015/16, the fact that this product continues to have the highest uphold rate of all should remind the UK’s payday lenders that there is no cause for complacency, and that they must do their utmost to treat their customers fairly.

Other products with uphold rates in excess of 40% in the last quarter included: catalogue shopping, warranties, home emergency cover, self-invested personal pensions and store cards. At 13%, debt counselling has the lowest uphold rate of any category, so here firms are successfully defending 87% of all complaints passed to the FOS. And although it still accounts for a significant chunk of the total complaints, the uphold rate for PBAs remains low, at 16%.

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.

15Feb

FOS comments on how complaints differ between age groups

In her introduction to the latest issue of Ombudsman News, the Financial Ombudsman Service (FOS)’s bi-monthly newsletter, chief ombudsman Caroline Wayman comments on how complaint trends differ between various age groups. She also makes reference to the recent studies which suggest today’s young people are set to be the first generation for some time to be worse off than their parents:

Ms Wayman commented:

“The question of whether younger people are worse off than their parents and grandparents has sparked media conversations, think-tank reports, and an ongoing Parliamentary inquiry. And the broader social trends underlying the debate – spanning money, lifestyles and longevity – will be reflected in the way people engage with financial services, and inevitably in the problems we see.”

The FOS chief adds that different age groups tend to complain about different things. Whilst payment protection insurance (PPI) remains responsible for the majority of complaints, Ms Wayman said that the under 25s rarely complained about this product – most of the mis-selling of PPI happened almost a decade ago.

Figures released by the FOS show that millennials and post-millennials (those born since 1980) are three times more likely than any other generation to complain about payday loans. They are also most likely to complain about current accounts (issues other than packaged bank accounts) and car and motorcycle insurance.

Generation X (those born between 1965 and 1980) complain more than other generations about packaged bank accounts and mortgages.

The babyboomers (born between 1946 and 1964) are the most likely to complain about personal pensions and term assurance.

The pre-babyboomers (born before 1946) are more likely than the other age groups to contact the FOS about portfolio management, savings accounts, travel insurance, whole-of-life insurance, buildings insurance and credit cards.

In total, those aged 25 and under are responsible for less than 1% of the FOS complaints workload.

Later in the bulletin, Simon Pugh, ombudsman manager, commented that age discrimination was now unlawful in financial services, unless certain exceptions applied. This comment was made in reference to the fact that around two thirds of age discrimination complaints the FOS sees concern mortgages, and there have certainly been press reports indicating many lenders’ reluctance to grant mortgages to those aged 40 and over, perhaps because they fear the borrowers will have difficulty maintaining payments should they retire before the end of the mortgage term.

Mr Pugh called on lenders to give more details of why they had refused applications, by saying:

“I think there’s still work to be done around the communication of lending decisions – thinking about what the outcome means for that individual customer and, where it’s not in their favour, how much they actually could be told about why that is. Of course, lenders might not want to share information that’s commercially sensitive. But our experience suggests that the more open the conversations that happen early on, the less chance there is of complaints being escalated.”

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.

14Feb

Warning notice issued by FCA over a firm’s pension transfer advice

The Financial Conduct Authority (FCA) has issued a Warning Notice to the compliance oversight officer of two firms, saying that his actions put clients “at serious risk of receiving unsuitable advice” regarding enhanced transfer value pension transfers.

As with previous FCA warning notices, neither the individual nor the firms concerned is named. The individual now has the right to make representations to the FCA’s Regulatory Decisions Committee, before this Committee decides if enforcement action is appropriate.

There are two very important lessons to be learnt from the issue of this Warning Notice, Firstly, that the FCA regards pension transfer advice – recommending that clients switch out of occupational pensions – as a high-risk area, and secondly that the FCA is ever more willing to take action against individuals, rather than against their firms, when wrongdoing occurs.

Around 500 clients of the firms in question are said to have transferred a total of £12.7 million of pension benefits from defined benefit (final salary) schemes to defined contribution (money purchase) schemes.

The FCA alleges that, over a period of three years, the firms’ compliance officer:

• Did not take reasonable steps to understand his obligations as a compliance oversight officer, or to understand the risks associated with enhanced transfer value business
• Did not effectively supervise the advice being given by the firms
• Failed to ensure that an external compliance consultant appointed to review the advice process was suitably qualified
• Failed identify “obvious flaws” in the advice process
• Did not identify and manage potential conflicts of interest concerning commission paid to his two firms by the provider to which the pensions were transferred
• Failed to review the firms’ processes and procedures given that the latest phase of MiFID will shortly be implemented

Since the issue of the Warning Notice, the FCA has issued extensive guidance on its website regarding how firms should handle advice on pension transfers.

At present, FCA rules say that firms should assume that a transfer is not suitable unless they can demonstrate otherwise. 19.1.6 of the FCA’s Conduct of Business Rules states that:

“When advising a retail client who is … a member of a defined benefits occupational pension scheme, or other scheme with safeguarded benefits, whether to transfer, convert or opt-out, a firm should start by assuming that a transfer, conversion or opt-out will not be suitable. A firm should only then consider a transfer, conversion or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer, conversion or opt-out is in the client’s best interests.”

Extreme care is also required when a firm advises on a potential switch out of a non-occupational or personal pension scheme that includes safeguarded benefits, such as guaranteed annuity rates and guaranteed minimum pensions.

The FCA calls on firms to ensure they carry out a transfer analysis, which carefully considers the likely benefits under the two schemes, the risks of each option and the costs and charges to be paid by the client. The FCA says it has seen examples of firms basing recommendations solely on the critical yield of the two schemes, and warns against adopting this practice.

To advise on pension transfers, firms require special permission from the FCA. If within these firms, advice on a transfer is given by an individual without a specialist pension qualification (such as G60 or AF3), then their advice must be checked by someone who is a pension specialist.

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.

13Feb

Adviser trade body calls for effective adviser referral system from new guidance body

The Association of Professional Financial Advisers (APFA) has called for the Government’s new single guidance body to do more to encourage consumers to seek professional financial advice.

A new guidance body is expected to be established by 2018 to replace the existing functions of the Money Advice Service (MAS), The Pensions Advisory Service (TPAS) and Pension Wise.

In particular, APFA has called for the new body to emphasise to consumers that almost all financial advisers offer free initial consultations, and to assist consumers in finding financial advisers in their area.

APFA’s response to the Treasury’s consultation on its proposals says:

“It should also be highlighted that the initial conversation with an adviser is always free as the first meeting is the opportunity to discuss and, if the service is wanted, agree the fee arrangement going forward.”

In general, the Association welcomes the proposals, saying that “the current system is fragmented and confusing.” It goes on to express the hope that the levies paid by advisory firms to fund the new body will be lower than their existing MAS/Pension Wise levies, both because the new body should be able to make cost savings because of economies of scale, and because APFA is also calling for non-FCA regulated entities that currently fund TPAS to be required to continue paying for the new entity.

The new organisation will have five areas of specialism: occupational and personal pensions; guidance to help avoid financial fraud and scams; debt advice; guidance to improve financial capability; and financial education programmes for children and young people. It will also fund the provision of regulated debt advice.

Guidance on all five areas will be offered via telephone and online. Pensions and debt guidance, and maybe guidance in other areas as well, are expected to be offered on a face-to-face basis.

The organisation will be accountable to Parliament and supervision of its activities is expected to be carried out by the Treasury and/or the Department of Work and Pensions.

The new body is not expected to have a ‘brand’ as such, and throughout the consultation document it is simply referred to as ‘the single financial guidance body’ or ‘SFGB’.

The consultation on the proposals ends on February 13 2017.

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.

10Feb

Over £9.2 billion released by pension freedoms

As the second anniversary of the introduction of the Government’s pension freedoms approaches, the Treasury has announced that the total amount cashed in by pension savers has reached £9.2 billion, made up of some 1.5 million separate withdrawals.

The rate at which people are cashing out their pension pots is also increasing, with 162,000 pensioners making 393,000 separate withdrawals totalling £1.56 billion in the fourth quarter of 2016 alone.

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

“Giving people freedom over what they do with their hard-earned savings, whether it’s buying an annuity or taking a cash lump sum, is the right thing to do. These figures show that people continue to take advantage of the choices on offer: choices ‎only made available since the government’s landmark pension freedoms were introduced in April 2015.

“We are working with our partners, including Pension Wise, the regulators and pension firms, so that savers have the support they need to understand the options available to them.”

Of course just because the Government allows pension savers to withdraw as much of their pension pot as they wish does not mean that this is the best course of action for everyone. In most cases there is no legal requirement to obtain professional financial advice before accessing pension savings, but where someone does consult a financial adviser, the adviser must carefully consider all available options and recommend the course of action that s/he believes is in the client’s best interests, regardless of their personal wishes.

Many advisory firms remain extremely reluctant to process ‘insistent client’ transactions, where a client chooses to pursue a different course of action to that recommended by their adviser.

The Treasury press release also makes reference to Government plans to cap pension exit fees, ban cold calling in relation to pensions and introduce a Pensions Dashboard where savers can easily view all their pension savings in one place.

In a separate announcement, the Treasury has confirmed that, from April 2017, consumers will be able to make up to three withdrawals, of not more than £500 on each occasion, from their pension pots in order to pay for regulated financial advice. These withdrawals, which will be restricted to one per tax year, can be made at any age. The withdrawals are permitted from all holders of defined contribution (money purchase) pensions, and can also be used to pay for robo-advice as well as traditional financial advice.

The ability to withdraw sums prior to retirement in order to fund advice fees was one of the recommendations of the Financial Advice Market Review, a joint initiative by the Treasury and the Financial Conduct Authority aimed at improving access to financial advice.

Regarding this announcement, Mr Kirby said:

“Pensions and savings decisions are some of the most important a person will make during their lifetime. This allowance will help people get the vital financial help they need to plan for their retirement.”

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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