12Jun

ICO welcomes Government consultation on plans to fine directors of companies

The Information Commissioner’s Office (ICO) has welcomed Government plans to extend its enforcement powers regarding nuisance marketing calls.

In late May 2018, the Government commenced a consultation into proposals for a new law that will result in directors being fined up to £500,000 should their companies make nuisance calls.

The ICO has noted that, of the £17.8 million in nuisance call fines it has issued since 2010, almost half (46%) of this amount has not been recovered. This is largely because some companies respond to a fine from the ICO by putting themselves into voluntary liquidation to avoid paying. However, in these circumstances, there is nothing to stop the company directors starting a new business under a different name, and possibly starting to make nuisance calls once again.

For example, the company that was fined £400,000 by the ICO for making almost 100 million nuisance calls was one of those that entered voluntary liquidation.

Hence this new law will allow the ICO to impose fines of up to £500,000 on individual company directors. It will be able to impose multiple fines where there is more than one director, and it will still have the power to fine the company itself, so the total penalty against the company and its directors could be significant.

The consultation closes in August 2018.

Steve Wood, Deputy Commissioner (Policy) at the ICO, said:

”We welcome these proposals from the Government to make directors themselves responsible for nuisance marketing. We have been calling for a change to the law for a while to deter those who deliberately set out to disrupt people with troublesome calls, texts and emails. These proposed changes will increase the tools we have to protect the public.”

Introducing the proposed new legislation, Margot James MP, the Minister for Digital and the Creative Industries, said:

Nuisance calls are a blight on society and we are determined to stamp them out.

“For too long a minority of company directors have escaped justice by liquidating their firms and opening up again under a different name.

“We want to make sure the Information Commissioner has the powers she needs to hold rogue bosses to account and put an end to these unwanted calls.”

John Mitchison, director of policy and compliance at the Direct Marketing Association, said:

“It should come as no surprise that individuals willing to skirt the law when it suits them are also ready to do the same to avoid paying their debts.

“The introduction of these new laws would target the individuals profiting from these rogue businesses, making them think twice about breaking the law if there is a real threat that they may be personally liable.”

Live marketing calls can only be made to individuals who have registered with the Telephone Preference Service. Automated marketing calls can only be made to individuals who have expressly consented in advance to receiving communications of this nature.

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

08Jun

FCA proposes new measures for high cost credit market

The Financial Conduct Authority (FCA)has unveiled a variety of new proposals relating to various parts of the high-cost credit sector. These proposals specifically concern overdrafts, rent-to-own, home-collected credit and catalogue credit/ store cards.

Regarding overdrafts, the proposals include:

  • Requiring banks to send mobile alerts to customers warning them of the charges they might face by becoming overdrawn
  • Stopping banks from describing the amount of the overdraft as ‘available funds’ in communications with customers
  • Additional disclosure requirements to make it clearer that an overdraft is a form of credit
  • Requiring banks to provide online tools that can carry out eligibility assessments, and introduce online calculators that show the costs of overdrafts for different usage patterns

The FCA has also indicated that it may propose banning fixed overdraft fees at some stage in the future, and imposing a price cap, although these measures are not being formally proposed at this stage.

The FCA notes that fees for unarranged overdrafts can sometimes be more than ten times higher than the fees for borrowing similar amounts via a payday loan.

Regarding rent-to-own, the proposals include:

  • Banning firms from selling extended warranties at point of sale
  • Considering a formal price cap on rent-to-own prices

At this stage, the FCA has not confirmed that a price cap will definitely be introduced, nor has it given details of the level of any cap. However, it does say that changes could be introduced in the rent-to-own market by April 2019.

The regulator notes that rent-to-own costs can be very high, and that it has seen examples of consumers needing to pay more than five times the amount that the same goods would cost if bought on the high street.

Regarding home-collected credit, the proposals include:

  • Banning firms from offering new loans, or a re-financing arrangement, during a visit to the customer’s home, unless the customer makes a specific request regarding this
  • Additional controls over the re-financing process, including a requirement for firms to explain the comparative costs of taking out a new loan alongside an existing loan

Regarding catalogue credit and store cards, the proposals include:

  • Requirements for firms to do more to assist customers in persistent debt, similar to the obligations which were recently imposed on credit card firms
  • An obligation to clearly explain the implications and costs involved with not meeting repayment obligations on ‘buy now pay later’ deals
  • Preventing firms from increasing the interest rate, or raising an individual’s credit limit, if they are in financial difficulty
  • Requiring firms to do more to identify customers at risk of financial difficulty

The consultation on these proposals ends on August 31 2018.

Andrew Bailey, Chief Executive of the FCA, said:

“High-cost credit is used by over three million consumers in the UK, some of who are the most vulnerable in society. Today we have proposed a significant package of reforms to ensure they are better protected including the possibility of a cap on rent-to-own lending.

“The proposals will benefit overdraft and high-cost credit users, rebalancing in the favour of the customer.

“Our immediate proposed changes will make overdraft costs more transparent and prevent people unintentionally dipping in to an overdraft in the first place. However, we believe more fundamental change is needed in the way banks charge customers for overdrafts. Given the size of the market our work here will be completed as part of our wider review into retail banking.”

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

07Jun

FOS reports large increase in credit complaints, as annual review shows PPI still accounts for the majority of cases

Although payment protection insurance (PPI) still accounts for 55% of the complaints made to the Financial Ombudsman Service (FOS), perhaps the most striking thing about the complaints statistics for the year to March 31 2018 is the rise in consumer credit complaints.

31% of the 339,967 complaints received concerned banking and credit, while just 4% concerned investments and pensions. 24% of the non-PPI complaints were about consumer credit.

It was the fourth successive year in which the total complaints figure has been somewhere between 329,000 and 341,000, after two years earlier in the decade where annual FOS complaints topped 500,000.

Complaints about home credit were up by 146%, i.e. more than double, when compared to the 2016/17 financial year. Volumes of complaints concerning credit references were up by 83%; complaints regarding hiring, leasing and renting rose by 73%; grievances about payday lending rose by 64%; and complaints about all forms of consumer credit were up by 40%.

Debt management firms fared better though, with debt counselling complaints falling by 74% and debt adjusting cases by 76%.

Away from the consumer credit arena, self-invested personal pension complaints rose by 37%, while complaints about conventional personal pensions fell by 38%.

During the year, the FOS resolved more than 400,000 complaints, meaning that its backlog is reducing in size.

61% of the complaints about payday loans were upheld, which is well in excess of the uphold rate for all products, which was just 34%. The uphold rate for the entire credit sector was 47%. For PPI, it was 36%, excluding cases affected by the Plevin judgement.

Consumer credit firms need to be mindful of the fact that consumers seem to be much more willing to make a complaint about them. The FOS annual figures serve as a reminder that the interests of the customer need to be central to the corporate culture.

Common reasons for complaining to the FOS about a consumer credit firm might include:

• The customer’s application was approved without rigorous affordability and credit assessments taking place
• Use of aggressive and high-pressure sales techniques
• Unfair treatment of borrowers in arrears, e.g. refusing to accommodate realistic requests for alternative repayment arrangements
• Failing to be transparent about fees, charges and repayment obligations
• Use of aggressive debt collection practices

FOS chief executive Caroline Wayman commented:
“For us – like for the financial services sector itself – standing still simply isn’t an option. That’s why, over the last couple of years, we’ve been through the biggest transformation of our service since we were set up.
“While continuing to manage the fallout of mis-sold payment protection insurance (PPI) – with complaints still reaching us in their hundreds of thousands, accounting for over half of all those we receive – we’ve been ensuring that we’re able to respond to the problems people are having today, and that we’re ready for the future too.”
Whilst not directly mentioning the concerns raised by an expose in the Channel 4 documentary Dispatches, Ms Wayman did make reference to the independent review of the way the FOS works. This review, chaired by former Which? executive director Richard Lloyd, is expected to be published later this month.

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

05Jun

What are soft opt ins?

A large number of firms have been fined by the Information Commissioner’s Office (ICO) after breaching the requirements of the Privacy and Electronic Communications (EC Directive) Regulations 2003 regarding email and text marketing.

Essentially, emails, texts and recorded telephone messages that are intended to promote a firm’s products or services can only be sent to individuals who have explicitly opted in to receiving communications of this nature. This consent must have been obtained in advance – including an option within in the communication to opt out of future communications is not normally sufficient.

However, the law does allow firms to make use of ‘soft opt-ins’ when it comes to obtaining consent for this type of communication. This applies where the recipient’s details were obtained “in the course of the sale or negotiations for the sale of a product or service to that recipient.” The three conditions that apply to use of the soft opt-in are:

  • The product or service the individual has previously enquired about must be of a similar nature to the products and services now being marketed
  • At the time their contact details were collected, the individual must have been given the opportunity to opt out of marketing communications
  • All promotional materials must give the recipient the opportunity to opt out of receiving marketing communications in the future

The last of these requirements could be achieved by including an unsubscribe option within an email message, or by inviting the recipient to reply with STOP in a text message. It should be noted that merely giving the individual the chance to opt out in the first such communication is not sufficient, and the opt out opportunity must be prominently displayed in all subsequent electronic promotions.

The ICO has clarified that in order for the soft opt-in exemption to be used, the individual must either have purchased a similar product or service from the firm or have made a specific enquiry about a similar product or service. If an individual simply views details of a product or service via general ‘browsing’ but does not proceed to make a purchase or enquiry, then the soft opt-in requirements have not been satisfied, and separate consent would be required before this individual could be sent any electronic marketing.

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

04Jun

SMCR to deliver significant changes for key employees of authorised firms

Although its full implementation has been delayed, all firms authorised by the Financial Conduct Authority (FCA) need to take careful note of the Senior Managers & Certification Regime (SM&CR). This new regime will replace the existing Approved Persons Regime.

At present, SM&CR only applies to banks, building societies, credit unions and large investment firms, but the FCA remains committed to introducing it throughout the financial services sector. Its introduction is now expected to occur sometime in 2019 – the exact implementation date will be confirmed by the Government in due course once the relevant legislation has completed its passage through Parliament.

The two central aims of the new Regime are:

  • Encouraging a corporate culture where staff at all levels take personal responsibility for their actions
  • Ensuring firms and staff clearly understand and can demonstrate where responsibility lies

The three principal components of SM&CR are:

  • The Senior Managers Regime
  • The Certification Regime
  • The Conduct Rules

As with the existing Approved Persons Regime, the Senior Managers Regime will require firms to obtain approval from the FCA whenever they intend to appoint an individual to a management role for the first time. As at present, whether the FCA grants approval will depend on whether they are satisfied that the person is ‘fit and proper’ to carry out such an important role.

The definition of ‘senior managers’ the FCA will use is likely to encompass individuals carrying out the following roles, or equivalent roles:

  • Chair
  • Chief Executive
  • Partner
  • Executive Director
  • Compliance Oversight
  • Money Laundering Reporting Officer

For each senior manager, firms will need to produce a document called a Statement of Responsibilities, which clearly sets out what they are responsible and accountable for. If something within their remit goes wrong, then they can be held personally accountable and the FCA can fine them, or ban them from working in senior roles, or even impose an outright ban on them working in financial services.

Duties of Senior Managers under the new Regime will include:

  • Taking reasonable steps to ensure that the business of the firm for which they are responsible is controlled effectively
  • Taking reasonable steps to ensure that the business of the firm for which they are responsible complies with the relevant requirements and standards of the regulatory system
  • Taking reasonable steps to ensure that any delegation of their responsibilities is to an appropriate person and that they oversee the discharge of the delegated responsibility effectively
  • Disclosing appropriately any information of which the FCA, or Prudential Regulation Authority, would reasonably expect notice

The Senior Managers Regime also requires firms to carry out their own annual assessment of whether each of their senior managers remains fit and proper to continue in their role.

The second component of the Regime is the Certification Regime. It applies to employees who are not considered to be senior managers but who carry out roles that could significantly impact customers or firms. Examples might include employees in more junior managerial roles, or investment advisers. These roles will be known as ‘certification functions’.

These individuals will not need to be approved by the FCA at any stage, and it will be the responsibility of the firm to certify these individuals for their fitness, skill and propriety at least once a year.

Finally, five new Conduct Rules will apply to all staff at all FCA authorised firms. These high-level rules will require all employees to:

  • Act with integrity
  • Act with due care, skill and diligence
  • Be open and cooperative with regulators
  • Pay due regard to customer interests and treat them fairly
  • Observe proper standards of market conduct

Firms will need to inform the FCA should they take disciplinary action against an employee for breaching one or more of these Conduct Rules.

Although its implementation is still more than 12 months away, firms would do well to start preparing for SM&CR now. A good starting point is to consider which individuals might be classed as senior managers, and what their responsibilities are; then to consider which individuals might be covered by the Certification requirements.

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

01Jun

ICO prosecutes individual who stole firm’s data to set up his own business 

The data protection watchdog, the Information Commissioner’s Office (ICO), has successfully prosecuted a recruitment consultant who unlawfully stole the data of clients belonging to a firm he had worked for.

The individual previously worked for a recruitment firm as an employee but left this employment in October 2017 in order to set up his own company. His new firm would also operate in the veterinary recruitment sector, and so could be said to be a rival to his former employer.

Shortly afterwards, his Exeter-based former employer contacted him to ask if he had taken any data from their database, and he confirmed that he had, but said it was merely “for his own record of achievement.”

The firm however referred the matter to the ICO, and after conducting its own investigation, the regulator concluded that he had taken the personal data of some 272 clients, and that he had done so for the purposes of commercial gain.

In an appearance before Exeter magistrates on May 21, he pleaded guilty to unlawfully obtaining personal data under section 55 of the Data Protection Act 1998. For this, he was fined £355, and was also required to pay costs of £700 and a victim surcharge of £35.

Mike Shaw, Criminal Investigations Manager at the ICO, said:

“[NAME] thought he could get away with stealing from his old employer to launch his own company.

“Data Protection laws are there for a reason and the ICO will continue to take action against those who abuse their position.”

Employees of authorised financial services firms are amongst those who need to take note of this case. For example, some financial advisers have in the past moved to another firm but continued to contact the same clients that they serviced on behalf of their previous firm. Unless their contract of employment stated otherwise, or the firm they left gave specific permission for the adviser to take their clients with them, the clients legally still belong to the firm and not to the adviser. This means that, in these circumstances, the adviser would not be able to contact the clients they serviced at their previous firm once they had commenced employment with the new firm.

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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