Government announces plans to give indebted consumers 60 days breathing space

The Government has unveiled plans that would force debt collectors, lenders and bailiffs to give those with debt problems 60 days ‘breathing space’ during which the affected consumers could put in place some form of debt arrangement. During this two-month period, firms would be unable to take any enforcement action to recover the unpaid debts; and lenders would also be forced to freeze interest and charges.

As part of the bargain, people with debt issues would need to use the 60-day period to seek professional debt advice. The exception to this would be those with mental health issues, who will not need to seek debt advice, and in their case the breathing space period will not end after two months but will instead last for as long as they are receiving treatment for their health issues.

As well as loan and credit card debt, the breathing space proposals will also apply to council tax arrears, personal tax debts and benefit overpayments.

The proposals are expected to be introduced to Parliament later this year, but it will be 2021 before the changes become law.

City Minister John Glen MP said:

“Problem debt can have a devastating impact of people’s lives, putting a huge burden on individuals which can lead to family breakdown, stress and mental health issues.

“No one should be stuck in an endless cycle of debt and facing the ever-looming threat of invasive debt collectors.

“That’s why I’m introducing this new scheme, giving everyone access to the advice, time and support they need to both get their finances under control and get away from the perpetual stress and worry debt can cause.”

National advice charity Citizens Advice welcomed the proposals. Its chief executive Gillian Guy commented:

“After years of calling for more support for people in debt, we’re pleased to see the government take action to protect people from action by creditors.

“This new scheme will help people struggling with debt keep a roof over their heads and food on the table while they pay back what they owe. This will also offer crucial respite from aggressive bailiffs.

“However, the scheme won’t cover everyone straight away. We’re concerned thousands of people with debts and deductions under Universal Credit are going to miss out on this support initially.

“With more people likely to seek debt advice as a result of this scheme, the government also needs to ensure specialist debt advice services are adequately funded.”

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


Professional football club amongst the latest firms to lose their FCA authorisation

Amongst the latest set of firms to lose their FCA authorisation, one name stands out. A League Two English football club is amongst those stripped of their regulatory permissions by the regulator, and like so many firms who receive this punishment, the cancellation of their permission is due to a failure to submit the Consumer Credit CCR007 data return.

It is unclear exactly which of the club’s activities required consumer credit permissions, but whatever these activities were, the club is no longer authorised to carry them out. Suggestions in online conversation suggest that the club previously offered instalment payment plans for season tickets.

The FCA does not have the resources to carry out an annual monitoring visit at every firm it authorises, so one of the principal ways it monitors firms is to ask them to complete data returns, where a series of quantitative and qualitative data needs to be provided. Without this information, the FCA cannot supervise firms, so a cancellation of their regulatory permissions is the inevitable result of failing to submit a data return.

The FCA believes that failing to submit a data return is a breach of the suitability Threshold Condition, in that the Authority would not be satisfied that the firm is fit and proper. The actions of a firm in this situation would also constitute a failure to comply with Principle 11, which requires firms to co-operate with their regulators.

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 ‘the pressure’s on’ as PPI deadline approaches

The Financial Conduct Authority (FCA) has appointed a ‘Pressure’s on Panel’ as the payment protection insurance (PPI) claims deadline approaches.

With just two months to go until the August 29 deadline, the diverse panel includes partner organisations such as the Money and Pensions Service, personal finance expert Sarah Pennells, 1990s TV celebrity Mr Motivator and an anonymous blogger who the FCA refers to as Skint Dad. Arnold Schwarzenegger has been involved in the campaign to alert consumers to the deadline since the very start, and his animatronic head will once again feature in the regulator’s final promotional push. The veteran US actor will appear in a series of advertisements urging people to take action on PPI before it’s too late.

The FCA says that, since the campaign was launched in August 2107, it has received 44,488 calls to its PPI helpline, and has received 3,720 PPI enquiries via email and has held 7,480 web chat conversations. 94% of users say they are satisfied with the service provided by the regulator. More than 3.9 million people have viewed the FCA’s PPI website, and a survey of a sample of website visitors revealed that 80% of people found this website helpful.

The regulator has also published the latest figure for the monthly amount of PPI compensation paid by firms it supervises. In April, a total of £334.3 million was paid out to customers who had complained about their PPI policy, taking the overall total to £35.3 billion. These figures are based on data from 23 firms who collectively make up 95% of PPI complaints.
Emma Stranack, the FCA’s PPI Deadline Campaign Lead, said:
“With just over 10 weeks to go, time is running out to claim back money for PPI. Simply put, if you haven’t complained to your provider by 29 August 2019, you won’t be able to claim money back for PPI – so you should make your decision as soon as possible. Checking if you had PPI is simple and free. Don’t worry about paperwork, you only need your date of birth and relevant previous addresses.”
Personal finance expert and consumer champion Sarah Pennells said:
“The PPI deadline is fast approaching – so now is the time to contact your bank, loan or card company as soon as possible. You can complain to them directly for free and you can use the FCA’s website for more information.
“I am working with the FCA to help remind consumers that now is the time to decide whether or not to make a complaint before the deadline on the 29 August 2019.”
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 writes to CMC bosses explaining its expectations when firms deal with customers

The CEO or equivalent of every UK claims management company (CMC) should now have received the ‘Dear CEO’ letter from the Financial Conduct Authority (FCA) which was issued on June 4.

The essential theme of the letter is ‘delivering good consumer outcomes’ – a mantra which the FCA is mentioning more often in policy statements, guidance papers, consultation papers, speeches etc.

The letter highlights four principal areas of concern:

• Some CMCs are acting on behalf of customers without getting their appropriate consent, such as asking them to complete letters of authority. Here the FCA reminds firms that to act without explicit written permission is a contravention of data protection law
• CMCs are submitting letters of authority and claims in fictitious customer names
• Some CMCs are submitting other forms of bogus claims, such as where is no relationship between the customer and the firm that is the subject of the claim
• Many CMC financial promotions do not comply with FCA rules in this area

The FCA says it will consider the extent to which firms are complying with the rules in these four areas when it assesses their applications for full authorisation. Almost all CMCs will still be operating under temporary permission at present, but in the longer term it will be necessary for them to obtain full authorisation from their new regulator should they wish to continue trading. In summary then, any firm which fails to satisfy FCA requirements in one or more of these four areas will need to exit the market.

For many CMCs, the deadline for submitting applications for full authorisation was May 31, and for the rest, their July 31 deadline is fast approaching, so anyone in any doubt as to how to satisfy FCA requirements in these four areas is advised to seek advice from their compliance consultant as a matter of urgency.

CMCs are warned that they must not pursue a claim if they have reasonable grounds to suspect that the claim is without merit, or is fraudulent, frivolous or vexatious. When making representations firms must:

• Substantiate the basis of the claim
• Provide information that is specific to the claim
• Not use false, misleading or exaggerated statements

Some of the issues the FCA has seen with CMCs’ promotions include:

• Stating that the service is ‘No win no fee’, but then failing to set out the fees that the firm charges
• Not making it clear which firm has issued the promotion, or not making it clear that the named firm is a CMC
• Suggesting that using the firm’s services could improve the consumer’s chances of a successful claim
• Not making it clear that claims can be made to the Financial Ombudsman Service without using the services of the firm and without paying a fee
• Still stating that the firm is regulated by the Claims Management Regulator and/or the Ministry of Justice, when the switch to FCA regulation happened more than two months ago

The FCA adds that it has the power to ban non-compliant financial promotions, including websites

The letter also clarifies just how wide the legal definition of regulated claims management activities is. A CMC needs authorisation from the FCA to carry out any of the following activities:

• Seeking out, referrals and identification of claims or potential claims and advice – even carrying out a ‘free PPI check’ falls under the scope of regulation
• Investigation or representation in relation to a financial services or financial product claim

Two final points made in the letter are:

• CMCs must demonstrate that they have adequate staffing, expertise, systems and controls to cope with any increase in customer numbers
• Firms must keep comprehensive records of services and transactions, and of anything else that is necessary to demonstrate their compliance with FCA requirements

All CEOs of CMCs are expected to share the letter with their board of directors, or equivalent, and to consider what action they may need to take to improve practices and procedures within their firms.

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


ICO head says firms need to focus on the consequences of data breaches for customers

In a blog marking the first anniversary of the General Data Protection Regulation (GDPR), Information Commissioner Elizabeth Denham calls on firms to consider the impact that having poor data practices could have on their customers and other individuals. Ms Denham highlighted that a simple box-ticking approach would not be sufficient, saying:

“The focus for the second year of the GDPR must be beyond baseline compliance – organisations need to shift their focus to accountability with a real evidenced understanding of the risks to individuals in the way they process data and how those risks should be mitigated.”

Another warning came as she highlighted that the public are now much more aware of data protection issues. Here the Commissioner suggested that “people have woken up to the new rights the GDPR delivers”, and so firms need to be aware of the fact that consumers are now much more likely to complain if they believe that their personal data has not been handled appropriately. She revealed that her organisation has received in excess of 40,000 data protection complaints and more than 14,000 reports of personal data breaches since GDPR was introduced on May 25 last year, and then stated that Information Commissioner’s Office staff are close to completing investigations into some of these cases, and that details of relevant enforcement action would be announced shortly.

Larger companies now need to have a named Data Protection Officer (DPO), and Ms Denham urged firms’ senior management teams to support their DPO where necessary.

Ms Denham also recently addressed the G20 Side Event – International Seminar on Personal Data in Tokyo. Here she also commented on public expectations by saying that consumers needed to trust that organisations would act appropriately, by saying:

“Trust means citizens knowing how their data is being used, how they can control its use, where the data is going.”

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 proposes limit on P2P investments for retail customers, along with other changes

Most consumers will be subject to limits on the amounts they can invest in peer-to-peer (P2P) investments, under new rules announced by the Financial Conduct Authority (FCA) in early June 2019.

Unless they have received regulated financial advice, ordinary retail investors who are new to P2P investing will only be allowed to place 10% of their investable assets in P2P agreements.

Investors who have self-certified as ‘sophisticated investors’ or who have been certified by the firm as ‘high net worth investors’ will not be subject to a 10% cap. However, the FCA says that it is important that all P2P customers understand the extent to which their capital is at risk, given that these investments are not covered by the Financial Services Compensation Scheme.

P2P firms will also be required to have an independent risk management function, an independent internal audit function and an effective compliance function, the size of which should be proportionate to the size of the firm. The risk function must be overseen by a person who meets the definition of a senior manager under the Senior Managers and Certification Regime, and who is not part of the independent compliance function. The FCA also highlights that, under existing rules, P2P firms must take appropriate steps to identify and to prevent or manage conflicts of interest.

Wind-down arrangements should be an important consideration for any P2P firm. The FCA says that arrangements should be in place to ensure that there is a “reasonable likelihood” that the investments can continue to be managed effectively should the P2P firm cease trading. If these arrangements involve another firm stepping in to wind down the management and administration of the P2P agreements, the lenders must be informed of the identity of that firm and how that firm will hold the lenders’ money.

All of these changes will come into force on December 9 2019.

There is, however, one further change that comes into force immediately. P2P platforms that offer home finance products will now need to comply with certain parts of the FCA’s Mortgage Conduct of Business Rules (MCOB). Unless one of the investors is not required to be authorised as a home finance provider, the P2P firm will need to comply with:

• MCOB 11 regarding affordability assessments
• MCOB 13 concerning arrears, payment shortfalls and repossessions
• MCOB 4, 5, 6 and 7 relating to the information to be disclosed at various stages of the process
• MCOB 12 on fees and charges
• MCOB 10 and 10A regarding calculation of the Annual Percentage Rate
• MCOB 2 concerning general conduct of business rules
• MCOB 3A governing financial promotions

Christopher Woolard, Executive Director of Strategy and Competition at the FCA said:

“These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities. For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article


Adviser trade body submits its formal response to the RDR/FAMR review

The Personal Investment Management & Financial Advice Association (PIMFA) has submitted a formal response to the Financial Conduct Authority (FCA) regarding its review of two recent initiatives.

The Association, a trade body representing financial advisers and wealth managers, is seeking to have its say as the regulator reviews the effectiveness of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR).

The response begins by stating that, although RDR has improved standards and increased levels of professionalism within the industry, consumers have suffered as the number of financial advisers falls and the costs of accessing advice increase.

PIMFA calls on the FCA to monitor how any new regulatory initiatives impact on the cost of compliance for firms. It states that “a balance needs to be found between protecting consumers and ultimately excluding them from advice altogether”, claiming that some of its member firms now spend 58% more on compliance than was the case prior to RDR.

Much of the response refers to the increasing need for financial advice amongst the older generation, and in order to make it easier for people to access regulated advice on their retirement options the Association calls on the FCA to do more to promote the pensions advice allowance proposals from the FAMR. The FAMR was designed to improve access to financial services, and one of its recommendations was that consumers would be allowed to withdraw £500 from their retirement savings in order to pay a financial adviser’s fees.

PIMFA’s response states that “it should be a concern to the FCA that such a small proportion of individuals are currently accessing financial advice to help them navigate pension freedoms”.

Simon Harrington, Senior Policy Adviser at PIMFA, said:

“There is a clear and obvious benefit in the use of financial advice. People who access it receive better outcomes than those who do not. It is, therefore, a source of some concern that such a small proportion of the UK population – including a number of whom who could reasonably benefit from financial advice – do not access it. The role of financial advice will become increasingly critical over the coming years. In comparison with older generations, people are now accumulating less liquid wealth, property, and are not saving an adequate amount for their retirements. As we live longer and spend more time out of work, the role of financial planning and the management of what wealth we do have will become increasingly important.

“The single biggest contributor to the advice gap currently is the cost of advice. Whilst the FCA recognises and defines the cost of regulation as the ‘cost of doing businesses well’ it also needs to recognise the unintended consequences of the regulatory obligations that it places upon firms. No single process exists which any firm can undertake in order to streamline their regulatory obligations and as a result, regulatory costs, as well as the cost of compliance, continues to rise. If the regulator is serious about closing the advice gap, making advice more affordable and encouraging more people into this market, it needs to also consider what role it can play in overseeing a regulatory landscape which encourages this.”

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


PPI complaints data shows rise in redress paid

With less than three months to go until the final payment protection insurance (PPI) claims deadline of August 29, the Financial Conduct Authority (FCA) has announced the amount of redress paid on this product for March 2019.

The March figure was £325.9 million, and this represents a 9% increase on the latest figure for the previous month. It should be noted here though that the number of days in the month of March is around 10% higher than in February, and also that the FCA regularly updates its monthly PPI compensation figures once additional data becomes available. For example, the February 2019 figure was originally announced as £286.4 million, but this was revised to £298.6 million on May 24 of this year. The March figure may well be revised upwards in due course.

Indeed, May 24 2019 saw the regulator revise all of its monthly PPI redress figures for the period January 2018 to February 2019, and in each case the revisions saw these monthly amounts rise by an amount that was somewhere between £10 million and £20 million.

The new figures show that £433.3 million was paid in January 2018, which was the largest total payout since March 2016. The total compensation paid in January 2019 has been updated to £350.4 million, which was higher than for all of the previous five months.

The total paid in PPI compensation now stands at £34.9 billion. In the first three months of 2019, a total of £974,956,563 (almost £1 billion) was paid out, although this is actually less than a quarter of the total figure for 2018, which was £4,434,600,700.

The highest monthly compensation figure was £735.3 million, from May 2012, and the highest annual payout was £6,278,972,550 (£6.3 billion), which occurred in 2012.

The Financial Ombudsman Service (FOS) says that in the 2018/19 financial year PPI complaints referred to them were 3% down on the previous year, from 186,418 to 180,507. Also, PPI no longer accounts for the majority of the complaints being made to FOS, with 46% of the annual total concerning this product; and the PPI uphold rate at FOS was only 21%, way below the levels seen in previous years.

Although August 29 is the last day on which most PPI claims can be tabled, the long-running saga looks set to rumble on a while longer. The date at the end of August is simply the last day on which a PPI complaint can be made to a firm, then from this time the firm will have eight weeks to investigate the complaint, and the customer will have a further six months after that to decide whether to refer the matter to the FOS.

Firms that sold PPI, and claims management companies that handle claims about this product, have both been warned to expect a surge in complaint volumes as the deadline approaches, indeed it has been suggested that some of the banks and other large PPI providers could receive thousands of complaints on the final day.

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 publish new P2P rules

Following consultation, the FCA is introducing rules designed to prevent harm to investors, without stifling innovation in the P2P sector. When the FCA set its first rules for P2P, it committed to keep these under review as the sector evolved. These new rules are designed to help better protect investors and allow firms and fundraisers to operate in a long-term, sustainable manner.

The FCA has refined its proposals to ensure the new rules protect consumers and support the P2P market. In particular, additional guidance has been provided to make it clear that platforms will not be prevented from including information about specific investments in their marketing materials.

As originally proposed, the FCA is placing a limit on investments in P2P agreements for retail customers new to the sector of 10 per cent of investable assets. This is an important means of ensuring that they do not over-expose themselves to risk. The investment restriction will not apply to new retail customers who have received regulated financial advice.

The paper also includes:

  • More explicit requirements to clarify what governance arrangements, systems and controls platforms need to have in place to support the outcomes they advertise, with a particular focus on credit risk assessment, risk management and fair valuation practices.
  • Strengthening rules on plans for the wind-down of P2P platforms if they fail.
  • Introducing a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them.
  • Setting out the minimum information that P2P platforms need to provide to investors.
  • Applying the Mortgage and Home Finance Conduct of Business (MCOB) sourcebook and other Handbook requirements to P2P platforms that offer home finance products, where at least one of the investors is not an authorised home finance provider.

P2P platforms need to implement these changes by 9 December 2019, except for the application of MCOB, which applies with immediate effect.

Full details are provided in the link below:



FCA issues undertaking to debt management firm

The Financial Conduct Authority (FCA) has intervened to force a debt management firm to amend three of its terms and conditions that related to cancellations. The regulator says it has taken action under the Consumer Rights Act 2015 (the CRA) and the Unfair Terms in Consumer Contracts Regulations 1999 (the UTCCRs).

The first issue concerned part of the firm’s ‘Pre-Contract information sheet’, where it stated:

“If you wish to cancel your Debt management plan you can do so at any time. However, as our commitment to you will begin when you enter into an agreement with us, if you do subsequently cancel the agreement we will lose the time we have spent on your case and we reserve the right to charge you an amount which is sufficient to cover any losses and costs suffered due to your cancellation.”

Similar wording was contained in the Debt Management Agreement, which stated:

“Our commitment to you begins when you sign this agreement. If you cancel this agreement, we will lose the time we have spent on your case and we reserve the right to charge you an amount which is sufficient to cover any losses and costs suffered because of your cancellation. If you cancel this agreement with 14 days, which is known as the cooling off period, we will refund all fees paid. If you wish us to commence work before the 14-day period expires you may elect to waive the cooling off period.”

The FCA was concerned that these terms allowed the firm to impose disproportionately high fees, and that they effectively gave the firm sole discretion to charge unspecified amounts. It cited section 62(4) of the CRA and Regulation 5(1) of the UTCCRs, which state that a term is unfair if:

“Contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.”

The firm has now amended its terms to state that any cancellation fee will not exceed the total of the initial set-up fee plus one month’s servicing fees, less any sum already paid by the customer.

The third area where the FCA had concerns was where the Agreement Conditions stated:

“The Client(s) may terminate this agreement at any time by given [name of firm] one month’s notice of their intention to do so.”

Here the FCA’s undertaking refers to sections 64(3) and 68(1) of the CRA and Regulation 7(1) of the UTCCRs. The regulator believes that the Agreement Conditions did not use “plain and intelligible language”.

The firm has now removed this third offending statement entirely. It has also amended the two other terms so that they now state customers must provide one month’s notice if they wish to cancel the contract outside of the 14-day cooling-off period.

The firm is now writing to all its existing customers to provide them with a copy of the new contract terms. It will not now seek to enforce the original wording in respect of existing customers; and previous customers, who had cancelled their agreements with the firm, will be provided with appropriate redress.

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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