28May

FCA extends mortgage holidays by three months

The Financial Conduct Authority has announced that lenders will have to provide borrowers with an additional three-month payment holiday in certain circumstances where the borrower’s finances have been adversely affected by a coronavirus. Since the scheme commenced in March, lenders have already offered 1.8 million payment holidays.

However, the FCA recognises that where customers can afford to make full payments, it is certainly in their interests to do so, as interest continues to accumulate during the payment holiday. Therefore, at the end of a payment holiday, firms should contact their customers to find out if they can resume payments. If the borrower is in a position to resume their repayments, firms should accede to this request, and agree to a plan on how the missed payments will be repaid.

Where borrowers have had a payment holiday, but remain in financial difficulty, lenders will now need to consider whether it is appropriate to offer a further three-month payment holiday.

Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. However, lenders will still be able to reject mortgage applications in the future when applicants may have taken a payment holiday during the coronavirus outbreak.

Lenders are welcome to provide additional forbearance over and above the new FCA requirements where they judge that this is appropriate. Examples of additional forbearance that a lender might consider include interest reductions and interest waivers.

The regulator also says that lenders should consider signposting customers towards sources of debt advice, especially if they are likely to be in longer-term financial difficulty.

Any borrower who has yet to ask for a payment holiday now has until October 31 2020 to request one. The ban on re-possessing any homes has also been extended until this date.

Finally, the FCA asks lenders to consider that many customers may not have access to digital banking services and may need to consider alternative arrangements to enable everyone to request payment holidays and access any other services they require.

Christopher Woolard, Interim Chief Executive at the FCA, said:

“Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a payment holiday will continue to be able to apply until 31 October.”

John Glen MP, economic secretary to the Treasury, said:

“Everyone’s circumstances will be different, so when homeowners can pay some or all of their mortgage, they should work with their lender on a plan.

“But if they are still struggling, I want them to know that help is there.”

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 of the facts, circumstances or legal position may change after publication of the article.

27May

FCA confirms extension to period that an employee can stand in for an absent Senior Manager

 

The Financial Conduct Authority has announced that it is now possible for another person to deputise for an absent senior manager for a period of up to 36 weeks, instead of the usual 12 weeks, where the reason for the manager’s absence is related to the coronavirus outbreak.

The amendment to SUP 10.3.13R in the Handbook applies to all authorised firms and lasts until April 30 2021.

The special permission applies where one of two circumstances applies:

  • An individual who has previously been approved as a Senior Manager is absent due to Covid-19
  • The recruitment process to replace a Senior Manager is delayed due to the health emergency

The ideal position is that, if a senior manager is unable to work due to the coronavirus situation, it would be another senior manager or managers who would assume their responsibilities until they were able to return. Individuals in senior management roles should have all received specific approval from the FCA.

If a senior manager is absent and the firm decides it is not feasible to transfer all of their responsibilities to other FCA-approved senior managers, the firm would obviously need to consider who was the best candidate to step in on a temporary basis. It is the firm’s responsibility to ensure the individual in question has the skills, qualifications, experience and competence to deputise for the Senior Manager.

Once the relevant individual has been identified, the firm should apply to the FCA for a ‘modification of consent’, to allow another person to carry out senior manager tasks for up to 36 weeks. In order to be as flexible as possible, the regulator will allow firms to apply for a modification by consent as a precautionary measure, in advance of actually needing it.

The health emergency has also prompted the FCA to relax the notification requirements for firms who make internal transfers of responsibilities between existing Senior Managers.

All authorised firms are expected to have Statements of Responsibilities (SoR) that document the responsibilities of their senior managers. In normal circumstances, the firm should inform the FCA and submit updated SoRs where certain responsibilities are transferred from one manager to another. However, the regulator recognises that the current situation may require firms to change senior manager responsibilities at short notice, for example, a manager may be forced into self-isolation because they are displaying symptoms, or a family member falls ill.

With this in mind, the FCA has said that there is no need for an affected firm to submit an updated SoR to the FCA where the following criteria are satisfied:

  • The changes have been made in response to the pandemic
  • The changes are of a temporary nature and, in the longer term, the firm expects to revert back to its previous arrangement

However, while firms don’t have to send the updated SoR to the FCA, they are expected to document the change in responsibility that has occurred and to retain a copy of this document internally.

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 of the facts, circumstances or legal position may change after publication of the article

26May

Former bank governor and ex-minister confirmed as speakers at trade body’s Virtual Fest

The Personal Investment Management & Financial Advice Association (PIMFA) has announced two high profile speakers for its Virtual Fest at the start of next month.

“Virtual Fest” aims to provide a wide-ranging programme of activities to support industry professionals who are currently working from home, and the Association suggests advisers could use the event to seek support on issues such as:

  • The optimum working arrangements during the current health crisis
  • How to engage with the FCA while adopting alternative working arrangements
  • Personal wellbeing while working in isolation

PIMFA promises that festival attendees will be able to connect easily via a normal internet connection, although they will need to register their attendance in advance.

The first special guest to be announced was former Bank of England governor, Mark Carney. He served as the Bank’s governor from July 2013 to March 2020 and is now the UN’s Special Envoy for Climate Change and Finance Adviser to the Prime Minister for the COP26 climate change summit that has been rescheduled for next year.

Baroness Morgan of Cotes (Nicky Morgan) has also agreed to speak at the conference, and she will provide delegates with some insight as to how both coronavirus and Brexit might affect the financial services industry. Baroness Morgan was Secretary of State for Education between July 2014 and July 2016, Chair of the Treasury Select Committee between July 2017 and July 2019 and Secretary of State for Culture, Media and Sport from July 2019 to February 2020.

The Association has confirmed that conference delegates can claim 10 hours of Continuing Professional Development by attending the full two days of Virtual Fest.

Liz Field, Chief Executive of PIMFA, commented:

“We are delighted that both Mark Carney and Baroness Nicky Morgan will be joining us as keynote speakers for Virtual Fest alongside a number of other leading industry figures.

“Their expert knowledge and experience will provide extremely valuable insights into some of the biggest challenges facing both financial services and wider society as well as current Government thinking in the wake of the COVID-19 pandemic and its effects.

“We said at the start of the pandemic and the current lockdown restrictions that PIMFA would be there to provide our wealth management and financial advice colleagues with as much support as possible and Virtual Fest is an illustration of our continuing commitment to supporting our member firm operations and individuals continued professional development during this period of isolation.”

Baroness Morgan of Cotes commented:

“A well-functioning UK financial services sector has been the engine of the UK economy for decades but it faces twin challenges at present from both COVID-19 and from preparations for our future trading relationship with the European Union.

“No-one can predict with any certainty what the impact of the COVID-19 pandemic will be on society or the economy, or how long-lasting the effects will be, and there remains a high degree of uncertainty around what the basis of our future financial services arrangements with the EU will look like.

“Understandably this is a cause of deep anxiety for many, and it is clear that a properly functioning financial services industry will be vital to ensuring that we can return to something approaching normality in the future. I look forward to sharing my insights into the current debate in Westminster on these issues, and what it will mean for the future of financial services in the UK at the Virtual Festival.”

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 of the facts, circumstances or legal position may change after publication of the article.

22May

FSCS will soon be in a position to issue the first LCF advice decisions

The Financial Services Compensation Scheme (FSCS) says it will start to issue decisions on London Capital & Finance (LCF) claims by the end of May 2020. The process is expected to be completed by the end of September 2020.

Quite simply, when a decision is reached on each claim, the individual customer will receive a letter informing them of the outcome, and if their claim has been successful, the letter will be accompanied by a cheque for what FSCS judges to be the appropriate amount of compensation.

Caroline Rainbird, FSCS’s CEO said:

“Having spent time reviewing all of the information we have gathered, I am pleased that we are now in a position to look at individual claims and will start to issue decisions on those claims this month, thereby providing some certainty for LCF customers.

“We appreciate that this process has been a lengthy one and that for many LCF customers the wait is not yet over. We want to reassure LCF customers that we are continuing to work tirelessly to bring this process to a conclusion and ensure that those customers who are entitled to compensation receive it.”

The LCF saga has been one of the most controversial stories in financial services in recent times.

Before it collapsed into administration, LCF was a firm that issued mini-bonds. However, the bonds themselves are not regulated by the Financial Conduct Authority, so most customers of the firm had no FSCS protection and lost their entire investment when the firm failed.

In its latest press release, FSCS acknowledges this by saying once again that a large proportion of LCF customers will not be eligible for compensation.

The only LCF customers who are likely to receive compensation are those who transferred funds from stocks & shares ISAs into the mini-bonds, or those who received professional advice to invest in the LCF bonds, and whose advice may have been misleading as to the existence of FSCS cover. In the latter case, they are eligible for FSCS protection as providing financial advice is an FCA-regulated activity. Those who transferred out of ISAs into LCF bonds have already been compensated, however, only 159 customers fell into this category.

FSCS will provide a further update on the situation before the end of June.

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 of the facts, circumstances or legal position may change after publication of the article.

21May

FCA says no change to its instructions to firms following Government’s lockdown easing

The Prime Minister went on television on the evening of Sunday May 10 and announced a partial easing of the UK’s lockdown, but the Financial Conduct Authority has responded by saying there is no change to its instructions to firms as a result of what Boris Johnson had to say.

Although the televised address included something of an encouragement for the UK population to return to work, this was more a change of emphasis than any change of policy. It is still of critical importance that jobs are carried out remotely wherever possible, both to reduce the spread of the virus within offices, and because there are concerns about overcrowding on public transport.

The FCA continues to say that certain staff should not be attending an office location or carrying out face-to-face meetings, and these include:

  • Financial advisers – in practice very few of these now work from busy offices full-time anyway, but they may need to get used to conducting client meetings online or by phone
  • IT staff, unless they are supervising important office-based systems and technology
  • Those offering claims management services
  • Those offering non-essential loans and credit

In today’s technological age, many roles can be carried out remotely, and this extends to many telephone-based customer-facing roles – roles of this nature existed even before the pandemic.

Where staff do need to travel to office locations, firms’ management are encouraged to consider whether it is appropriate to take some or all of the following precautions:

  • Introducing staggered shifts, so not everyone travels in the normal rush hour
  • Urging staff to stay at home should they think that they may have symptoms of the virus
  • Relaxing requirements that might currently require staff to provide doctor’s notes and similar for periods of illness
  • Understanding that staff who are symptom-free may still need to be away from work as their family members might have caught the virus, or their children’s school has been closed
  • Purchasing hand sanitiser
  • Ensuring all toilets have a well-stocked soap dispenser and a number of anti-septic wipes
  • Encouraging staff to wash their hands regularly, in line with the Government’s advice
  • Regularly cleaning computer keyboards, desks and surfaces
  • Changing any ‘hot desking’ practices or similar, as the virus can remain on surfaces for as long as a few days
  • Changing the office layout so employees are seated at least two metres apart when working
  • Erecting screens between desks
  • Staggering break times so everyone isn’t in the communal area at the same time

The FCA continues to emphasise that senior management have a critical role to play in deciding which staff need to travel to the office and which staff can work from home or can be furloughed.

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

14May

Calls for urgent government help for lenders as Covid forbearance requests hit 1.2 million 

Trade association the Finance and Leasing Association (FLA) has called for urgent Government assistance to be provided to the personal finance sector after customer requests for forbearance to its member firms reached 1.2 million. This is just the figure reported by firms who are members of the Association, and the true figure for the sector is likely to be a good deal higher.

One of the startling things about the coronavirus pandemic is how quickly things have changed, after all as recently as mid-March the UK public were still visiting the pub and continuing with their normal lives.

The Financial Conduct Authority’s first major actions to protect consumer credit borrowers came on April 9:

  • Customers with an overdraft who had been affected by the health emergency were allowed a three-month interest-free period on £500 of the balance
  • Firms were expected to offer a temporary payment freeze on loans and credit cards where consumers faced difficulties with their finances as a result of coronavirus, for up to three months

From April 24, firms were expected to offer three-month payment freezes to anyone experiencing difficulty with motor finance payments, and a one-month payment freeze to anyone who was in difficulty on a high interest short-term product, such as a payday loan.

By May 7, the FLA reported that its members had received 1.2 million requests for forbearance from customers since the FCA made these announcements. It added that 75% of these requests had already been approved – some other requests may still be under consideration.

Many lenders and credit providers have been forced to provide this hugely costly forbearance at a time when their own new business volumes are falling sharply for a variety of reasons related to Covid-19.

The current health emergency does of course mean that people cannot spend money on many of the things for which they might normally take out credit, or it’s harder to purchase certain big-ticket items, for example:

  • A holiday – the Government is still advising against all but essential travel to all other areas of the world, and all UK hotels and other holiday accommodation remain closed for holiday purposes
  • A car – car showrooms remain closed
  • A wedding – all UK weddings are cancelled with no indication of when they can resume
  • Home improvements – internal building work in an occupied property isn’t currently permitted

Most firms have reported increased sickness absence, and some firms have been uneasy about asking staff to report for work altogether amid concerns for their safety.

FLA statistics concerning new business volumes include:

  • New business volumes in the car finance sector in March 2020 were 29% lower than in March 2019
  • New business in the second charge mortgage sector in March 2020 fell by 14% compared to the same month in the previous year
  • Consumer finance new business was down by 16% when the same measure is used
  • Credit card and personal loan new business fell by 10%

Stephen Haddrill, director general at the FLA, called for immediate government support for his members, saying:

“The asset, consumer and motor finance markets have been hit hard by the measures taken to deal with the coronavirus crisis, with a 20 percent fall in new business in March alone.

“FLA members have also faced almost 1.2 million Covid-19 related requests for forbearance, of which 75 percent have already been granted. The industry is committed to supporting their customers during these exceptional times.

“Urgent action is needed – in days, not weeks – to deliver financial support to the non-bank lending sector to ensure that we maintain a financial services sector that is diverse, innovative and competitive.”

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

13May

Bank of England reports big rise in those paying down debt

Coronavirus has undoubtedly had a huge negative impact on many people’s finances, but there may also have been some positive things to come out of it regarding personal debt as well. March 2020 saw UK households pay back a record level of personal debt, perhaps because people were cutting back on discretionary spending.

March saw a total of £3.8 billion in unsecured consumer credit debt repaid to lenders and other providers, according to Bank of England data. This represents the largest net monthly repayment since 2008 and the first time unsecured household debt has fallen in eight years. Total unsecured household debt now stands at £220.9 billion, a reduction of 1.7% since the end of February 2020.

£2.4 billion of the £3.8 billion was credit card debt repayment, and it is only the second time since July 2013 when total UK credit card debt has fallen during the course of a single month. Total UK card debt now stands at £69.3 billion, which is lower than the equivalent figure at the end of March 2019, and this represents the first occasion on which the total card debt figure has been lower than it was 12 months previously since the data started to be collected in 2008.

The Bank of England has also recorded a fall in year-on-year credit card spending for the first time, with its figures showing a 0.3% drop in spending on credit cards in March 2020 compared to March 2019.

Meanwhile, new consumer lending fell by £5.4 billion during March.

The current health emergency does of course mean that people cannot spend money on many of the things for which they might normally take out credit, or it’s harder to purchase certain big-ticket items, for example:

  • A holiday – the Government is still advising against all but essential travel to all other areas of the world, and all UK hotels and other holiday accommodation remain closed for holiday purposes
  • A car – car showrooms remain closed
  • A wedding – all UK weddings are cancelled with no indication of when they can resume
  • Home improvements – internal building work in an occupied property isn’t currently permitted

Andrew Hagger, the founder of personal finance site Moneycomms, said:

“The cut back in spending is astonishing but a combination of people being extra careful with their money and unable to spend on big ticket items such as cars and holidays has seen borrowing levels slump.”

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

How might firms verify client ID if they can’t meet face-to-face?

The current UK Government lockdown restrictions are unambiguous – face-to-face meetings with people outside of your own household are only permitted in certain limited circumstances, and these circumstances certainly don’t include meeting clients to conduct financial services business.

However, the Financial Conduct Authority remains equally unambiguous in saying firms cannot use coronavirus as an excuse for failing to verify the identity of their clients. The Money Laundering Regulations 2017 continue to apply, and some firms remain subject to detailed FCA anti-money laundering rules, while other lower risk firms are still subject to high-level requirements to reduce the risks of financial crime occurring.

In its Dear CEO letter of March 31 2020, this was one of the topics the FCA covered, under the heading “Client identify verification needs to continue, but firms have flexibility within our rules”

It must be remembered, of course, that many firms operate online, or operate other business models that mean they never meet clients face-to-face, so these firms will be used to the idea of verifying client identity without meeting them. Some firms have purchased tried and trusted electronic identity verification systems that search various public databases and then tell the firm if they can be satisfied that their client is indeed who they are claiming to be.

The suggested methods of verifying identity listed in the recent FCA letter are:

  • Accepting scanned documentation sent by e-mail, preferably as a PDF
  • Seeking third party verification of identity to corroborate that provided by the client, such as from the client’s lawyer, accountant, doctor, minister of religion or other responsible person who knows the client well
  • Asking clients to submit ‘selfies’ or videos – frequently these would show the client’s face and would also show them holding their passport or other identity document
  • Placing reliance on due diligence carried out by others, such as the client’s primary bank account provider, where appropriate agreements are in place to provide access to data
  • Using commercial providers who triangulate data sources to verify documentation provided
  • Gathering and analysing additional data to triangulate the evidence provided by the client, such as geolocation, IP addresses, verifiable phone numbers
  • Verifying phone numbers, e-mails and/or physical addresses by sending codes to the client’s address to validate access to accounts
  • Seeking additional verification once restrictions on movement are lifted for the relevant client group – although this last method may have one obvious drawback, which is ‘exactly how long will it be before the lockdown is relaxed sufficiently to allow face-to-face client meetings once more?’

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

 

11May

Personal insolvencies fall in first quarter 

The Insolvency Service has reported that the number of individual insolvencies in the first quarter of 2020 was 11% lower than in the final quarter of 2019, as well as being 4% lower than in the same period in 2019.

The first three months of 2020 saw 27,849 individual insolvencies, comprising:

  • 16,714 individual voluntary arrangements (IVAs) (60% of the total)
  • 6,875 debt relief orders (DROs) (25%)
  • 4,261 bankruptcies (15%)

This is the lowest quarterly figure since the 24,763 that were recorded in the third quarter of 2018.

While the total number of individual insolvencies is falling, this was not the case when we look solely at bankruptcies, as here the numbers reported for 2020 Q1 were higher than in both Q1 and Q4 of 2019.

Comparing each of the three areas, the number of IVAs fell by 7% between 2019 Q4 and 2020 Q1, while the change in the number of DROs was minimal and bankruptcies showed a 2.5% rise.

Furthermore, bankruptcies initiated by the individual involved, where proceedings can commence without any court involvement, are at their highest level for more than six years.

Bankruptcies initiated by creditors and involving traditional court hearings are now at their lowest level for 10 years.

Michael Mulligan, insolvency and restructuring partner at law firm Shakespeare Martineau, described the Q1 figures as “the calm before the storm”. The final days of March 2020 were of course the time when coronavirus really started to have an impact on daily life in the UK, and he suggested that the figures were skewed by restrictions on court reporting from mid-March onwards as the lockdown took hold.

Other experts were divided as to the impact Covid-19 might have on the figures in the next quarter.

Duncan Swift, who recently left his post as president of insolvency and restructuring at insolvency trade association R3, warned that “many people are just one change in circumstances away from being unable to keep on top of their debts”, going on to list “illness, a relationship breakup, a reduction in hours at work or the threat of job loss” as things that can “all be devastating even in more ‘normal’ times, but the impact of coronavirus has made this underlying reality more visible.”

Alec Pillmoor, personal insolvency partner at insolvency and business advisory firm RSM, forecasts a further fall in the number of personal insolvencies in 2020 Q2, firstly because lenders have been forced by the Financial Conduct Authority to provide massive amounts of forbearance to borrowers in recent weeks, but he also observed that:

“Anyone currently furloughed, or concerned for their future employment, would presently have great difficulty in putting forward proposals for an IVA based on their future income.”

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

08May

MAPS instructs advisory firms to check their directory entry

Any firm that is included on the Money and Pensions Service Retirement Adviser Directory is advised to check that their details are correct. MAPS is recommending firms do this as a result of the recent changes made by the Financial Conduct Authority to their own Register.

Around 7,000 firms are listed on the Retirement Adviser Directory, which was originally set up by the Money Advice Service, one of the three organisations that merged to form MAPS.

The Retirement Adviser Directory allows a consumer seeking retirement advice to search for firms that are:

  • Based in their area
  • Offer the type of ongoing service they are seeking
  • Offering advice at a price they are prepared to pay
  • Offering advice for the size of pension pot they hold

MAPS has highlighted an issue in that its internal verification process is unable to automatically verify any individual advisers listed in the Retirement Adviser Directory who are not designated as senior managers under the Senior Managers & Certification Regime.

MAPS recognises that it does not wish to prevent advisers from appearing on its directory simply because they don’t meet the FCA criteria for a Senior Manager. However, individuals in this position may now need to contact MAPS to either update their Retirement Adviser Directory entry or to add their details from scratch.

The FCA changes also mean that it won’t be possible for MAPS to automatically remove inactive advisers from the Retirement Adviser Directory, and it will only be able to do so if it is notified by the firm that a particular adviser has moved on.

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

07May

FCA commences civil proceedings over alleged unauthorised investment advice

On April 27 2020 the Financial Conduct Authority announced that it has commenced civil proceedings against a firm and its director, who are alleged to have given investment advice without being authorised by the regulator.

The High Court motion filed by the FCA alleges that, since 2017, the firm has been carrying out three activities without authorisation:

  • Giving advice on investments
  • Arranging investments
  • Engaging in financial promotions relating to investments (here it is said the firm has not availed themselves of the other option of having their promotions approved by an authorised person either)

The FCA says that the firm’s director has been “knowingly concerned” in these contraventions.

The regulator adds that many of the investment recommendations to clients have been made via WhatsApp and other social media platforms, and that clients have been assured of significant profits were they to follow these recommendations.

While the court proceedings continue, the FCA has secured an interim injunction stopping these activities from continuing and freezing the defendants’ assets up to £624,311 pending further legal proceedings.

The FCA first published a warning on its website about the activities of the firm in question in September 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.

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