The FCA has adopted a similar position regarding the proposed scheme of arrangement of a major doorstep lender to the stance it took when another one of these schemes was mooted by a guarantor lender a short time ago. Essentially, the regulator has made clear its concerns over the proposed scheme, but will not take action to block it, because the alternative of the firm pursuing an insolvency solution would mean that customers with complaints would receive an even smaller proportion of the amount they were owed by the company.
Scott Robert Newsletter
- The FCA has released the FG21/1 finalised guidance on treating vulnerable customers fairly:
The FCA has finalised guidance for FCA regulated firms on how to treat vulnerable customers. The FG21/1 document has updated examples and diagrams from its predecessor G3/20 released last year. the FCA’s definition of vulnerable customers continues to be “someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”. Firms should rely on this guidance in conjunction with FCA handbook provisions and TCF rules to best ensure that they handle vulnerable customers to the standard that the FCA expects. Scott Robert has written an article summarising and highlighting key points of the guidance which can be found here fca-guidance-for-firms-on-the-fair-treatment-of-vulnerable-customers.
- A quarter of UK adults have low financial resilience according to the FCA’s financial lives survey: The Financial Lives Survey is the FCA’s questionnaire that is sent to a sample of consumers to measure and gain insight into each consumer’s financial circumstances and history of engagement with financial service firms. The recent ‘Financial Lives 2020’ publication initially covered the period from August 2019 to February 2020 in consumer responses, however an extra survey was conducted in October 2020 to factor in the impact of the coronavirus pandemic. According to the October survey, 27.7 million UK adults displayed characteristics of vulnerability and low financial resilience. This is a 15% increase from the initial survey ending in February demonstrating the increased impact of the pandemic on people’s lives. The initial survey had 16,000 respondents whereas the additional survey in October had 22,000 respondents. The full report by the FCA and its further findings can be found here FCA financial-lives-survey-2020.pdf
- ICO launches a data analytics toolkit for data controllers and processors: The Information Commissioner’s Office has launched a toolkit for any data controller and processor who are at the start of their data analysis cycle. This toolkit is designed to assist controllers and processors in identifying key risks and any infringements on the data rights of the data subject before data analysis is conducted. The ICO has stressed that this toolkit is not ‘a pathway to absolute compliance’ but is a useful starting point for data analysis procedure. The ICO defines data analytics as ‘the use of software to automatically discover patterns in data sets (where those data sets contain personal data) and use them to make predictions, classifications, or risk scores.’ Access to the toolkit can be found here ICO-toolkit-for-organisations-considering-using-data-analytics.
- FCA have published a Memorandum of Understanding with The Commission for Equality and Human Rights: The FCA have liaised with the Equality and Human Rights Commission (EHRC) to establish a common approach with the Equality Act 2010 and by extension general protection for people within the financial services market. The EHRC is the regulator of the Equalities Act which ‘enforces people’s rights to fairness, dignity and respect.’ This shares an overlap in responsibility with the FCA’s principles and approach to treating customers fairly as well as other principles for business. As such, the FCA and EHRC have published the Memorandum to outline the areas of cooperation both public bodies will assist each other with. The Memorandum outlining the level of cooperation can be found here FCA-publication.pdf
Please visit our website to see how we can support you or if you have any questions regarding the information in this newsletter, please contact us today on 0161 914 5727 or email firstname.lastname@example.org.
- CMC proposed Fee Cap Consultation CP21/1 paper: The FCA has released a consultation paper which proposes fee caps on claims management companies (CMC) who assist consumers whose claims fall within a statutory redress scheme (such as the Financial Ombudsman Service, Financial Services Compensation Scheme and Pension Ombudsman). Broadly, this means any CMC specialising in financial mis-selling (with the exception of PPI and Plevin) claims will have maximum fee caps to adhere to. The fee cap amount is dependent on the amount of compensation the complainant is awarded. For example, if a complainant is compensated between £1 to £1499 the CMC firm can only collect a maximum of 30% as a service fee, whereas, if a complainant receives more than £50,000 the service fee cap is at 15% to the limit of a maximum of £10,000. The FCA have sorted the fee caps into 5 redress bands which can be viewed within their consultation paper here. In addition, the FCA proposes further rule changes for CMCs, one notable change is CMCOB 4.2.2 R where firms must seek confirmation (rather than state as a disclosure) from complainants they do not wish to progress the claim individually themselves with the relevant redress scheme. The FCA is asking for responses to the consultation, then link can be found here Restricting CMC charges for financial products and services claims with the consultation period lasting until the 21st of April 2021.
The Insolvency Service has proposed increasing the amount of debt that can be held in a Debt Relief Order from £20,000 to £30,000.
Happy New Year from Scott Robert Compliance Limited! We have identified the following information for our first newsletter of 2021. The news we will circulate will primarily be on relevant and interesting regulatory updates for FCA regulated firms.
FCA annual fines at a record low, but it highlights the sums paid in redress as evidence it maintains a tough enforcement stance
The Financial Conduct Authority issued just 10 fines during 2020, the lowest number since the organisation’s foundation in 2013. The total of these penalties was £183.6 million, which is the third lowest annual total.
The number of fines is significantly lower than in previous years. It is less than half the 2019 total of 21, and scarcely one-third of the annual average of 29. In its first year, 2013, the FCA issued 48 monetary penalties.
The total amount of the 2019 fines was £392 million, so this year’s total is less than half of that. The average since 2013 in this respect is £508 million, with a peak of £1.47 billion in 2014.
The largest fine this year was a £64 million penalty for a high street bank over its treatment of mortgage customers who were in financial difficulties.
The FCA stressed that, in addition to the £183.6 million in fines, it has forced firms to pay a further £617 million in compensation to disadvantaged customers. This is illustrated by the last of the year’s fines, where another high street bank paid received a £26 million fine for its treatment of consumer credit customers who fell into arrears or experienced financial difficulties. However, the bank has also paid £273 million in compensation to disadvantaged customers affected by this issue.
Other fines imposed by the regulator this year include:
- £100,000, and a prohibition, for market abuse (on two occasions)
- £107,200 for an advisory firm that gave unsuitable advice regarding Self Invested Personal Pensions
- £3.4 million for a firm that failed to manage risks relating to wholesale broking
- £48 million for an investment bank for its role in the 1MDB embezzlement saga
- £873,118 for a firm that failed to disclose a short position
- £41,400 and £23,200, together with prohibitions, for directors of an advisory firm that gave unsuitable advice regarding Self Invested Personal Pensions
- £2.8 million for a motor finance lender that didn’t give customers in arrears sufficient time to pay their debts
2020 also saw the FCA cancel the permissions of 132 firms, issue prohibitions to 15 individuals and commence five sets of criminal proceedings.
An FCA spokeswoman said:
“The purpose of enforcement is not just penalties. It is to ensure just outcomes and to deter future misconduct. Dealing with the consequences of misconduct is as important as any penalty. This year alone we secured redress and compensation totalling £617 million, making sure that firms made good losses for consumers. This includes cases where we did not impose a penalty.
“Enforcement has continued as normal during the pandemic. We will open cases where we suspect serious misconduct. The number of new cases and outcomes fluctuates month-on-month and year-on-year and nothing much should be read into the figures.
“As well as imposing financial penalties totalling £183 million, we have cancelled the permissions of 132 firms, prohibited 15 individuals and commenced criminal proceedings against five individuals. We have also successfully obtained restitution orders in the High Court worth £16.8 million. We have commenced 154 investigations into firms and individuals so far in 2020.”
The Children’s Society, a charity that assists disadvantaged children, has issued a call for payday loan advertisements to be banned from all TV and radio broadcasts before the 9pm watershed, and has claimed that its research shows that 74% of parents would support such a ban.
This goes further than the ban on loan advertising on children’s television many other campaigners have called for, and which Labour Party leader Ed Miliband MP has indicated his party will sign up to should they win next year’s general election.
The Society has issued a report entitled “Playday not payday: Protecting children from irresponsible payday loan advertising,” which contains the results of market research into the subject.
The Society cites research from broadcasting watchdog Ofcom which says that there are now 20 times as many loan adverts being broadcast on TV than was the case four years ago. The majority of these adverts are aired before 5pm. Research from Moneysavingexpert.com is quoted in the report which reveals that one third of parents of under 10s have heard their children repeat payday loan advertising slogans.
The Society also commissioned its own research, via research agency YouGov, which found that one third of children aged 13-17 thought payday loan adverts were “fun, tempting or exciting.” 55% of teenagers knew the names of at least three payday lenders, and almost three quarters of respondents in this age group had seen a payday loan advert within the seven days prior to being surveyed.
In summary, the report is calling for advertising restrictions on payday loans similar to those that exist for the drinks industry.
Other recommendations in the Society’s report include a ban on consumer credit firms making unsolicited marketing calls, and a ban on payday loan advertising from council premises.
Persons under the age of 18 are of course not permitted to borrow money. But the main concerns about advertising to minors are: firstly that children will pester their parents to take out loans to spend on toys and treats; and secondly that the lenders are grooming the next generation into believing that borrowing money is normal.
The Society has now launched its Debt Trap campaign, where the public are invited to lobby members of the House of Lords. It is seeking an amendment – under which pre-watershed loan advertisements would be banned – to the Consumer Rights Bill currently making its way through Parliament.
Lily Caprani, director of policy and strategy at The Children’s Society, said that
“children across the country are being exposed to a barrage of payday loan adverts.”
Matthew Reed, CEO of the Children’s Society, added:
“It is crucial children learn about borrowing and money from their school and family, not payday loan adverts.”
The UK’s largest lender, Wonga, has already stopped using its elderly ‘puppet’ characters in its advertising. New chairman Andy Haste made the announcement shortly after taking up his duties at the lender, saying he did not wish to take the risk of “inadvertently attracting the very young or vulnerable.”
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.
On August 19 2014, the Financial Ombudsman Service (FOS) published a raft of information on its website about payday lending. The FOS is the independent body that adjudicates on complaints where the customer and the firm cannot reach agreement, and it is experiencing significant rises in the numbers of complaints being received about these types of loans.
Firstly, the FOS published a warning about payday loan broking websites. It said that many customers were having fees taken from them by brokers who never managed to arrange a loan, and that in some cases customers were being charged multiple fees as their details were passed on to numerous other brokers.
The FOS said that 10,000 people had contacted it about credit brokers so far in 2014, double the total for 2013, although this figure is for the entire credit sector and not just for payday loan brokers. Many firms made immediate refunds as soon as they became aware of the FOS’s involvement.
The FOS also added that many customers of these brokers were misled into believing that the firm they were dealing with was actually a lender.
Senior ombudsman Juliana Francis commented:
“It’s disappointing that people who are already struggling to make ends meet are being misled into thinking that these websites will get them a loan. In too many of the cases we sort out, no loan is provided and people’s bank accounts have been charged a high fee, often multiple times. If money has been taken from your account unfairly or without warning, the good news is the ombudsman is here to help. Give us a call and we can put things right quickly.”
Secondly, almost all of the July/August issue of the Ombudsman News bulletin is devoted to payday lending. Case studies give examples of complaints the FOS has upheld against firms who: applied charges and interest unfairly on a customer in financial difficulty, took a lump sum payment that was contrary to the terms of an agreed payment plan, allowed a customer to roll over her loan some 15 times, granted a loan to a customer with mental capacity issues and granted an unaffordable loan to a customer that amounted to more than his monthly income.
Ms Francis then speaks to Ombudsman News about her experiences of payday loan complaints. She says that very few complaints concern the cost of the loan, and that grievances are much more likely to concern debt collection practices, use of Continuous Payment Authority (CPA) and the impact of a loan on a person’s credit score. One in six complaints centre around a customer saying they never took out a loan with the lender in question.
Finally, the FOS published details of people it had helped with payday loan-related issues. These included: a man who received a visit from a debt collector before the lender had tried to arrange an alternative repayment plan; a woman who was referred by FOS to a debt advice charity; a man who was receiving 12 debt collection calls per day; and a woman who signed up to a CPA without understanding the terms of the arrangement, and whose bank incorrectly refused her request to cancel the CPA.