28Jul

Payment deferrals hit 1.7 million

As the financial effects of coronavirus continue to bite, loan and credit card providers have little choice but to continue providing interest-free overdrafts and payment deferrals and freezes to their customers.

Data from trade association UK Finance shows that the UK’s credit card providers have now granted more than one million payment deferrals, while personal loan providers have granted this facility to more than 700,000 customers.

More than one million of the total 1.7 million deferrals were provided in the three months between mid-April and mid-July.

The Financial Conduct Authority is now urging consumers who can afford to resume loan and card repayments to do so, but it is clear that a great many people are still suffering the financial consequences of the Covid-19 pandemic and require additional support.

A £500 interest-free overdraft has also been offered on more than 27 million bank accounts.

Eric Leenders, managing director of personal finance at UK Finance, said:

“Many borrowers facing financial pressures are taking up the measures being offered by lenders to help them get through this crisis. The banking and finance industry has a clear plan to help the country through these tough times and is committed to providing ongoing support to those customers who need it.”

Anyone adversely affected by coronavirus now has until October 31 2020 to request either a £500 interest-free overdraft or a three-month payment freeze.

When customers come to the end of a previously agreed payment freeze period, firms should contact their customers to find out if they can resume payments, and if so, agree to a plan on how the missed payments could be repaid. If the customer is still unable to make any form of repayment, they should be offered a further payment deferral. If they are able to make reduced payments, the firm must ensure that they only repay what they can afford.

As with previous FCA interventions in this area, any forbearance granted to a customer affected by Covid-19 must not have a negative impact on their credit file, and firms are responsible for ensuring that this does not occur.

Firms will also need to consider whether it is appropriate to refer customers to providers of free debt advice and other money guidance services.

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.

23Jul

Payday lender forced to write off £500,000 after failing to send statements as required 

A payday lender has been forced to write off £527,863 after failing to send statements as required to 15,218 customers over a 12-month period.

These borrowing statements need to be provided by lenders under the Competition and Markets Authority’s Payday Lending Order. The statements give information such as the amounts of interest and fees borrowers are expected to pay on their loans and when their next payment is due. The information is also designed to help customers shop around after concerns were revealed about the lack of competition in the payday loan sector.

In this case, the CMA said that it was especially concerned that the lender’s failure to provide the statements had adversely impacted a large number of vulnerable customers. By failing to provide the information as required, customers were unable to make informed decisions regarding their loans and some may have suffered detriment as a result.

The late statements have now been made available to the affected customers, both by email and online.

The CMA also says that the lender has put in place measures to ensure it complies with the requirement to send the statements in future.

Alistair Thompson, CMA director of remedies, business and financial analysis, said:

“The summaries we require payday lenders to send to customers are crucial in helping borrowers make informed decisions about their loans.

“While it is disappointing to see so many customers not being properly informed, [name of firm]’s commitment to writing off £500,000 in loans will help put this right.”

“We will continue to monitor the situation and will take further action if needed.”

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.

22Jul

FCA wants to hear from firms who can assist mortgage prisoners

The issue of ‘mortgage prisoners’ – people who are trapped on unfavourable mortgage deals – has certainly attracted considerable publicity in recent years.

The Financial Conduct Authority has now invited the UK’s mortgage intermediary firms to get in touch with the regulator if they believe that they may be able to assist these ‘prisoners.’

The FCA estimates that there are 170,000 borrowers who have mortgages with closed-book firms or with unregulated entities, but who are up to date with payments and would be eligible to switch mortgages.

The administrators of these mortgages are required to contact the affected customers by December 1st 2020. The information that will be provided to these customers will include a list of mortgage intermediaries who may be able to assist, so any firm that wishes to be included on this list needs to apply to the FCA by August 6th.

To be eligible for inclusion on the list of intermediaries, a firm needs to meet all of the following criteria:

  • They must have access to mortgages that represent the whole of the market
  • They must either be able to advise on later life options, such as equity release, retirement interest-only mortgages and mortgages into older age; or they must have an established arrangement to refer these enquiries to another intermediary who can advise on these products
  • They must either be able to advise on debt consolidation, or they must have an established arrangement to refer these enquiries to another intermediary who can advise on this option
  • They must not charge a fee until an application is submitted to a lender
  • They must be willing to collect data on the support they have provided to the mortgage prisoners and to share this data with the FCA

The FCA suggests that suitable strategies for mortgage prisoners, depending on their individual circumstances, might include:

  • Switching them to a like-for-like re-mortgage, but with relaxed underwriting criteria, such as only requiring lenders to demonstrate that the new repayments are lower than those on the existing product
  • Later life lending options
  • Re-mortgaging to an interest-only product with some form of repayment strategy. This strategy could be the sale of the property where this is realistic
  • Re-mortgaging to a part capital and part interest-only mortgage
  • Debt consolidation

On July 13 2020, a cross-party group of MPs wrote to the Chancellor of the Exchequer, calling for a range of measures to be taken to protect mortgage prisoners, such as a cap on standard variable rate margins and a ban on mortgages being sold to private equity funds.

Another letter written by the MPs, to the Competition and Markets Authority, highlights that the average interest rate being paid by a mortgage prisoner is 4.4%, whereas a typical commercial mortgage interest rate might be around 1.8%.

Rachel Neale of the UK Mortgage Prisoners campaign said:

“Families are being crippled by these high-interest rates and aren’t able to live properly because of it. We need action immediately before things get even worse and drive people into further arrears or cause repossessions.”

A spokesman for the Treasury said:

“We know that being unable to switch your mortgage can be stressful. That’s why we’ve introduced rules that will make it easier for some customers to change provider, which we now expect to be in place by the end of the year.”

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

21Jul

Government confirms start date for breathing space scheme

The credit sector was already aware of a new requirement that would see providers required to provide 60 days’ breathing space to borrowers in financial difficulty, but now the Government has confirmed that the scheme will commence on May 4 2021.

Once the 60 days of breathing space has commenced, firms must refrain from applying interest and charges, and from taking action to recover the debt. During the breathing space period, the borrower is required to speak to a professional debt adviser. Hopefully, they will then put in place a plan to repay their debt.

For borrowers who are receiving mental health treatment on the NHS, the breathing space period will not end after 60 days and will instead last for as long as their treatment continues.

Debts to be covered under the scheme include credit cards, loans, council tax, utility debts and HMRC debts. Court fines, child maintenance payments, student loans and personal injury liabilities are not covered by the new scheme.

The Government estimates that the breathing space scheme will assist 700,000 people in the first year and will then assist more than 1.2 million people every year once the scheme has been up and running for 10 years.

Joanna Elson OBE, chief executive of the Money Advice Trust, said:

“Breathing space will provide the time and protections that people in financial difficult need to begin to deal with their debts and gives us a powerful tool to incentivise people to seek free debt advice.”

“As households deal with the economic and financial impact of the Covid-19 crisis, the benefits that breathing space will bring cannot come soon enough.”

StepChange head of policy Peter Tutton said:

“We look forward to working on the detail of implementation constructively with the government, to ensure that it fully meets the policy objectives of getting more people to the debt advice they need.”

Helen Undy, chief executive of the Money and Mental Health Policy Institute, said:

“This scheme could genuinely save lives. Everyone experiencing a mental health crisis should have the opportunity to recover free from escalating debt fees, charges and the threat of bailiffs arriving at their door.

“We are delighted that the Government acted on our call to protect people from being hassled about debts while they’re receiving crisis care, and we look forward to working with ministers to put these plans in place over the coming year.”

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

20Jul

Adviser trade body issues guidance on a return to office work for financial services firms

The Personal Investment Management and Financial Advice Association (PIMFA) has issued guidance to firms in the financial industry regarding how they might reduce the risk of Covid-19 infection in their offices. It comes as firms might be considering bringing more employees back to the office after an extended period of home working.

When employees work from the office, firms must ensure that their arrangements allow social distancing of ‘two metres’ or ‘one-metre plus’ to be maintained. One metre plus means that two people are only one metre apart, but additional mitigating measures are taken, such as they are sitting side-by-side or back-to-back, instead of face-to-face, or are separated by a screen.

PIMFA recommends that firms make the following changes to their offices:

  • Changing seating layouts so employees are no longer seated face-to-face
  • Reducing the number of people in enclosed spaces
  • Improving ventilation
  • Installing protective screens
  • Closing non-essential social spaces, perhaps asking employees to eat at their desk, or away from the building
  • Providing hand sanitiser on desks
  • Changing shift patterns so that some employees can avoid public transport at peak times. This can also avoid the problem of how to get everyone up to the office for the start of the working day – you certainly can’t ask people to pack into a lift in the present climate

Other measures firms might wish to consider include:

  • Cleaning the premises thoroughly ahead of any re-opening and repeating this cleaning exercise regularly
  • Discouraging handshaking and other close contact
  • Making sure employees are aware of what is expected of them, including the need to maintain social distancing of two metres, or one metre where additional measures are in place. They also need to be constantly aware of the need to wash and sanitise hands regularly. It could be helpful if the new Covid-19 ‘rules’ were displayed on posters around the premises

However, while the media might refer to these changes as making offices ‘Covid-secure’, of course, it is not possible for any firm to guarantee a completely risk-free environment.

The Government has said that, from August 1st, it will be up to firms to decide whether their employees should work from home, but that appeared to contradict advice given by the Chief Scientific Adviser, who said he saw no reason to change the previous working from home advice.

On the subject of home working, the Prime Minister said:

“It is not for government to decide how employers should run their companies. What we are saying now is if employers think it would be better and more productive for employees to come to office, and they can work in a safe way, there should be discussions between employers and employees and people should make a decision.”

In recent days, the media have been speculating for the first time about the possibility of face coverings being worn in offices. However, the Health Secretary has said they would not make much difference in an office environment and the Chief Scientific Adviser has said of face coverings:I don’t think it’s something you can wear all day in indoor environments.”

Regardless of what any firm might do to reduce the risk of virus infection in their offices, it’s hard not to argue that it’s safer when people work from home. RBS has announced that 50,000 of its staff will be allowed to work from home for the remainder of the year.

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

16Jul

FCA proposes to extend period firms have to complete Certification assessments

In recognition of the additional pressures faced by some firms as a result of coronavirus, the Financial Conduct Authority has agreed to extend the deadline for completing fit and proper assessments of Certified Persons under the Senior Managers & Certification Regime. This deadline has now been extended from December 9 2020 to March 31 2021.

If they need the extra time, firms, therefore, have eight more months to assess whether the relevant employees are fit and proper to carry out their roles.

The FCA’s announcement of the extension does have some important caveats though:

  • If a firm is able to complete the certification process prior to March 2021, it should still do so. The FCA will still publish details of firms’ assessments of Certified Persons on the Register from December 9, as and when these assessments are completed and notified to the regulator
  • If a firm knows or suspects that an individual in a Certification role is not fit and proper, then the FCA’s announcement does not give it permission to wait until March to take action, and it is still expected to remove the individual from their role prior to this

The proposed deadline extension remains subject to a formal consultation.

The Certification Regime is the middle tier of the SM&CR. It applies to individuals within a firm who are not Senior Managers, but who still hold positions of responsibility, especially if their actions could have a significant impact on whether a firm’s customers are treated fairly. There is no need for individuals in Certification roles to be approved by the FCA, however, firms are still required to carry out their own annual fit and proper assessments.

Suggested examples of staff who might be covered by the Certification Regime include:

  • Head of HR
  • Head of Complaints Handling
  • Head of Product Design
  • Others with some form of supervisory responsibility

The FCA suggests that a fit and proper assessment of a person in a Certification role might include:

  • Criminal records checks
  • Obtaining regulatory references
  • Knowledge tests

An assessment of fitness and propriety must consider the individual’s honesty, integrity and reputation; competence and capability; and financial soundness.

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.

15Jul

FSCS publishes guide for pension savers affected by Covid

With coronavirus having caused a sharp drop in share prices, particularly in the period between late February and late March 2020, seven organisations have collaborated to produce a guide for pension savers who may be worried about their pension pot. These organisations are:

  • Financial Conduct Authority
  • Financial Ombudsman Service
  • Financial Services Compensation Scheme
  • Money and Pensions Service
  • The Pensions Regulator
  • Pension Protection Fund
  • The Pensions Ombudsman

Introducing the guide, Pensions Minister Guy Opperman MP said:

“I would urge anyone considering making changes to their pension to think carefully and to avoid making rash decisions.”

The nation’s financial advisers could certainly have a role to play here in re-assuring their clients. No-one with any form of equity-based investment will have been able to escape the stock market crash that developed as the pandemic took hold, but share-based investments have always delivered the best long-term returns. As of early July, the FTSE 100 had partially recovered, with the rise since the end of March comprising more than 50% of the earlier Covid-related decline.

For those who were close to their intended retirement date though, there can be no denying that coronavirus has had a significant financial impact, and many are now facing the choice of accepting a lower retirement income or delaying their retirement.

The guide also warns consumers about the threat of scams, and the authorities are concerned that the present uncertain situation could lead to more people being persuaded to either cash in their pension or accept an offer to transfer it elsewhere to somewhere where the promised returns are just too good to be true. The FCA warns consumers that a cold call offering a pension review from a firm that an individual has not dealt with previously is highly likely to be a scam. It also advises consumers that they can check if a firm is legitimate by searching the Financial Services Register, or by phoning the FCA’s helpline. Even if a firm shares the same name as one on the Register, this is not itself a guarantee of authenticity, as there is a growing problem with ‘clone firms’; so the FCA says consumers should ensure they use the contact details given for the firm on the Register, rather than any different details that the caller might provide.

In their section of the guide, TPR says that the average amount lost in a pension scam is £82,000 and that some have lost their entire life savings.

TPR also say that, for the foreseeable future, anyone who is looking to transfer their benefits out of a defined benefit pension scheme will be sent a new warning letter – signed by TPR, the FCA and MAPS. It says transferring out of a DB pension is unlikely to be in the individual’s long-term interest.

For the millions of employees who have been furloughed, they should continue to contribute to their workplace pension scheme, if at all possible. If they do so, then employer contributions will still be made to the pension scheme, except it will now be the Government that does this, via the Coronavirus Job Retention Scheme. The government will pay the minimum 3% employer contribution based on the furloughed salary, which is capped at £2,500 a 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 of the facts, circumstances or legal position may change after publication of the article.

10Jul

FCA announces plans to move to RegData reporting system

The Financial Conduct Authority has urged firms to check the accuracy of their information in the existing Gabriel reporting system, ahead of the forthcoming change to the new RegData reporting system. This is the first occasion on which the regulator has announced that ‘RegData’ is the name of the new system that authorised firms will use to report data to the FCA.

Firms will not be able to access the new RegData system until their information has been transferred across from Gabriel. The FCA will email each firm’s principal user of Gabriel and each of the firm’s associated users three weeks before their transfer date. Reminder emails will then be issued five days and one day prior to the transfer. Where a compliance consultant is shown as having an association with a firm’s Gabriel account, the consultant will also receive these emails.

Until their transfer date, firms need to continue to use Gabriel in the usual way.

If they have not already done so, firms also need to log into Gabriel and complete the RegData registration process ahead of their transfer date. Firms will require the same login credentials as they use to log in to Connect – anyone who isn’t currently a Connect user will be able to set up a Connect account through this registration process. When completing the RegData registration process, firms should have to hand their Connect username, password and six-digit passcode.

Ahead of the transfer, firms also need to check the following:

  • All of the contact details in Gabriel are up to date
  • They have nominated the correct principal user and associated users in Gabriel
  • There is accurate information in Gabriel about all users
  • All non-active users still shown in Gabriel, such as those who have left the firm, have been disabled

Firms will be able to view previous Gabriel submissions via RegData.

The FCA recommends firms have the following IT resources to get the best out of RegData:

  • Adobe Acrobat Reader 7.0 or above (this is available for free download)
  • Google Chrome
  • A screen resolution of 1028 x 960 pixels

The move to the RegData system is part of the FCA’s wider Data Strategy. The FCA is aiming to deliver some real changes in the way it collects data, which could lead to some significant changes in the way it regulates firms. Some media reports suggested that this need for a change in its vision was one of the reasons why Nikhil Rathi was preferred to Christopher Woolard when recruiting the regulator’s new permanent CEO. The FCA is expected to regulate a very large number of firms, without an increase in its resources, so it now needs to examine ways in which it can ‘work smarter’. 

The FCA says it will take the following steps:

  • Investment in new technology
  • Greater use of data from external sources
  • Investment in new working practices
  • Setting up data science units in certain areas of the organisation
  • Migrating to cloud-based IT infrastructure
  • Reviewing historical data and how these indicate consumer harms
  • Deciding whether current and recent data mean that it needs to intervene in a particular sector
  • Deciding whether current and recent data indicates that financial crime has occurred
  • Greater use of predictive analytics, especially with regard to identifying trends amongst 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 of the facts, circumstances or legal position may change after publication of the article

10Jul

FCA announces new protections for motor finance and high cost credit borrowers affected by Covid

With the financial effects of coronavirus on UK consumers showing no sign of ending, it is no surprise that the Financial Conduct Authority has instructed lenders to provide additional forbearance to customers with high-cost short-term credit (HCSTC), motor finance, buy-now-pay-later (BNPL), rent-to-own (RTO) and pawnbroking arrangements.

Numbers of daily cases and deaths may be declining slowly in the UK, and society may gradually be inching back towards normal, but many people have lost their jobs, been furloughed on reduced earnings, seen their self-employed earnings reduce etc. The hospitality sector may have been permitted to re-open, but not every outlet has re-opened, so job security for those employed in this sector is very limited. The entertainment sector may remain closed for many months to come.

For customers who have motor finance, pawnbroking, HCSTC, BNPL or RTO agreement and are yet to request a payment freeze, the period in which they can apply for one will be extended until October 31 2020.

For customers who have already been granted a pay freeze for one of these products, firms should make contact with them at the end of their payment freeze period to ascertain what their financial situation is at that time.

The FCA’s first point is very clear – if the customer is in a position to resume repayments, then they should do so, as otherwise significant arrears could accumulate on the account.

If a customer needs additional support, the FCA says that firms may need to provide additional forbearance as follows:

  • For motor finance, BNPL or RTO agreement – either a further three-month payment freeze should be agreed if the customer is unable to afford to pay anything, or a reduced payment arrangement should be set up at a level they can afford
  • For BNPL customers – the promotional period of the loan could be extended, where applicable
  • For a pawnbroking agreement – if the agreement is still in the redemption period, that period could be extended by another three months. If the redemption period has ended, the firm could agree not to sell the item for a further three months
  • For HCSTC – if a customer has already had a one-month payment freeze, the new FCA rules do not dictate that another one needs to be offered if the customer remains in financial difficulty. However, the FCA says “firms should be providing a range of support – including formal forbearance – in accordance with the FCA Handbook”

The ban on re-possessing any goods provided as security under any of these arrangements continues until October 31 2020.

Firms are responsible for ensuring any forbearance they provide to borrowers affected by Covid-19 does not have an impact on their credit files.

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

“It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance they need. For those who have already taken a pay freeze and can afford to start making payments, even partially, it is in their best interest to do so, but for those that need help it will be 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

09Jul

MAPS delivers its assessment of the impact of Covid on financial wellbeing

One of the buzzwords used by the Money and Pensions Service is the ‘financial wellbeing’ of the nation, something that is of course rather strained at the present time.

MAPS comments that more than one-fifth (22%) of UK adults are struggling to pay their bills, including essential bills. More people are worried what the future holds – will they keep their jobs for example? This is inevitably having an impact on larger spending decisions.

The latest MAPS Financial Wellbeing report for June 2020 is not a single new survey, but a report that collects relevant data from various other sources.

In the Opinions and Lifestyle Survey, conducted by the Office for National Statistics, almost one- quarter (23%) said their household finances had been impacted in some way by Coronavirus. Other ONS work found 40% of adults reporting that the health emergency had resulted in some form of impact on their work situation, with 22% of those whose work situation had been affected saying they had been furloughed and 18% saying their working hours had been reduced. The ONS says 27% of the overall UK workforce have now been placed on furlough.

Amongst the lowest 10% of UK income earners, as many as one-third work in sectors that were partially or completely closed during the lockdown. For the highest 10% of earners, only 5% work in a business area that was forced to shut, as reported by the Institute for Fiscal Studies.

Only 13% of workers in the C2DE socio-economic groups were able to switch to home working with no loss of income when the crisis began.

YouGov report that one in nine (11%) of households are in serious financial difficulty, while another one in six (17%) say that they are struggling to make ends meet.

One in five (21%) of households are reported to have used their savings to pay their bills since the Covid-related financial pressures commenced, but for many, this is not an option. Covid-19 has exacerbated the already parlous state of the nation’s household finances, where 11.5 million UK adults (22% of the total) have less than £100 in savings. Almost two-thirds of people (63%) say they are saving less since coronavirus hit the UK.

In the absence of any significant savings, many will need to resort to credit in the current emergency situation. Ipsos Mori polling shows that:

  • 12% have used an overdraft and a further 11% are considering this
  • 11% have borrowed more than usual on a credit card, and 9% are considering doing this
  • 9% have sought loans from family/friends, with 8% considering this option
  • 5% have accessed a new credit card and 7% are considering doing so
  • 6% have requested mortgage payments be temporarily stopped, with another 9% considering a request of this nature
  • 4% have obtained a personal loan from a bank, with 8% considering this

Standard Life Foundation data shows that, in a four-week period at the height of lockdown in April, 19% of households in the UK used a credit card, overdraft or other borrowings to buy food and other essentials. This rises to 64% of those in the ‘serious financial difficulty’ segment.

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.

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