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.

Our experts are here to help with any FCA Regulation enquiries you may have.

06May

Bailiffs banned from carrying out home visits

It may have been more than five weeks after most of the Government’s lockdown restrictions came into force, but the last week of April finally saw bailiffs banned from carrying out home visits to enforce debts.

Now, because of fears that they might spread the coronavirus, emergency legislation has been passed that means no bailiff can visit a consumer’s home for the purposes of trying to enforce a debt.

The new laws, which are amendments to the Taking Control of Goods Regulations 2013, not only prevent bailiffs from entering properties and seizing possessions, but also ban the practice of taking any vehicles that a debtor might have parked outside their home.

There had certainly been reports in some newspapers that bailiff visits continued in the early weeks of the lockdown, even if the bailiffs trade association the Civil Enforcement Association insisted later in April that their members had ceased carrying out home visits and were now instead using their vehicles to support deliveries of essential supplies.

StepChange chief executive Phil Andrew welcomed the move, but took the opportunity to call for additional regulation of bailiffs, commenting:

“This emergency legislation is welcome, and reinforces our view that if the debt enforcement system can’t be fully relied upon to hold off inappropriate action during the emergency period without legislation, then it can’t be relied on to operate to high standards of practice without a formal regulatory system in the long term either.

“That’s why we regard statutory regulation of the bailiff sector as a vital next step that the Ministry of Justice should take, which would give greater confidence that debt enforcement will be handled more appropriately in the future, addressing the woeful inadequacies that have caused such harm and detriment to vulnerable people in the past.”

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

05May

FSCS publishes plan & budget

Payment protection insurance has dominated so many aspects of UK financial services over the past decade and more, yet the new annual Plan and Budget from the Financial Services Compensation Scheme opens by acknowledging that the Service now handles twice as many pension claims as PPI cases.

Many of these pension cases concern transfers out of defined benefit pensions, and the wrapping of risky and illiquid investments into Self-Invested Personal Pensions.

FSCS CEO Caroline Rainbird’s overview to the Plan and Budget document acknowledges a number of changes her organisation has been required to adapt to, including:

  • Continuing vulnerability of customers, rising customer expectations
  • A higher number of firm failures
  • A growing number of complex claims
  • An increased choice of financial products
  • A faster pace of technological change
  • An ever critical need to keep personal data secure

FSCS originally forecast it would process 23,400 claims in the 2019/20 financial year, but now believes that the true figure was 27,200. Its forecast for the number of claims in 2020/21 is also 27,200.

The proposed indicative levy to fund FSCS in the 2020/21 financial year is £635 million. This is an increase of £87 million, or 16%, from the 2019/20 figure of £548 million, and increasing SIPP operator claims are said to be the main driver behind this significant rise. Prior to January 2018 there had been no SIPP operator failures in the UK, but since then there have been as many as nine and predicted costs for this area alone in the next 12 months are £209 million.

The £635 million figure will include levies on firms in the following individual sectors as follows:

  • Life Distribution, Pensions and Investment Intermediation – £213 million, a rise of £24 million
  • Investment Provision – £200 million, a rise of £61 million
  • General Insurance Provision – £118 million, a fall of £47 million

FSCS is reporting an increase in claims due to unsuitable advice for interest-only mortgages. However, the majority of these have been rejected due to insufficient evidence of negligent advice, meaning that there has been no real impact on compensation costs. The 2020/21 forecast is for claim volumes in this area to reduce.

FSCS forecasts that its management expenses in the forthcoming financial year will be £78.2 million. This is £1 million higher than the latest forecast figure for 2019/20 and £3.6 million higher than the original budgeted figure for 2019/20.

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

 

02May

FCA publishes final report on PPI campaign

The campaign to alert the UK public to the payment protection insurance deadline ran for two years – between August 2017 and August 2019 – cost £42 million and prominently featured Arnold Schwarzenegger urging consumers to “make a decision” as to whether they wished to make a complaint. But just how effective was the campaign?

The Financial Conduct Authority has now published its final report on the impact of the campaign, and this shows that:

  • 32 million UK consumers said they recognised the campaign, equivalent to 71% of the target audience of UK adults aged 25 and over; while the FCA claims that the various media it used reached 99.9% of the target audience, with the average audience member being reached 49 times
  • 2 million people visited the PPI website that was set up by the FCA for the duration of the campaign, with 110,000 people phoning the dedicated campaign
  • Firms that sold PPI were forced to pay £9.1 billion in redress during the campaign, equivalent to almost a quarter of the industry’s total compensation bill of £38 billion. The average redress payment during the campaign was around £2,000 for a mis-selling complaint and £740 for a complaint concerning undisclosed commission (often referred to as a ‘Plevin’ complaint)

Whilst we cannot be sure exactly whether complainants were prompted to register their claims as a direct result of the campaign, the number of PPI complaints rose from 3.7 million in the first 10 months of the campaign to 8.9 million in the final 14 months, including 1.4 million in the final month. The 12.6 million complaints made during the two-year campaign make up almost 40% of the 32.4 million complaints that have been made about this product.

The FCA says there is very little evidence that large numbers of people ran out of time to make a complaint, and that when one examines the complaints that were received after the deadline, many of these were duplicates of complaints that had already been made, or were from customers who had never had PPI with the firm in question.

The FCA says that the publication of this report “closes our project work on the issue”, but given that so many complaints were submitted in the days leading up to the August 29 2019 deadline, many firms are still investigating complaints, so the regulator still has a role to play in ensuring these firms handle their remaining PPI complaints fairly. For example, the report urges these firms to communicate clearly when their complainants can expect to receive a final response.

Jonathan Davidson, Executive Director of Supervision, Retail and Authorisations, said:

“PPI is the largest consumer redress exercise in the UK’s history. We set out to bring the issue of PPI to an orderly conclusion and prompt consumers who wanted to complain about PPI to act. Our campaign was a success in reaching millions of consumers, many of whom were not previously engaged with the PPI complaints process.

“Firms are still handling complaints. We will continue to monitor firms to ensure that those complaints are handled fairly.”

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

01May

FCA cuts some slack to advisory firms by agreeing coronavirus means they can delay implementation of pension rules and examination requirements

Coronavirus has resulted in some tough times for many firms, but advisory firms may be cheered by two announcements from the Financial Conduct Authority. The regulator has agreed that, due to the health emergency, firms can have extra time to ensure their trainee advisers obtain a professional qualification, and they also have additional time before needing to implement certain new rules relating to pension advice.

The relevant rule in the TC section of the Handbook says:

“A firm must ensure that the employee attains an appropriate qualification within 48 months of starting to carry on that activity.”

However, the FCA recognises that it would be impossible to enforce this given that professional qualification providers are cancelling Diploma examinations because of coronavirus with no specific arrangements in place to reschedule them. Instead, up until October 31 2020, the FCA intends to apply an amended version of the above rule, so that where it reads “48 months”, in practice what it will really mean is “48 months or, where necessary, as soon as reasonably practicable afterwards, up to a further 12 months”.

Firms should note, however, that they still have a responsibility to ensure that the trainee advisers whose examinations have been delayed possess the skills, knowledge and expertise needed to discharge their responsibilities.

The new rules that require pension transfer specialists (PTSs) to obtain the same qualification as an investment adviser, alongside the existing PTS qualification, were due to come into force on October 1 2020. However, this requirement has now been delayed by 12 months.

Other new rules relating to pension transfer advice will now be introduced on February 1 2021, instead of August 1 2020. These include:

  • The requirement to provide ‘investment pathways’ for any customers of a firm that choose to enter drawdown without taking advice
  • The need to ensure that customers entering drawdown only invest in cash if they make an active decision to do so
  • The requirement to send annual information on all the costs and charges paid over the previous year to any customers who have accessed their pension
  • Various rules for investments platforms that are designed to make it easier for customers to move from one platform to another without liquidating their assets

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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