FCA regulatory updates for; Funeral Plans, Buy now Pay Later, FCA approach to International Firms, further regulations for BNPL firms and FCA asks banks to Reconsider Bank branch closures

  1. Funeral Plans to be Financial Conduct Authority (‘FCA’) regulated: Legislation is passing through parliament to formalise the FCA’s supervision of pre-paid funeral plans. The Financial Services Markets Act 2000 Regulated Activities Order (Amendment) 2020 brings the funeral plan sector under FCA remit. This will include funeral plan providers as well as any introducer/broker for the product. The FCA has announced it will enforce its rules and regulations by July 2022 and will release a consultation paper shortly within the first quarter of 2021. The consultation paper will outline the FCA’s approach, incoming regulations and fees levied for firms in the funeral plan sector. Funeral plan providers should now prepare for the FCA authorisation applications, become an appointed representative of another regulated firm (with the relevant permissions), or discontinue this product if neither option is preferable. Please see our recent article on the matter. Funeral plans to becpme FCA regulated.
  2. Buy Now Pay Later products recommended to be FCA regulated by the Woolard Review: Adding to the FCA’s remit is Buy-Now-Pay-Later (BNPL) products which are 0% interest and have repayment terms under 12 months, the model has boomed in the market with companies such as Klarna becoming prominent. The Woolard review notes an increase in BNPL attraction due to the circumstances around the ongoing pandemic the utility of spreading out payments interest free is enticing to consumers. However, the Woolard review’s recommendations were accepted by the HM Treasury as the review identified high-risk of consumer harm as BNPL providers had no requirement to conduct consumer affordability checks and the repayment plan between debtor and creditor would not appear on a credit search becoming a hidden debt until a consumer found themselves in arrears. The FCA will seek to publish a consultation paper around April 2021 outlining the impending steps to bring the market within FCA regulation. See the HM Treasury announcement buy-now-pay-later-products-to-be-regulated and the Woolard review report here woolard-review-report.pdf.
  3. FCA publishes its ‘Approach to International Firms’ paper: The FCA has published a paper for international firms who may not be aware of the UK’s financial regulation regime administered by the FCA. International firms seeking to gain access to the UK financial market may find this paper helpful. The FCA asks all firms whether domestic or international to meet its threshold (minimum) conditions in order for the firm to gain authorisation. For more information please see our article on the paper found here – FCA-approach-to-international-firms.pdf
  4. ASA has revised the CAP code to further regulate BNPL products: Along with the FCA seeking to regulate BNPL the Advertising Standards Agency (ASA) has added some additional rules within its CAP code for companies who advertise BNPL. For example, BNPL advertisements should now indicate what they offer is considered a form of credit and not advertise the arrangement as not affecting a customer’s credit score when in reality that is still possible if it becomes a debt.
  5. FCA asks banks to reconsider branch closures: In light of the ongoing pandemic the FCA has cautioned banks from closing its branches, arguing the harm could be greater to consumers and small medium enterprises if they remain closed. Concerned that closing bank branches would reduce access for consumers in accessing their own finances the FCA recommends banks to take a balanced approach factoring in the restrictions and consumer needs. For more information on the guidance see the FCA’s statement here – banks-branch-closures-coronavirus-lockdown.

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