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Financial Conduct Authority's Priorities for Q2
Looking beyond the 31 March deadlines for the Conduct Rules, Certification Regime, Directory Persons and the deadline for consumers to apply for a payment deferral, this week we’ll take a look at some of the Financial Conduct Authority’s priority areas over the coming months.
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In Confidence, With Confidence Campaign
The FCA has launched a new campaign to encourage individuals working within the financial services sector to feel able to come forward and report potential wrongdoing to the FCA. The ‘in confidence, with confidence’ campaign is made up of published materials for firms to share with employees and a digital toolkit for use by consumer and whistleblowing groups to encourage individuals to speak up. The FCA also want to make clear that whistleblowers should feel safe in coming forward and will have a dedicated FCA case manager with whom they can discuss any concerns. They can also opt to receive regular updates throughout the investigation.
The information sheets are designed to acknowledge and assuage any fears a potential whistleblower might have in approaching the Regulator and specifically notes that identities will be protected and that there is no onus on the individual to prove the allegation they make, instead, the FCA will then use the information to investigate.
The FCA has invested in increased internal resourcing to support the initiative, including extended staff training, recruiting additional staff to its specialist whistleblowing team and updates to its website to provide more detailed information for staff coming forward, and a confidential webform.
Buy-Now-Pay-Later Regulation
The prospective regulation of buy-now-pay-later (BNPL) products has taken a new step with the Government publication of an amendment to the Financial Services Bill. An announcement on 2 February 2021 confirmed that the government intended to act swiftly to bring interest-free BNPL agreements under the remit of the FCA, and that once that happens, lenders will be ‘required to carry out affordability checks on customers and ensure the vulnerable are treated fairly’. The Government announcement noted that with the volume of these transactions tripling in 2020, there is a new significant risk of harm to consumers.
Under the current perimeter, BNPL agreements are exempt under articles 60F(2) and 60F(3) of the Financial Services and Markets Act (Regulated Activities Order) 2001. While the amendment does not yet officially either bring BNPL products under the remit of the FCA, or remove the exemption, this step will allow HM Treasury to disapply parts of the Consumer Credit Act 1974 (CCA) for BNPL products once they become regulated, which means that in effect, the activity would become regulated activity, without the need for further legislation.
Importantly, until there is further information, it is not clear which provision of the CCA would be removed, however, as stated in the Government press release, affordability checks and obligations towards vulnerable customers will almost certainly be retained.
The Bill is currently subject to final votes in both Houses of Parliament, and there is then likely to be a consultation period.
FCA Review of the Tailored Support Guidance
The FCA has reminded mortgage consumers who have been financially impacted by the coronavirus of support that remains available following the payment deferral application deadline on 31 March 2021. The ‘tailored support’ framework that the FCA has created sets out a wide range of options that should take into account a customer’s individual needs and circumstances. The finalised guidance also makes clear that customers whose homes may be repossessed should be treated fairly and appropriately, particularly where there are risks to customers who are vulnerable, including customers whose vulnerability has arisen as a result of coronavirus. Repossession should be a last resort and only considered when all other reasonable attempts have failed.
The FCA have also monitored consumer credit and mortgage firms’ implementation of the Tailored Support Guidance from November 2020, the results of which are available within their review document. The review highlights some findings that set out where the FCA consider that some improvements could be made:
All assessed firms had vulnerable customer policies, and while 94% of mortgage firms had reviewed or added to them in light of the pandemic, only 64% of credit firms had done so. The FCA recommends that firms review the recently published finalised guidance on vulnerable consumers and embed relevant aspects into their processes.
Where firms have taken on additional staff to assist with an increase in demand from customers in financial difficulty, they should ensure that these potentially inexperienced staff are adequately trained and that there is appropriate oversight of new staff to ensure that the right support is provided to customers.
Although plans to automate aspects of the customer support journey viewed by the FCA have generally been assessed as being helpful for customers, some firms could make improvements, particularly around the ease of access to non-digital support.
We offer a dedicated online training course on the fair treatment of vulnerable customers. Priced at just £15 per user, the course is accessible at the delegate’s convenience and provides a certificate upon successful completion, allowing firms to track and record each user’s progress.
For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.
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