FCA: Coronavirus Guidance Updates
The uncertainty surrounding the coronavirus pandemic continues to reshape the financial services sector, with the Financial Conduct Authority releasing a paired back business plan for 2020/21 that affirms the continuation of some plans, but halts other priorities.
The Regulator has been quick to address some of the effects of coronavirus on consumers and on firms, with temporary financial relief measures for consumers published early on, and advice and guidance for firms making clear the FCA’s expectations.
This includes guidance for mortgage providers on the 3-month payment holiday, where a customer who experiences payment difficulties due to circumstances relating to coronavirus should be granted a holiday for 3 monthly payments.
There have also been a number of measures to support users of consumer credit products. Personal loan providers should provide support to consumers that face potential payment difficulties, including through the use of payment deferral arrangements for a three-month period where this is in the customer’s interests, or consider forbearance other than a three-month payment deferral. Where there is any suggestion the customer will find it difficult to make payments after the three-month period, the firm should work with the customer to resolve difficulties.
The guidance for all firms places some onus on them to broach the payment holiday or payment deferral if a customer mentions potential difficulties due to coronavirus, such as a reduction in household income.
In all cases, the FCA will review its guidance before the three-month mark.
The regulator has advised that insurance firms should consider the needs of their customers carefully and show flexibility in their treatment of them, including not rejecting claims due to a temporary change in how consumers use vehicles and home addresses. General insurance firms are also reminded of the requirements to maintain operational resilience and business continuity.
Reporting and Fees
There are also a number of temporary changes in reporting and fee paying. The FCA have extended submission deadlines for a number of regulatory returns for submissions due up to 30 June 2020, and the administrative fee for late returns has been waived until 30 June 2020 for small and medium sized businesses (those that pay less than £10,000 in fees and levies this year).
The regulator has also confirmed that firms must carefully consider the use of electronic signatures in agreements, saying that it cannot give legal advice. The FCA does, however, reconfirm that electronic signatures can be accepted for fund-related applications and applications from mutual societies.
The FCA also has a renewed focus on scams, given the recent increase due to coronavirus, with advice to consumers published in early April and confirmation that it continues to work with law enforcement and consumer groups to raise awareness. It plans to push ahead with work supporting the most vulnerable customers, and will take action against unscrupulous firms that take advantage of the current situation. The regulator has made clear that where poor behaviour is found, they will take appropriate enforcement action.
2020/21 Business Plan
Publishing it’s 2020/21 business plan in early April, the FCA has said that where possible, it hopes to continue with its plans, but has acknowledged that in some cases the uncertainty about the size and nature of the damage means this is a constantly changing landscape, especially given that by the time the regulator can focus fully on the activities of the business plan, the issues it needs to address may have changed significantly.
It’s top business plan priority is dealing with the implications of the pandemic, “supporting firms whilst not tolerating serious misconduct.” Whilst the FCA plans to continue work that assists with the delivery of its objectives, any non-urgent activity is delayed.
As such, the focus remains on ensuring consumers can rely on safe and accessible payments, can make effective investment decisions about their savings, that credit markets work well for consumers, and that they are offered fair value products in a digital age. The regulator will also look at transforming their own operations for a digital age, particularly on the potential reshaping of the regulatory framework to try to shift the focus from rules and process. This will require a shift of focus on to a more principles and outcomes-based approach – and focusing on prevention rather than on the cure.
Operational resilience remains a focus – particularly apt in the current climate – with the regulator aiming to set new requirements that strengthen operational resilience. Firms are reminded that they should identify important business services, and consider how disruption to these services could cause harm to their customers or market integrity. Each must set a tolerance for disruption and ensure they can continue to deliver their important business services during ‘severe but plausible scenarios’. The joint consultation on operational resilience is now open until 1 Oct 2020 – but the FCA expect all firms to have contingency plans to deal with major events and to have tested those plans. Final rules will be published following consideration of the responses.