FCA Updates Coronavirus Guidance For Consumer Credit and SMCR
The UK’s Financial Conduct Authority acted swiftly to provide additional guidance on appropriate support for customers during the first weeks of the pandemic crisis. However, early guidance raised questions for some, particularly around timescales and how the proposed guidance interacted with current Handbook rules and the application of the Consumer Credit Act 1974.
Recent publications by the Regulator have also provided clarity for the industry, both in the application of the guidance, and of firms’ obligations in relation to certified persons’ fitness assessments as required by the Senior Managers and Certification Regime, the first assessment for which had been due in December of this year.
Consumer Credit Updates
The updates to FCA-issued guidance for firms providing personal loans, credit cards and overdrafts, came into force on 3 July and unless updated again, will expire on 31 October 2020. It was confirmed that firms should continue to help customers who cannot afford to return to regular repayment or partial repayment.
The guidance sets out that firms should provide ‘exceptional and immediate support’ to customers who face payment difficulties due to the pandemic, for example because of a reduction in income. Possible support options include freezing or reducing payments for another three months on both personal loans and on credit cards unless it is not in the customer’s best interests to do so, offering interest free overdrafts of up to £500 for a further three months, not charging interest on the first £500 of an overdraft, and where an arranged overdraft has a limit of over £500, supporting the customer with the cost of any borrowing over £500.
The updates also make clear that where firms have dealt with customers at the end of a payment deferral period before the updated guidance came into force, they should review whether the outcome the customer received is consistent with the outcome they would have received if the guidance had been in force. Where the answer is no, firms should ‘make all reasonable efforts’ to contact affected customers with an opportunity for further help.
In a feedback statement on the initial guidelines, the FCA clarified that customers cannot apply for payment deferrals after 31 October.
The updated guidance for providers of credit cards and retail revolving credit offers clarity on how firms should apply the persistent debt rules to customers exiting a payment deferral. The guidance makes clear that where a customer exits the payment deferral, then persistent debt provisions will resume, with the period for which the payment deferral was granted still counted in the assessments the firm is required to make. The guidance also makes clear that given the deferral, the month in which the firm may need to undertake the assessment may have been affected by the suspension of the rules.
Senior Managers and Certification Regime Updates
Disruption caused by the coronavirus pandemic has also impacted the requirements of the Senior Managers and Certification Regime, with the FCA announcing a delay – from 9 December 2020 to 31 March 2021 – of the deadline for solo-regulated firms to have undertaken the first assessment of the fitness and propriety of their Certified Persons. This delay is designed to give firms affected by the pandemic the time to make any necessary changes to ensure robust compliance with the Regime.
The FCA are also consulting on extending the deadline to 31 March 2021 for:
The date the Conduct Rules come into force
The deadline for submission of information about Directory Persons to the Register
References in the FCA’s rules to the deadline for assessing Certified Persons as fit and proper.
The SM&CR aims to encourage individual accountability and set new standards of personal conduct. The Regime requires that those in roles that aren’t Senior Management Functions but could have a significant impact on either customers, the firm or the market are assessed, once a year, as suitable to do their job.
While the extension is designed to give firms the time they need to prepare for and conduct robust assessments – given that most firms will have refocused resource during the last few months - this does not mean that the regulator will turn a blind eye to breaches of competence or the Conduct Rules. The FCA has emphasised the importance of continuing with training on the conduct rules so that staff understand what they are and how they apply to their roles, encouraging compliant work and a positive culture in advance of the new deadlines.
The FCA state that ‘Senior Managers must ensure that Conduct Rules training is effective, so that staff are aware of the Conduct Rules and understand how they apply to them in their jobs.’
We offer two Conduct Rule Training options, one dedicated course for Senior Managers and another for certified staff and others subject to the Rules. These online courses are able to be completed at the individual’s convenience, and provide clear and comprehensive training in the Rules, including a mix of videos, small amounts of text and plenty of scenarios to demonstrate how the rules apply practically.
The regulator also confirms that firms should move on with programmes of work if they are able to, and if staff can be certified earlier than March 2021, they should be – stressing that if a firm discovers certified staff who are not fit and proper, they should not wait to remove them from their role.
The FCA also intend to push ahead with the publication of details of certified employees from 9 December on the Financial Services Register.
The FCA’s enhanced Financial Services Register will be published on 27th July, with the directory of certified and assessed persons to be added later this year. The directory had been scheduled for release in March of this year, however the regulator pushed back publication given the additional burden this would have placed on firms.