Regulatory Round-up: July 2022
On 6 July, the FCA published a research paper that indicates that contact between those in financial difficulties and their lenders – and vice versa – could be improved. The report highlighted that only around a third of the sample 2969 borrowers in financial difficulty could recall having any contact with their lenders to discuss their financial challenges. The report suggests that this proportion of total respondents answering in this way means that this could be the experience of around 2.5 million adults across the UK.
The report stated that only 13% of those in financial difficulties proactively engaged with their lenders without having had any contact from the lender. This suggests a very large proportion of those in financial difficulties that are likely to need proactive contact from the lender in order to engage with their finances. The report shows that most of those getting in touch with their lenders did so only once they had reached crisis point and wished that they had done so sooner.
From this, the importance of lenders contacting customers promptly when they first fall into financial difficulties is clear. The data shows that a fair number of customers were reluctant to contact lenders due to the perception that lending firms would not be approachable, and due to feelings of embarrassment. Significantly, around a fifth of borrowers did not know that lenders could offer support and help. Lenders contacting customers to discuss their circumstances and support options could make a significant difference both to the financial wellbeing of individuals and to the economy.
The report also provides some very useful data around preferred contact methods. For example, two thirds of borrowers proactively contacting their lenders did so by telephone, demonstrating a clear preference for telephone contact.
Areas of improvement for firms include:
Early engagement - Offering support to customers before they miss payments
Tailoring solutions, based on the customer’s individual circumstances
Staff training must cover practical forbearance options
Ensuring that those who would benefit from debt advice are referred.
FCA publish updated reporting requirements for CMCs
The FCA have made amendments to their webpage covering information for Claims Management Companies annual reporting requirements. The updated information covers Relevant Connections notifications, which are to be collected electronically from CMCs within 60 business days of the date of authorisation. The requirements are set out in full in CMCOB 2.1.15R onwards. Firms should note that the initial report must cover a period of 6 years up to the date of the notification request.
Funeral Plan providers
Funeral plan providers must be authorised by the FCA by 29th July 2022 to continue operating within the UK. Firms that are not authorised will need to stop selling and carrying out funeral plans. In preparation for authorisation, and to protect consumers, the FCA have published a list of firms that have not yet sought authorisation from the regulator. Also published are lists of firms that have withdrawn their applications, or have had their applications refused, or have notified the FCA that they are transferring their plans to other providers.
Firms that are preparing for regulation should be aware that a proposed amendment to the Compensation Sourcebook was published in the latest Quarterly Consultation. The proposed additional rules cover:
Addition to COMP 12A around payments made by the FSCS on behalf of or to funeral plan providers in default, in respect of reasonable fees, costs charges and other expenses to an administrator or liquidator.
Amendments to FPCOB sourcebook to include new rules requiring that where a transfer is taking place, a new provider must issue a legally binding undertaking to customers on similar terms to the original contract that it will provide them a funeral.
FCA Dear CEO letter tells banks to improve treatment of small business borrowers
A letter published on 12 July highlighted concerning collection practices, including not treating SMEs fairly when agreeing a sustainable payment plan and insisting on plans that are clearly unaffordable, staff not having the right training to provide effective support and to make fair decisions, not having clear policies around the identification and support of vulnerable customers, and not having appropriate quality assurance or testing to ensure they deliver fair results. While the FCA has contacted the firms in question directly, it wants to see action taken by the whole sector.
UK GDPR – Data Reform Bill
Plans for the UK’s Data Reform Bill have been released, including a potential increase in fines for companies making nuisance calls. The current maximum is £500,000; under the new plans the upper limit would be shifted to 4% of the firm’s global turnover or £17.5m, whichever is greater, bringing fines under PECR in line with GDPR penalties.
PECR rules are also mooted to be updated to cut ‘user consent’ pop-ups and banners. In general, the bill aims to make it easier for internet users to understand and control how their data is collected and used online, but via a single approach, rather than having a requirement that cookies are opted into on every single website.
The Bill also includes some aspects that will not affect firms directly; it plans to modernise the ICO, updating governance structures to introduce a chair and a board, and new objectives so that Parliament and the public can hold the regulator to account.
Our UK GDPR compliance resources provide everything that firms need to meet the legislative requirements.
We also offer Data Protection online training that interprets the requirements that all staff need to abide by in an easy to understand, relatable way. Priced at £20, the course is accessible at the user’s convenience and provides a certificate upon successful completion.
To enquire further, or to book, simply email Robert.email@example.com.