Regulatory Round Up: June 2023
In a statement on 2 June 2023, the Financial Conduct Authority (FCA) confirmed that referral fees for debt packager firms will be banned. In this business model, debt packager firms receive commission once a customer has been referred to a ‘solution provider’ such as an Insolvency Practitioner.
The FCA is concerned that if other solutions – which would not earn debt packager firms commission – would be more suitable for the customer, the incentive to refer to commission-only solutions would result in consumer harm.
The Regulator calculated that the median referral fee was between £940 and £1340 with the higher fee applying to Scottish solutions. In this scenario, the FCA said that IVAs (or PTDs in Scotland) could cost consumers £3650 or more over their lifetime, whereas Debt Relief Orders cost £90 in upfront fees, and Minimal Asset Process costs £50.
In the worst cases, the FCA has seen evidence of manipulation of customer details so that they meet the criteria for IVAs/PTDs and which have meant that individual customers have paid more money for a longer period of time to become debt free, than if they had been recommended a DRO/MAP.
The new rules come into force on 2 October 2023 for existing firms; for new entrants to the debt packager market the ban is in effect immediately. The full rules are available here.
Financial Difficulties – Lenders to pay out
The FCA has announced that, following work with almost 100 lenders and treatment of borrowers in financial difficulties, it has secured up to £47m of redress for over 195,000 customers. The Regulator had concerns about practices including not tailoring support to customer circumstances, failing to identify and respond to indicators of vulnerability and not engaging with customers about guidance and debt advice.
In the same press release, the FCA confirmed that it is proposing to make the requirements to support borrowers in difficulty – put into place during the pandemic – permanent.
This will mean that mortgage, consumer credit and overdraft providers must:
Provide tailored support to customers who are struggling to meet their repayments, including:
making reduced or no payments temporarily
changing the mortgage or loan term
Ensure that repayment arrangements are appropriate
Signpost customers to free, impartial money guidance and debt advice
Not charge arrears fees that are higher than necessary to recover reasonable costs
Consider the overall impact of support arrangements on mortgage balances
The consultation to make the temporary guidance permanent is open until 13 July 2023. If accepted, the new rules should come into effect in H1 2024. For firms already compliant with the guidance, this won’t introduce major changes, but it is important to proactively assess current practices to ensure they comply with FCA requirements ahead of the shift from guidance to new rules.
The Information Commissioner’s Office has fined two firms – Ice Telecommunications Ltd and UK Direct Business Solutions Limited - for making more than 480,000 unlawful marketing calls to businesses signed up with the UK’s ‘do not call’ register. One £80,000 fine related to over 70,000 calls made between September 2021 and January 2022, including repeated and persistent calls; in this case the firm continued to make illegal calls while under investigation. A £100,000 fine was issued in relation to 410,000 calls between March 2020 and October 2021. In this case, complainants noted that some calls were “rude and argumentative.”
The ICO has published a new series of three short videos on the subject of the Privacy and Electronic Communications Regulations (PECR), particularly useful for small firms.
FCA alert for firms – fake communications
The FCA updated its list of fake communications addresses and websites in late May 2023 – available here.
The simple list records email addresses and websites that the regulator is aware have been used in phishing attempts – making it quick and easy to check any suspicious contacts.
The FCA has also highlighted a new attempt via a fake letter claiming to be from the FCA and HMRC asking for tax return money. The letter uses the FCA and HMRC logo but is not genuine.
ICO issues new Subject Access Request guide
The new guide for businesses and employers covers frequently asked questions on a subject that continues to scupper firms; the Information Commissioner received over 15,000 Subject Access complaints last year. The ICO suggests that misunderstanding around the importance of these requests is behind the high number of complaints. In particular, a lack of awareness that SARs don’t need to contain the words ‘subject access request’, can be made via any channel, and have a month deadline for response has caught out a number of firms.
Notes for Dual Regulated Firms
A Consultation Paper on proposed changes to the Bank’s approach to enforcement is open, and closes on 4 August 2023. There are some administrative changes proposed, alongside consequential amendments to policies and procedures including the introduction of a new Early Account Scheme and amendments for clarity around prohibition orders.
The PRA’s proposal to move Senior Manager Regime forms from the PRA rulebook has been accepted, and the new rules are now in place. Links to forms A (long form) and A (shortened form), along with B, E, I, J and the statement of responsibilities are removed from the PRA Rulebook; downloadable blank template forms remain available on the SMR section of the website but cannot be downloaded from the Connect system. Form A (long form) will be updated so that the length of employment history required will change from 5 years to 10 years.
Consumer Duty – Just under two months to go
The FCA has published its findings following a review of firms’ approaches to fair value assessments under the Consumer Duty. The findings helpfully set out suggested areas of focus, examples of good practice, and potential areas for improvement.
The FCA has recently highlighted a lack of training as a key contributor to poor outcomes for customers, in both introductory and refresher training. RB Compliance can help firms here. We offer a dedicated Consumer Duty course which guides learners step-by-step through the expectations of the Duty, covering the background, Principle, cross-cutting rules, and the four outcomes.
You may also find our wider range of resources on the Consumer Duty helpful.