Regulatory Update - June 2025

Mortgage Rule Review

Consultation Paper CP25/11 sets out the FCA’s proposals to simplify some responsible lending and advice rules and increase flexibility. The aim is to make it easier, faster and cheaper for consumers to make certain changes to their mortgage. Firms should benefit from the regulator’s proposal to “make mortgage regulation simpler”, reducing the number of different sources that firms have to consult to remain compliant.

The FCA says its proposals would also introduce options for firms that would promote competition in the interests of consumers and economic growth. Following this paper, later in June 2025, the regulator will begin a public discussion on the future of the mortgage market.

In short, the proposals are designed to make it easier for consumers to:

• Engage with their mortgage provider without the firm having to provide mortgage advice when not needed

• Reduce their mortgage term, lowering the total cost of borrowing and reducing the balance of mortgage debt taken into later life

• Access the cheapest products available to them when remortgaging.

• Of real interest to mortgage firms is the proposal to remove the interaction trigger at MCOB 4.8A.7R (3), to remove the requirement for customers to positively elect to proceed with an execution-only sale where there is interactive dialogue with the firm at MCOB 4.8A.14R (5), and removing the associated Rules and Guidance with the aim of allowing firms more freedom to interact with consumers during a sale or contract variation. A rule will be introduced to require that firms consider whether processes are appropriate to identify execution-only customers for whom advice or other support might be necessary to avoid foreseeable harm. Rules that require advice where customers may be at higher risk will not be changed.

The FCA understands that this change will potentially introduce some risk that consumers choose an unsuitable product, but say that in most cases, lenders will have to have assessed whether the product is affordable and note that most sales allow a 7-day reflection period.

The second proposal is to amend the MAA to permit lenders to enter into a new mortgage contract where it is more affordable than either 1) a customer’s current mortgage, or 2) a new mortgage product that is available to that customer from their current lender. The FCA also proposes to retire FG13/7 and FG24/2.

The FCA aim to publish a Policy Statement in Q3 2025.

Simplifying Insurance Rules

Consultation Paper 25/12 aims to make changes to ensure the FCA’s rules work well for insurance and funeral plan products. They aim to ensure protection for consumers whilst supporting innovation and growth.

Proposed changes include:

• Determining which rules apply to commercial insurance: The FCA propose to replace the current ‘contracts of large risks’ definition with a new definition to identify larger commercial insurance customers.

• Co-manufacturing: The FCA propose an additional option where more than one firm manufactures insurance products, allowing them to select a lead to be solely responsible for compliance.

• Bespoke contracts: The FCA would broaden the scope of an exclusion to both intermediaries and insurers, so that all bespoke non-investment insurance contracts are excluded from PROD 4.

• Frequency of review: The FCA propose to remove the minimum 12-month review requirement under PROD 4 for non-investment insurance products. Firms will be required to determine and record the most appropriate review frequency for a product based on that product’s potential for customer harm.

• Employers’ Liability Insurance notification and reporting requirements: The EL notification would be removed, along with annual reporting requirements to ensure the rules are proportionate and reflect the current EL market. Firms will instead need to notify the FCA of any significant breaches of the rules.

• Training and competency: The 15-hour CPD requirement applying to employees of insurance intermediaries distributing non-investment insurance and to employees of funeral plan firms would be removed. It would then be up to firms to determine appropriate knowledge and training requirements.

• Consequential changes: The FCA are also consulting on any consequential rule changes resulting from the above proposals.

The Consultation is open until 2 July 2025. A Policy Statement will be published in Q2 2025.

Consumer Credit Regulatory Returns

The new return will collect data from consumer credit firms with permission to engage in one or more of:

• Credit broking

• Debt adjusting

• Debt counselling

• Providing credit information services

The new return will have 5 mandatory sections of questions, asking for data about firms’:

• Permissions – the regulated activities firms have undertaken in the past 12 months

• Business model – the financial products, goods, and/or services firms are providing

• Marketing – the channels firms use to acquire consumers

• Revenue – total revenue from credit-related activities and non-credit related activities

• Staff – the number of employees, and incentive and remuneration arrangements.

The new return will replace elements of CCR002 and CCR007. The FCA have been clear that some of the new return’s elements will overlap with other CCR returns, and that this is an interim stage until they complete their review of the remaining credit-related returns. As a result, they are providing regulatory forbearance so any firms that submit CCR009 do not need to provide similar information on CCR002 or CCR007 where they relate to their credit broking or debt management activities.

For principal firms, the data return must include consolidated answers from all of the firm’s Appointed Representatives unless specified otherwise.

There were concerns about regulatory burden where firms also need to submit the new PSD returns. The FCA confirmed that only firms with over £2m in outstanding / new lending will submit the PSD returns for consumer credit agreements, with reporting beginning in 2025.

There were also concerns about the timescales for implementation, with some firms concerned that they do not currently have the resources to meet the new requirements. The FCA confirms that “any firm which is a relevant ancillary credit firm as at 7 May 2025 which does not have sufficient data to report for the entire first reporting period must calculate an annualised figure based on the actual data available where possible.”

The proposals state that the current reporting frequency (6-monthly for full permission firms with annual revenue over £5m, 12-monthly for full permission firms with annual revenue up to and including £5 and annual reporting frequency for limited permission firms) will remain.

Firms should be aware that the new rules will align submissions with a fixed calendar year. The FCA’s definition of ‘relevant ancillary credit firm’ is any firm which: “has permission to carry on any of the following regulated activities:

a)      Credit broking

b)      Debt adjusting

c)      Debt counselling or

d)      Providing credit information services.

CCR009 Return

Firm Type	Frequency	Submission Deadline
Relevant Ancillary credit firm (Annual revenue from credit related regulated activities up to and including £5 million).	Annually (annual reporting period beginning on 1 Jan and ending on 31 December).	40 business days
Relevant Ancillary credit firm (Annual revenue from credit related regulated activities over £5 million).	Half-yearly A (6-month period beginning on 1 Jan and ending 30 June) B (annual reporting period beginning on 1 Jan and ending on 31 December).	40 business days

Reporting frequencies and reporting periods are calculated on a calendar year basis and not by reference to the firm’s accounting reference date. The relevant half-years end on the last business day of June and December.

The first reporting period for a relevant ancillary credit firm as at 7 May 2025 or becomes one before 1 January 2026 is the annual period beginning 1 January and ending 31 December 2025. The full rules are set out in Appendix 1 of the Policy Statement.

FCA updates to requirements, limitations and directions

The FCA are reviewing and updating the requirements, directions and limitations applied to over 9000 firms, following a review to check that the data they hold remains accurate, reflects their current wording, and reflects any changes to legislation.

Their review found that some data was out of date, had been superseded by new content or needed small errors correcting.

Where the regulator has identified changes are needed, they will automatically make small amendments where these don’t change what a firm can or cannot do. Where a larger change might be needed, or they need to remove a requirement, direction or limitation, then the FCA will contact the firm and find an efficient way of making the change. Firms don’t need to take any action unless the FCA get in touch.

Our Compliance Consultancy website includes a range of Consumer Duty tools, designed to support your compliance. Our updated Fair Value Assessment Tool provides assurance that true value has been thoroughly assessed and ensure that assessments are consistent, proportionate and actionable.

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