FCA Regulatory Updates: March 2022
The Financial Conduct Authority (FCA) has confirmed the increase to the Financial Ombudsman Service’s (FOS) award limits. From 1 April 2022, award limits will increase from £350,000 to £375,000 for acts or omissions by firms on or after 1 April 2019. For complaints about issues taking place before 1 April 2019, the compensation limit will be £170,000.
The FOS’ award limit is adjusted each year in line with inflation as measured by the Consumer Prices Index. The Guidance on the Ombudsman’s website will be adjusted from 1 April 2022 to reflect the changes.
FCA announces claims management companies fees cap
Under new FCA rules, claims management companies are subject to a fees cap, with the maximum fee charged based on how much redress the customer is due. The cap applies to most claims where a “consumer is awarded monetary redress from a financial services firm, either directly, via the Financial Ombudsman Service, or from the Financial Services Compensation Scheme.”
Claims management companies must also give key information to consumers before entering a contract, including the method for the calculation of fees, and ensuring consumers understand free routes to redress.
The fee cap operates on a sliding scale. Cases where the redress amount would be under £1499 the maximum rate of charge is 30% with the maximum total fee set at £420. For cases between £25,000 and £49,999, the maximum rate of charge is 20% with the maximum total fee set at £7,500.
FCA highlights importance of supporting consumers through tough times
In a speech delivered on 23 March, Brian Corr, the Interim Director of Retail Lending at the FCA, suggested that the ongoing and sustained nature of pressure on certain consumers has significant potential for harm, and that credit providers should ensure that support for those in financial difficulties remains a key priority.
While the FCA are looking at how to help people with limited borrowing options – they acknowledge that access to credit “matters greatly for consumers and can help them to cope” – they note that protection from unaffordable lending and other types of harm remains as important as ever, and even more so given the likelihood that more people will need support currently than ever before. Following the UK Chancellor’s Spring Statement, the Resolution Foundation calculated that around 1.3 million more people are likely to be in ‘absolute poverty’ in 2023, with families facing 4% real terms income loss and tax rises for 7 in 8 workers. This cost-of-living crisis will have a measurable and significant impact on the market, and on the financial resilience of its customers.
Corr highlighted that low resilience and rising costs are a combination that could have potentially disastrous results for millions of people, with significant implications across the credit sector.
Among the actions expected from firms, Corr noted the importance of being cautious and diligent, focused on customer needs, and being ready to respond as those needs change. A key part of this will be focusing on good outcomes for customers, which is the key driver of the new Consumer Duty.
Our upcoming webinar will cover what the Consumer Duty is, what is expected of firms, and how to put it into practice.
FCA to take ‘assertive action’ to tackle harm in the consumer investments market
The Financial Conduct Authority continues its efforts to tackle harm in the consumer investments market. Enquiries about possible scams increased by a third for the period April to September 2021, from the same period in 2020.
The Regulator also reports that it has stopped a quarter of applicant firms from entering the market, and is taking more assertive enforcement action.
UK’s Economic Crime (Transparency and Enforcement) Act fast tracked into law
This Act brings in a raft of reforms in three main areas; the creation of a register of overseas entities and their beneficial owners, new measures to strengthen Unexplained Wealth Orders, and reforms to the UK’s sanction regime.
The Act amends several provisions in other legislation, including the removal of the knowledge of reasonable cause requirement in Section 146(1) of the Policing and Crime Act 2017, and an amendment to the Sanctions and Anti-Money Laundering Act 2018, adding a ‘urgent procedure’ where the ‘standard procedure’ (involved person) test is not met.
ICO action against marketing calls to vulnerable and older people
On 15 March the Information Commissioner’s Office (ICO) announced combined fines of £405,000 handed out to five firms that it found had targeted older and vulnerable people with marketing calls for insurance products. The firms were also issued with enforcement notices requiring the firms to cease making what the ICO termed “predatory calls”.
The ICO received complaints from a number of sources including Action Fraud and Trading Standards. Investigations found that the firms were either working together or had purchased the same marketing data lists and used the same approach – asking for the data of individuals that were over 60, homeowners, with landline numbers. The calls aimed to sell insurance products or white good services that the firms knew the consumers did not need.
The ICO acknowledged that the individuals affected felt frightened and distressed by the tactics employed by the firms, and were sometimes intimidated into giving their financial details just to be able to end the call. The ICO stated that it is investigating a number of firms utilizing similar tactics, and intends to ensure that where appropriate, it will take action to change the behaviour of firms that breach the rules.
Now is the time to ensure that your staff are clear on the identification and support of customers in financial difficulties. Our dedicated course takes learners through techniques that have been tried and tested, covers questioning skills, empathy and active listening, what to say, when to say it, and how to support customers.
This online course, priced at just £20, is accessible at the delegate’s convenience, and provides a certificate upon successful completion, allowing firms to track and record each user’s progress. For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.email@example.com.