FCA publishes further information on extension of SMCR to solo regulated firms

On 11 September 2019, the UK Financial Conduct Authority published extra information on a webpage for firms only regulated by the FCA on the extension of the Senior Manager and Certification Regime.

The webpage includes extra information about Form K. This is the form that must be submitted by firms to the FCA no later than 11:59pm on 24 November 2019 to convert an approved person to a senior management function.

From 9 December 2019, the SMCR regime will apply to firms only regulated by the FCA.

US Consumer Financial Protection Bureau Director suggests consumer education is key

It’s never a bad idea to keep an eye out for what’s happening in other jurisdictions. In the United States of America, the Consumer Financial Protection Bureau (or CFPB) has a relatively newly-installed director, Kathy Kraninger. One of her plans to help tackle the consumer finance industry in the US is to improve consumer education (a topic which has fairly limited traction, it seems, with the UK Financial Conduct Authority).

For an interesting take on this approach by The Hill, the following article is well worth a read: https://thehill.com/opinion/finance/460384-cpfb-head-misguided-in-reliance-on-consumer-education

Final notice given to Interest Free Loans Limited refusing its application for authorisation (and provides a useful insight of the FCA’s expectations when making an application)

The UK Financial Conduct Authority has published a final notice given on 10 July 2019 to Interest Free Loans Limited refusing its application for permission to (amongst other things) enter into a regulated credit agreement for high-cost short-term credit as lender.

The final notice gives a useful insight into the FCA’s approach when considering an application for authorisation for credit-related regulated activities. For example, it lists the documents sought from the applicant (see paragraph 22) and the kind of information the FCA expects to see in policy and procedure documents (see paragraph 28).

High Court hands down judgment on unfair relationship provisions involving a business borrower and the burden of proof

On 3 September 2019, the High Court handed down judgment in Promontoria (Henrico) Limited v Samra [2019] EWHC 2327 (Ch). The customer challenged the relationship arising out of the agreement as being unfair under the unfair relationship provisions in Sections 140A to 140C of the Consumer Credit Act 1974 (the CCA) because of (a) the assignment of the agreement from Clydesdale Bank plc to Promontoria (Henrico) Limited and (b) a claim that the lender gave a positive indication about future lending to the customer. It also considered the impact of the reversed burden of proof under Section 140B(9) of the CCA.

The Court decided the relationship arising out of the agreement between the lender and the customer was not unfair. The Court had real concerns over the customer’s evidence (see, for example, paragraph [24] of the judgment). But ultimately it did not consider the issues raised, after deciding “it was not necessary to go through the list of factors [set out in Deutsche Bank (Suisse) SA v Khan [2013] EWHC 482 (Comm)] in every case, or particularly useful to do so in a case such as this where the allegations of unfairness are somewhat diffuse” (see paragraph [94] of the judgment), meant there was any unfairness in the relationship.

The Court’s decision on the burden of proof is, however, important. It decided (see paragraph [26]) that:

This … does not however mean, in my judgment (and Mr Hill did not contend) that where Mr Samra makes allegations of fact on which he relies he does not have the burden of proving them to the normal civil standard. The onus placed on the creditor is as to the relationship between it and the debtor, and does not have the effect that factual allegations made by Mr Samra must be accepted unless they can be positively disproved by contrary evidence.

Now the High Court has given such a clear view on the burden of proof, it must now follow that the position is clear: a customer must prove the facts he says create unfairness arising out of the relationship and (once proven) the burden then shifts onto the lender to prove those facts (as proven) do not mean the relationship is unfair to the customer.

Updated practice note on the interaction between the consumer credit regime and guarantees

We’ve recently updated a practice note, published by Practical Law and written by Russell Kelsall and Paula Twist, entitled: ‘The interaction between the consumer credit regime and guarantees’. We’ve updated it to consider, amongst other things, the recent extension of the FOS’ remit so that it can consider complaints from certain guarantors.

If you’re a subscriber to Practical Law, you can visit the practice note by clicking here or by visiting: https://uk.practicallaw.thomsonreuters.com/w-015-0686.

Draft legislation to introduce five month transitional period for Brexit changes to the SECCI

In the last few days, HM Treasury published a new draft statutory instrument: the Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019.

If it becomes law (which seems likely), Regulation 14 will delay the changes to the SECCI caused by Brexit (and set out in the  Consumer Credit (Amendment) (EU Exit) Regulations 2018) so that there is a five month transitional period after ‘exit day’.

FCA sets up an implementation group to help the mortgage industry deal with proposed new rules for ‘mortgage prisoners’

On 27 August 2019, the UK Financial Conduct Authority set up a working group to help the mortgage industry deal with the implementation of its proposed new rules, set out in consultation paper 19/14, to deal with so-called ‘mortgage prisoners’.

The FCA has published a website (which it will update) summarising the discussions with the working group.

The current members of the group are:

– Building Societies Association
– UK Finance
– Ipswich Building Society
– Buckinghamshire Building Society
– Furness Building Society
– Tipton and Coseley Building Society
– West Bromwich Building Society
– OneSavings Bank
– UK Asset Resolution Ltd.
– Leeds Building Society
– Kensington Mortgages
– Yorkshire Building Society
– Link Asset Services
– Mortgages Plc