Month: July 2023

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ICO and FCA publishes joint letter on data protection provisions and effective communications to savings customers

On 18 July 2023, the Information Commissioner’s Office and the Financial Conduct Authority published a joint letter sent to UK Finance and the Building Societies Association setting out whether data protection regulations stop firms from telling savings customers about better deals. The joint letter’s answer is that this “is not the case“.

There are a number of useful points from the joint letter including:

– Data protection law gives data subjects the right to object from direct marketing.

– But this does not stop firms from providing communications when requested, or required, by a statutory regulatory (for example, the FCA under the consumer duty). This is true even if the customer has ‘opted out’ of direct marketing.

– PRIN 2A.5.3R and PRIN 2A.5.5R (both of which implement the consumer duty) both require firms to communicate with their customers so that they can make informed decisions.

– The ICO’s guidance on direct marketing and regulatory communications explains how to draft such regulatory communications, and includes illustrative examples. Firms should use a neutral tone and avoid active promotion or encouragement.

– Firms can therefore send regulatory communications to all their savings customers that provide neutral, factual information about the interest rate and terms of the savings product they hold, the interest rate and terms of other available savings products, and what their options are for moving to another product.

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FCA publishes draft guidance on financial promotions on social media

On 17 July 2023, the UK Financial Conduct Authority (the FCA) published a press release and draft guidance dealing with financial promotions on social media. This has been a hot topic for a number of years. The consultation period ends on 11 September 2023. Responses can be sent by email to gc23-2@fca.org.uk.

The key messages from the draft guidance are that:

– The FCA proposes to keep the key principles of Finalised Guidance 15/4, including its expectation that financial promotions should be standalone compliant.

– The consumer duty (which comes into force on 31 July 2023) will “raise our expectations of firms communicating financial promotions on social medium above the requirement of Principle 7 to be ‘clear, fair and not misleading’.“

– The FCA will continue to focus on compliance issues on social media (and, in particular, says firms should consider whether financial promotions for debt counselling would be appropriate given the complexity of such services).

– For unregulated buy-now, pay-later products, the promotion must outline the relevant risks and be balanced (and there’s a proposed example, in Figure 6, of a clear, fair and not misleading promotion).

– The FCA sets out its expectations on prominence standards for social media channels.

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Financial Services and Markets Act 2023 receives Royal Assent: impact for consumer credit firms

On 29 June 2023, the Financial Services and Markets Act 2023 received Royal Assent. It is often referred to as being part of the EU ‘bonfire’ legislation. From the date it comes into force, Section 1(1) of the Financial Services and Markets Act 2023 revokes the legislation listed in Schedule 1. This includes a number of provisions which make up the consumer credit regulatory framework.

We’ve been busy at Walker Morris Towers looking into the impact of Section 1(1) of the Financial Services and Markets Act 2023 on consumer credit firms. Here’s our one page summary. If you click on it, you’ll get a bigger version of it.

If anyone needs a PDF copy with the embedded links (shown in the image as underlining), please contact me, Jeanette Burgess, Leanna Bradshaw or Hasan Siddique.

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FCA’s board minutes record board’s discussion on PS23/5: Debt Packagers: Feedback to CP23/5 and final rules

Earlier this week, the UK Financial Conduct Authority (the FCA) published its board minutes from the meeting held on 25 May 2023.

Debt management firms may be interested to note that the board discussed the proposed policy statement on debt packagers. The FCA later published Policy Statement 23/5: Debt Packagers: Feedback to CP23/5 and final rules on 2 June 2023 (the FCA’s press release is available by clicking here and you can read my earlier post on the changes to CONC).

The following key points were noted by the FCA’s board members:

– the FCA’s team assured the board that any consequential risk on capacity in the debt advice sector from introducing the ban should be minimal and absorbable; and

– the Board was comfortable with the rationale for setting the implementation period at four months, and concluded that this, along with the mitigating steps the team proposed the FCA take during that period, was sufficient to appropriately balance the interests of firms with the urgent need to protect consumers from the harm.

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The Mortgage Charter and changes to MCOB to help borrowers

Mortgage lenders have had a busy time recently. The Government has published the Mortgage Charter (which is a voluntary charter that first charge lenders can sign up to) and the FCA has published Policy Statement 23/8 to enable firms to do what the charter requires. For more on the changes to MCOB, please see my earlier post.

We’ve put our heads together at Walker Morris towers to produce a one page summary of what the changes are and what firms need to do. If you click on it, you’ll get a bigger version of it.

If anyone needs a PDF copy with the embedded links (shown in the image as underlining), please contact me, Jeanette Burgess or Hasan Siddique.

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Less than one month to go before the consumer duty comes into force

The UK Financial Conduct Authority’s new consumer duty comes into force (for most purposes) on 31 July 2023. This will require firms to act to deliver good outcomes for retail customers.

Whilst much has been said about the consumer duty, the FCA’s focus is now on ensuring firms properly implementing it. To help, the FCA published an update on 28 June 2023. It included ten questions for firms to consider:

1. Are you satisfied your products and services are well designed to meet the needs of consumers in the target market, and perform as expected? What testing has been conducted?

2. Do your products or services have features that could risk harm for groups of customers with characteristics of vulnerability? If so, what changes to the design of your products and services are you making?

3. What action have you taken as a result of your fair value assessments, and how are you ensuring this action is effective in improving consumer outcomes?

4. What data, MI and other intelligence are you using to monitor the fair value of your products and services on an ongoing basis?

5. How are you testing the effectiveness of your communications? How are you acting on these results?

6. How do you adapt your communications to meet the needs of customers with characteristics of vulnerability, and how do you know these adaptions are effective?

7. What assessment have you made about whether your customer support is meeting the needs of customers with characteristics of vulnerability? What data, MI and customer feedback is being used to support this assessment?

8. How have you satisfied yourself that the quality and availability of any post-sale support you have is as good as your pre-sale support?

9. Do individuals throughout your firm – including those in control and support functions – understand their role and responsibility in delivering the Duty?

10. Have you identified the key risks to your ability to deliver good outcomes to customers and put appropriate mitigants in place?

This is not, of course, a ‘checklist’ but it does give a useful insight into the FCA’s priorities.

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FCA publishes Handbook Notice 110 setting out changes to CONC and MCOB

At the end of June 2023, the UK Financial Conduct Authority (the FCA) published Handbook Notice 110. This set out changes made to the FCA Handbook 2 June 2023 and 30 June 2023. These include:

– changes to CONC 8.3 and TP8 (and changes to PERG 2.9 and PERG 17.7) resulting from the Consumer Credit (Debt Packager Remuneration from Debt Solution Providers) Instrument 2023. This introduces rules and guidance banning debt packers from receiving remuneration from debt solution providers and came into force on 2 June 2023.

– changes to MCOB 11.6 resulting from the Mortgage Affordability Rules (Amendment) Instrument 2023. This implements the Mortgage Charter and allows lenders to offer borrowers a switch to interest-only repayments for six months and a term extension to reduce their monthly repayments and switch back within six months (for more, please see Policy Statement 23/8: Mortgage Charter: enabling provisions and the FCA’s press release). These changes came into force on 30 June 2023.