Author: Russell J Kelsall

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FCA publishes webpage setting out terms of reference for review into change and innovation in the unsecured credit market

On 26 October 2020, the UK Financial Conduct Authority updated its webpage on its review into change and innovation in the unsecured credit market. This review will be led by Christopher Woolard.

The review will look at:

– how regulation can better support a healthy unsecured lending market; and

– the impact of COVID-19 on employment security and credit scores, changes in business models and new developments in the unsecured lending (including the growth in point of sale unregulated products).

The webpage sets out the review’s terms of reference. These are:

– To examine the current state of the unsecured credit market in the UK including the component parts, recent changes in size and scale, whether in regulated or in adjacent unregulated products.

– To examine changes in regulation, noting those areas that have been subject to regulatory oversight in recent years from a variety of bodies including the FCA (for example overdrafts or high cost credit), and comparing likely harms or dynamic effects seen in those areas.

– To examine the immediate effect of coronavirus on demand for unsecured credit and on the role of credit information.

– To report on possible trends and potential future pressures.

– To identify areas of growth in demand from consumers for credit including from non-traditional providers of credit.

– To present an assessment of the benefits and harms evident in the market and those that may be expected as the market develops.

– To compare international approaches to these issues where relevant.

– To make conclusions and recommendations to the FCA Board on management of harms in this sector; gaps in understanding or data; potential changes in regulation for the FCA to consider; advice on potential changes to the overall system the FCA may wish to consider with other authorities or the Government; and possible innovations to support a sustainable market.

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FCA publishes ‘Dear CEO’ letter to claims management companies

On 26 October 2020, the UK Financial Conduct Authority published a ‘Dear CEO’ letter to claims management companies. This states that the FCA has “identified, and continues to identify, issues” including:

– misleading, unclear and unfair advertising;

– poor disclosure of pre-contractual information about fees and/or the availability of free alternatives;

– unclear fee structures (including the fact that “a CMC’s fee will significantly reduce the amount of redress they might otherwise receive“;

– poor service standards (including advice);

– failing to undertake sufficient checks and collect relevant information before presenting claims;

– certain CMCs having been established by, or having close associations with, individuals at previous firms involved in misconduct (including mis-selling of financial products); and

– some CMCs have been looking to use existing data to recycle and re-market claims, leading to nuisance calls.

The FCA concludes that “many CMCs have demonstrated a poor understanding of, and sometimes attitude to, their regulatory obligations“.

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UK Supreme Court to consider RyanAir’s decision to pay compensation directly to a complainant and not to a law firm

On 27 October 2020, a panel of five Justices of the UK Supreme Court will hear the appeal of law firm, Bott & Co, against the Court of Appeal’s decision that the law firm had no equitable lien for fees over any compensation paid directly to a complainant.

The UK Supreme Court’s decision may have an impact for consumer finance firms receiving complaints from law firms, or claims management companies, on a complainant’s behalf.

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FCA adds the Institute of Financial Accountants to the list of bodies whose members can provide a statement of high net worth

On 1 October 2020, the Consumer Credit (High Net Worth Exemption) (Amendment) Instrument 2020 came into force. This amends CONC App 1.4.3R(2) by adding the Institute of Financial Accountants to the list of bodies whose members can provide a statement of high net worth under CONC App 1.4.

This change was confirmed in the Financial Conduct Authority’s Handbook Notice 80 and followed the FCA’s Quarterly Consultation in Consultation Paper 20/4.

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European Court of Justice says there is a duty to consider the cumulative effect of all terms

On 10 September 2020, the European Court of Justice gave judgment in A (Sous-location d’un logement social) (Case C-738/19) EU:C:2020:687. The issue before the ECJ was whether the Court must, under the Unfair Contract Terms Directive, consider only the unfairness of clauses relating to those challenged by the consumer, or the cumulative effect of all terms. In a perhaps unsurprising decision, the ECJ decided the Court’s duty is to consider the cumulative effect of all terms.

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Butterworths Financial Regulation Service – updated commentary on CONC, and new commentary on MCOB, published

Issue 112 of Butterworths Financial Regulation Service has now been published. I’ve written a new chapter on CONC 6, and reviewed and revised the existing chapters on CONC (including adding the latest COVID-19 guidance published by the Financial Conduct Authority).

I’m also delighted to have published brand new commentary on MCOB. There will be further new chapters over the coming issues but this issue has:

– an introductory chapter setting the scene on mortgage regulation;

– commentary on MCOB 1, 10, 10A, 12 and 13.

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HM Treasury publishes revised draft statutory instrument: the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020

Earlier today, on 10 September 2020, HM Treasury published a revised statutory instrument: the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020.  This replaces the draft published on 15 July 2020.

You can view the draft revised statutory instrument by clicking here, and view the explanatory memorandum by clicking here and the impact assessment by clicking here.

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Issue 63 of Goode: Consumer Credit Law and Practice published with new chapter on ancillary credit business and credit reporting

Issue 63 of Goode: Consumer Credit Law and Practice has now been published. This includes a new chapter 48, written by me, on ancillary credit business and credit reporting. It was rather humbling when Professor Sir Roy Goode QC invited me to join the editorial team a few years ago and it’s great to see my first chapter being published.

I’ve also written four new case reports: these appear in Goode: Consumer Credit Reports.