Author: Russell J Kelsall

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FCA publishes research report on buying mortgages without advice

On 7 May 2019, the UK Financial Conduct Authority published a report it had commissioned by Revealing Reality on the way consumers buy regulated mortgages without advice.

There’s some interesting findings from the research including:

– execution-only customers generally understood they wouldn’t receive any advice on the mortgage;

– there was a lack of understanding (both for advised and non-advised sales) of the documentation given to customers;

– the difference between an advised and a non-advised sale was not generally understood;

– repetition helps make sure the customer understands the message;

– customers don’t like the look and feel of disclosure documents; and

– plain English, bullet points and Q&As, help get your message across better.

If you’re drafting mortgage documentation, this is likely to be a helpful bit of research. Depending on the outcome of Brexit, there may be an opportunity to simplify some of the documentation and procedures to tackle some of the problems found in this research.

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Payment Systems Regulator consults on a specific direction on the implementation of the confirmation of payee service

On 9 May 2019, the UK Payment Systems Regulator (the PSR) published its response to the first consultation on the proposed implementation of the confirmation of payee service, and published a new consultation on a specific direction on the implementation of the service.

After considering the feedback, the PSR has refined its approach. It has decided to give a specific direction to Lloyds Group, Barclays Group, HSBC Group, Royal Bank of Scotland Group, Santander Group and Nationwide Building Society (being the six largest payment services providers).

The proposed effect of the specific direction is to require:

– From 31 December 2019: the directed PSPs must respond to compliant confirmation of payee requests; and

– From 31 March 2020: the directed PSPs must send confirmation of payee requests and present responses to their customers.

The consultation period ends on 5 June 2019.

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FCA publishes undertaking given by James Brearley & Sons Limited about the fairness of a term allowing it to immediately end a contract

On 9 May 2019, the UK Financial Conduct Authority published an undertaking given by James Brearley & Sons Limited about a term allowing it to end a contract by giving “written notice at any time”. 

The FCA considered such a term was potentially unfair under Regulation 5(1) of the Unfair Terms in Consumer Contracts Regulations 1999 and Section 62(4) of the Consumer Rights Act 2015.

The firm agreed to stop using the term and replace it with a term saying it needed to give a customer twenty business days’ notice if it wanted to stop providing the services to them.

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Information Commissioner’s Office fines Hall and Hanley Limited £120,000 for instigating the sending of almost three and a half million spam direct marketing texts

On 3 May 2019, the UK Information Commissioner’s Office (the ICO) issued a monetary penalty notice (otherwise known as a fine) of £120,000 to Hall and Hanley Limited for sending unsolicited texts about potential payment protection insurance complaints to individuals.

The ICO decided Hall and Hanley Limited had breached Regulation 22 of the Privacy and Electronic Communications (EU Directive) Regulations 2003 (PECR) by instigating the sending over three and a half million unsolicited texts to individuals between January and June 2018. Whilst Hall and Hanley Limited did not send the text messages, the ICO was satisfied it was the instigator of those messages (and it did not have a valid consent to send them).

This is another example of the ICO using its powers under the PECR to issue significant monetary penalty notices to firms. For another example, see our earlier blog post.

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Banking (Consumer and Small Business Protection) Bill 2017-19 has its first reading in the House of Commons

On 7 May 2019, the UK House of Commons had its first reading of a private members’ bill, sponsored by Charlie Elphicke MP, called the Banking (Consumer and Small Business Protection) Bill 2017-19.

There is little information on the detail at this stage: Parliament’s website says the Bill is “being prepared for publication”. But the summary is interesting: “A Bill to make provision to enable consumers to transfer mortgages between providers; to prohibit the sale of mortgage debt to unregulated entities and the foreclosure of certain loans; to establish financial services tribunals; and for connected purposes”

There may, of course, be overlap with the UK Financial Conduct Authority’s consultation paper on helping so called ‘mortgage prisoners. Private Members’ Bills are also notoriously difficult to pass into law. It’ll therefore be interesting to keep a close eye on the Bill’s progression.

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FCA publishes its ‘Approach to Supervision’ and ‘Approach to Enforcement’

On 24 April 2019, the UK Financial Conduct Authority published its ‘Approach to Supervision’ and its ‘Approach to Enforcement’.

Both of these approach documents provide a helpful insight to firms on the FCA’s approach to both supervision and enforcement.

The FCA’s approach to enforcement gives the following insights:

– The “overriding principle in our approach to enforcement is a commitment to achieve fair and just outcomes in response to misconduct. Wrongdoers must be held to account and our rules and requirements must be obeyed”;

– “Not all breach’s of our rules or requirements constitute serious misconduct. Many breaches can be addressed and remedied elsewhere (and we expect them to be) without the need for enforcement action, especially where the error is technical or minor”;

– “Firms and individuals should not wait for an investigation to end before acting in a way they think is right”; and

– “We aim to make sure the sanction is sufficient to deter the firm or individual from re-offending and deter others from offending”.

The FCA’s approach to supervision also gives the following insights:

– “We expect firms and their employees to meet [our] standards and hold them to account when they fail to meet them”;

– The supervisory principles (a) are forward looking, (b) focus on strategy and business models, (c) focus on culture and governance, (d) focus on individual and firm accountability, (e) are proportionate and risk-based, (f) involve two-way communication, (g) are co-ordinated and (h) put right systemic harm that has happened and stop it happening again;

– Culture and business models are still key things the FCA considers important;

– The FCA continues to adopt a decision-making framework (see, for example, Chapter 4; there are some real nuggets of information here).

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FCA’s Andrew Bailey gives speech on the future of financial conduct regulation

On 23 April 2019, the UK Financial Conduct Authority’s chief executive, Andrew Bailey, gave a speech to the ‘Future of Financial Conduct Regulation’ conference in London.

If there is any speech you are going to read, it probably should be this one. It gives a clear insight into the FCA’s thinking and, in particular, the role and use of the FCA’s Principles for Businesses. There seems a clear will within the FCA to re-look at these principles (and potentially increase their scope). As Mr Bailey says, “principles are not debating points, they are the bedrock of our regulation, and there is a good case for enhancing their standing and practical impact”.

For good measure, there is also some focus on Brexit (and its impact on financial services) and the FCA’s consultation on introducing a ‘duty of care’ in financial services.

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FCA publishes ‘Dear CEO’ letter to firms approving financial promotions

On 11 April 2019, the UK Financial Conduct authority published a ‘Dear CEO’ letter to firms approving financial promtions. This letter is aimed at firms approving financial promotions for unauthorised firms.

The FCA reminds firms:

– Before approving a financial promotion for an unauthorised firm, the authorised firm must ensure the promotion complies;

– Despite its earlier letter dated 9 January 2019, the FCA has found “a number of examples where it appears the due diligence carried out on a financial promotion may have fallen well short of the standard we expect”.

– The approver of a restricted financial promotion (ie one which can only be sent to certain persons) must ensure any restriction is complied with (and express reference is made to mini-bonds)

– Firms not complying are reminded of the FCA’s extensive enforcement toolkit.

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Treasury makes the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019

On 29 March 2019, the Treasury made the Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2019. 

From ‘exit day’, these Regulations will effectively mean the rules in Rome I, Rome II and the Rome Convention will continue to apply as domestic law in all parts of the UK to decide the applicable law for contractual and non-contractual obligations.

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European Commission consults on the effectiveness of the Distance Marketing Directive

On 9 April 2019, the European Commission started a consultation on the effectiveness of the Distance Marketing of Financial Services Directive 2002/65/EC (the DMD).

The European Commission’s webpage says the goal of the consultation is to “ensure that all relevant stakeholders have the opportunity to express their views on the effectiveness of the Directive”.

The Commission’s webpage goes on to say that since the DMD came into force, “the retail financial sector has gone increasingly digital, with new products and actors available on the market and new sales channels being used. Several EU laws pertinent to financial services have also been adopted or updated”.

The deadline for responding to the consultation is 2 July 2019. The European Commission expects to publish its findings and conclusions by the end of 2019.

The DMD was last reviewed by the Commission in 2009.