Category: CONC

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FCA publishes policy statement and finalised guidance on ways consumer credit and mortgage firms should support customers in financial difficulty

Earlier today, on 10 April 2024, the UK Financial Conduct Authority published a press release and Policy Statement, PS24/2, setting out the new rules and guidance which will apply to consumer credit and mortgage firms to support customers in financial difficulity.

The FCA has also published updated finalised guidance, FG24/2, and a press release.

The changes made to both CONC and MCOB by PS24/2, and FG24/2, will come into force on 4 November 2024.

We’ve set out a summary in a one page infographic (if you click the infographic it should be larger):

If you want a PDF copy, please contact your usual contact at Walker Morris LLP.

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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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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.

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FCA publishes final report on strategic review of retail banking business models 

On 20 January 2022, the UK Financial Conduct Authority published its final report following its strategic review of retail banking business models, together with a webpage and press release.

This report follows the FCA’s progress report from June 2018.

The key points from the final report are:

– large banks have a strong position but are facing challenge from others;

– low levels of consumer engagement have historically contributed to high barriers to entry and expansion;

– digital challenges have rapidly gained a share of the personal current account and business current account markets

– competition in the mortgage market has increased (causing yields to come down)

– yields for consumer credit firms have fallen too (particularly on unarranged overdrafts);

– large banks did proportionately more micro-business lending under the government schemes than most other banks; and

– increased competition and innovation have improved outcomes for many consumers and some small businesses.

The FCA says it will be “discussing the points raised in our 2022 Final Report with firms and consumer organisations but are keen to hear from other stakeholders”. The FCA has invited written submissions by 31 March 2022.

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Policy Statement published on changes to FCA Handbook to reflect breathing space

On 26 February 2021, the FCA published Policy Statement 20/1: ‘Breathing Space Regulations – changes to our handbook’ (‘PS 20/1’) to make changes to the Consumer Credit Sourcebook (or ‘CONC’) to implement the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium (England and Wales) Regulations 2020 (which come into force on 4 May 2021).

The changes (which come into force on 4 May 2021) are:

– two new definitions will be introduced: ‘Debt Respite moratorium’ and ‘moratorium debt’;

– CONC 5D.3.3G(5) will be amended to say that if a Debt Respite moratorium is in effect for a customer’s overdraft and a firm is complying with its obligations under that moratorium, the firm is treating the customer with appropriate forbearance for the portion of the overdraft subject to the moratorium (and the firm is not required to take the steps under CONC 5D.3 during the moratorium);

– there will be changes to CONC 6.7 so that complying with a Debt Respite moratorium is considered to be compliance with a firm’s obligations under CONC 6.7 (in effect, a moratorium is equivalent or more favourable steps); and

– firms can take into account the period under a Debt Respite moratorium when considering a ‘reasonable period’ under CONC 7.3.11R.

The FCA does not consider any changes are necessary to CONC 8, or to MCOB.

PS21/1 makes it clear that “consumers ought to be able to benefit from the protections of both the Regulations and our rules” (see paragraph 1.14). The FCA’s view is that “advising a customer on eligibility for a moratorium clearly falls within the regulated activity of debt counselling”.

The FCA also says that any “communications required by our rules should continue to be made. The Regulations do not prevent a credit from contacting a customer where this is required under the Consumer Credit Act 1974 (CCA) or FCA rules (Regulation 11). Section 3.9 of the Insolvency Service’s guidance also explains the effect of the Regulations on communications with customers” (see paragraph 3.5).

The FCA says MCOB does “not require firms to inform customers about breathing space specifically, but a firm may choose to do so” (see paragraph 3.7).

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Butterworths Financial Regulation Service – updated commentary on CONC and BCOBS, and new commentary on BCOBS 4 and 5, published

Issue 115 of Butterworths Financial Regulation Service has now been published. I’ve written new chapters on BCOBS 4 and BCOBS 5. I’ve also reviewed and revised the existing chapters in BCOBS and in CONC. The commentary is up to date to December 2020.

The changes include:

– revising the commentary in CONC to reflect latest COVID-19 guidance from the FCA;

– updating the commentary in CONC to consider the changes to commission disclosure, including analysing the meaning of the ‘nature’ of commission; and

– considering the changes to both CONC and BCOBS as a result of Brexit.

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

Issue 113 of Butterworths Financial Regulation Service has now been published. I’ve written a new chapter on CONC 8, and reviewed and revised the existing chapters on CONC (including adding the latest COVID-19 guidance published by the Financial Conduct Authority).

I’ve also written new chapters on MCOB 2A, 3B, 4A and 6A, and reviewed and revised the existing chapters on MCOB.

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

– an introductory chapter on BCOBS; and

– commentary on BCOBS 1, 2, 2A and 3.

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FCA announces further proposals to support consumer credit customers impacted by COVID-19

Earlier today, on 4 November 2020, the UK Financial Conduct Authority published a press release setting out its further proposals to support consumer credit customers impacted by COVID-19.

There is:

– a draft updated guidance for consumer credit firms;

– a draft further updated temporary guidance for personal loans;

– a draft further updated temporary guidance for credit cards (including retail revolving credit cards);

– a draft further updated temporary guidance for motor finance;

– a draft further updated temporary guidance for high-cost short-term credit;

– a draft further updated temporary guidance for rent-to-own, buy-now pay-later and pawnbroking agreements; and

– a draft Consumer Credit Instrument updating provisions in CONC 6.7 and 7.3.

The FCA proposes:

– those who have not yet had a payment deferral will be eligible for two payment deferrals of up to six months in total;

– those who have had one payment deferral, will be eligible for another payment deferral of up to three months;

– those with high-cost short-term credit agreements, who have not yet had a deferral, can ask for a one month deferral but no more;

– to allow customers until 31 January 2021 to ask for a payment deferral;

– if a customer has restarted payments after a deferral, they are not entitled to another deferral but should receive tailored support if they are experiencing payment difficulties.

– if customers can afford to make repayments then they should continue to do so;

– borrowers should hold off contacting their lender until the enhanced measures are in place;

– lenders should hold off repossessions of goods, unless there are exceptional circumstances, until 31 January 2021; and

The FCA also proposes to maintain the existing position on overdrafts and premium finance.

The FCA has invited comments by 10am on 6 November 2020.

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FCA to announce further support for consumer credit borrowers impacted by COVID-19

On 2 November 2020, and following the Prime Minister’s announcement of a further month-long lockdown for England, the UK Financial Conduct Authority issued a press release saying it will announce further support for consumer credit customers impacted by COVID-19.

It seems likely that:

– If a borrower has not yet had deferral already because they are unable to make their repayments because of COVID-19, they will be entitled to ask for a deferral. This could last (depending on the product) for up to six months.

– If a borrower (other than one under a high-cost short-term credit agreement) has already had a payment deferral because of COVID-19, they will be entitled to ask for another deferral.

– If a borrower has already had already benefitted from payment deferrals, and are still unable to make their repayments because of COVID-19, they will need to contact their lender for ‘tailored support’.

The FCA reminds borrowers that “consumer credit customers who can afford to do so continue to make repayments. Borrowers should only take up this support if they need it”.

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FCA to announce further support for mortgage borrowers

On 31 October 2020, and following the Prime Minister’s announcement of a further month-long lockdown for England, the UK Financial Conduct Authority issued a press release saying it will announce further support for mortgage borrowers on 2 November 2020.

It seems likely that:

– If a mortgage borrower has not had deferral already because they are unable to make their repayments because of COVID-19, they will be entitled to ask for deferral of up to six months.

– If a mortgage borrower has already had a payment deferral because of COVID-19 of less than six months, they will be entitled to ask for another deferral so the maximum total deferral is six months.

– If a mortgage borrower has already had a payment deferral because of COVID-19 of six months, and are still unable to make their repayments because of COVID-19, they will need to contact their lender for ‘tailored support’.

The FCA is also considering the implications of this approach for the consumer credit industry.

UK Finance and the Building Societies Association have published a joint press release following the announcement.