On 25 March 2024, the UK Financial Conduct Authority published a new webpage listing all of the fines it has issued in 2024. The FCA will continue to update this webpage as and when it issues further fines throughout 2024. There are also links to similar webpages for earlier years.
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.
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.
FCA tells firms to improve their treatment of struggling small business borrowers
On 12 July 2022, the UK Financial Conduct Authority published a press release telling firms to improve their treatment of struggling small business borrowers together with (a) its review into small and medium enterprise collections and recoveries and (b) a ‘Dear Chair’ letter to firms.
The FCA reviewed the practices of eleven banks. It found a number of issues including:
– lenders not treating small businesses fairly when trying to agree sustainable payment plans (for example, arranging clearly unaffordable payment plans);
– staff not having the right training to provide effective support to consumers and to make fair decisions;
– lenders not having clear policies to help staff identify and support vulnerable customers; and
– not having quality assurance and testing for their processes to ensure that they deliver fair results for consumers.
The FCA has given feedback to individual firms. It has also written to the chairs of all retail banks with small business customers. The FCA makes it clear that their ’Dear Chair’ letter is based on the existing principles, rules and guidance. It reminds firms that it will not wait for the introduction of the consumer duty in 2023 to take action where it finds evidence of customer detriment.
The ‘Dear Chair’ letter makes it clear that “all regulated firms offering lending to individuals and relevant recipients of credit (“RRCs”) should consider the findings and recommendations and where necessary, act on them“. The FCA expects “accountable Senior Manager(s) to proactively engage to achieve good practice when overseeing SME collections and recoveries“.
The FCA has set out some of its expectations in the ‘Dear Chair’ letter. These include:
– Where borrowers are treated as if they have a regulated credit agreement, either by requirement or voluntarily, firms should be able to demonstrate they are meeting these standards.
– Policies and procedures are clear with adequate information to support staff to make judgements when required.
– Systems and controls should be arranged to help with the delivery of fair customer outcomes.
– Firms should be able to accurately maintain records and be able to use such records to test whether they have delivered fair outcomes. Firms should also be able to produce customer records without gaps in a timely manner;
– Firms should be able to demonstrate forbearance and due consideration are being offered in accordance with CONC 7.3.4R (where it applies).
– Where CONC 7.2.1R applies, the firm must establish and implement clear, effective and appropriate policies and procedures for the fair and appropriate treatment of customers, who the firm understands, or reasonably suspects, to be vulnerable.
– The management of third parties should be subject to a suitable risk framework that helps ensure fair treatment of SMEs
– The FCA encourages all firms to carry out both quality assurance and customer outcomes testing for customer processes. This assurance should follow a holistic approach so that the customer’s overall outcomes are understood and these are assessed for fairness. There should be clear evidence that root cause analysis is effectively identifying opportunities to improve customer outcomes.
– Staff should receive suitable training that equips them to effectively support SME customers to receive fair outcomes during collections and recoveries.
– Senior management should receive effective MI that allows holistic oversight of SME customer treatment during collections and recoveries
– Senior managers responsible for collections and recoveries should have suitable levels of awareness and oversight of SME customer matters including treatment during collections and recoveries.
The FCA is expected to publish its review of its final findings into firms’ provision of appropriate support to borrowers in financial difficulty both during and after the COVID-19 pandemic, and next steps. This publication is currently expected on Q3 2022.
FCA sends portfolio letter to mortgage third party administrators
On 10 August 2021, the UK Financial Conduct Authority published a portfolio letter it had sent to mortgage third party administrators.
This letter sets out that the FCA considers there are three areas of potential harm:
– customer treatment: firms need to particularly focus on vulnerable customers, ensuring appropriate forbearance and giving customers clear information on their complaints and why they are being pursued for debt.
– operational resilience: firms need to have adequate systems and controls, processes and policies in place, and the appropriate governance and oversight, to mitigate the risk of operational events.
– prudential resources: liquid resources are critical for a firm’s survival.
The FCA’s areas of focus for supervision will therefore be on:
– fair treatment of customers;
– vulnerable customers;
– operational resilience;
– financial resilience;
– forbearance and due consideration;
– senior managers and certificate regime;
– the FCA’s supervisory strategy; and
– regulatory reporting.
Whilst the focus of this letter is on mortgage third party administrators, other third party administrators (particularly those involved in consumer credit) read this portfolio letter and consider whether any further steps should be taken.
The FCA also wrote to firms outsourcing their mortgage activities reminding them of their obligations.
Financial Conduct Authority publishes terms of reference for mortgage prisoner review
Earlier today, on 20 July 2021, the UK Financial Conduct Authority published its terms of reference setting out the steps it proposes to take in its mortgage prisoner review.
The FCA estimates there are around 250,000 borrowers who have mortgages with ‘inactive firms’ (ie firms which are either not lending to new customers, or are not lenders). The FCA accepts that “[n]ot all of these borrowers are mortgage prisoners”. The FCA says mortgage prisoners are “borrowers who are unable to switch to a new mortgage deal despite being up to date with their mortgage payments and, depending on their loan and borrower risk characteristics, could potentially benefit from switching”.
The FCA intends to review two areas:
– a data review: this will review and update the FCA’s data to consider the demographic and loan characteristics of mortgage prisoners; and
– an interventions review: this will review the effectiveness of the FCA’s recent interventions to remove regulatory barriers to switching (focussing on the modified affordability assessments and the intra-group switching rule change).
The FCA expects to undertake its data review and analysis between July and October 2021. It also expects to engage with interested stakeholders between July and August 2021. The FCA expects to report to HM Treasury by the end of November 2021.
FCA publishes latest mortgage lending statistics
On 8 June 2021, the UK Financial Conduct Authority published its mortgage lending statistics for Q1 2021.
The FCA notes:
– the outstanding value of all residential mortgage loans was £1,561.8 billion at the end of Q1 2021 (3.6% higher than a year earlier);
– the value of gross mortgage advances in Q1 2021 was £83.3 billion (26.5% higher than in Q1 2020, and the highest level since Q4 2007); and
– the value of new mortgage commitments (lending agreed to be advanced in the coming months) was 15% higher than a year earlier at £77.5 billion.
FCA’s published board minutes show a review of its legal risk appetite
The UK Financial Conduct Authority has recently published the minutes for the board meeting held on 29 April 2021. Firms may be interested to see that the board was briefed on “concerns around whether the [FCA] has sufficient appetite for taking legal risks”.
The FCA’s board “recognised that legal risk was one of many factors to be considered when deciding on the appropriate action for the FCA to take”. It therefore supported proposals to “recalibrate the degree of legal risk the organisation is willing to take, how to implement this in practice and the inclusion of legal risk appetite/tolerance in the FCA’s Own Risk framework”.
It remains to be seen what impact this recalibration will have on the FCA’s approach to enforcement. But firms will need to remain alive to any changes to the FCA’s risk appetite.
FCA publishes updated information sheets (to be used from 25 October 2021)
On 24 March 2021, the UK Financial Conduct Authority published updated consumer credit information sheets for arrears and for defaults. These new information sheets must be used from (and including) 25 October 2021. The current information sheets should continue to be used up to (and including) 24 October 2021.
For copies of the new information sheets, please visit: https://www.fca.org.uk/firms/information-sheets-consumer-credit.
FCA publishes call for input for its review into change and innovation in the unsecured credit market
Earlier today, on 2 November 2020, the UK Financial Conduct Authority published a call for input asking for views on change and innovation in the unsecured credit market as part of its review on how regulation can better support a healthy unsecured lending market (called the ‘Woolard Review’).
The FCA has also published a dedicated webpage. The deadline for responses is 1 December 2020.