The regulatory experts at Gowling WLG provide their bite size overviews of the major legal and regulatory developments and news for the consumer, asset and automotive finance sectors
Reaction to Brexit vote
In the immediate aftermath of the Brexit vote, the Governor of the Bank of England, the Director General of the FLA and the FCA each issued statements reacting to the vote. Common themes included the emphasis that the short term effects of Brexit would be minimal and that, for the meantime, the message was very much 'business as usual'.
This was followed by a statement on 29 June by the business secretary, Sajid Javid. In this Mr Javid emphasised that the UK remained a member of the EU and the single market and that government would look to maximise the opportunities afforded by Brexit whilst simultaneously ensuring that this access is protected.
Speech by the Governor of the Bank of England
Following on from this, on 30 June Mark Carney gave a second speech stressing that "the question is not whether the UK will adjust but rather how quickly and how well".
He went on to reemphasise that the Bank of England has a plan in place to support jobs and growth during the looming period of uncertainty, but that monetary policy would not be able to fully offset the negative shock to the economy caused by the Brexit vote.
FCA review of crowdfunding cites regulatory arbitrage as key concern
The FCA has carried out a post-implementation review of the crowdfunding rules which were introduced in 2014. The review looks into both loan-based and investment-based crowdfunding, and highlights a number of concerns with the P2P sector.
Foremost among these is the fear that the 'blurred lines' between loan-based crowdfunding and other business models creates the risk of regulatory arbitrage. This review is seen as a reaction to concerns amongst financial services providers regarding imbalances in the regulatory system.
The deadline for responses is 8 September.
Eurofinas releases new publication
The European Federation of Finance House Associations, Eurofinas, released a publication entitled 'Helping Borrowers with their Financial Situation' on 14 June.
In the document, Eurofinas sets out a number of initiatives to assist consumers with the budget, including a budget tool called Monitorata, and a service website for consumers called 'Kredit mit Verantwortung' (Credit with Responsibility), a not-for-profit website explaining key features of responsible lending and borrowing.
New corporate offence of failing to prevent the criminal facilitation of tax evasion
The Government has released draft legislation and guidance for a proposed new offence of failing to prevent the criminal facilitation of tax evasion. The new law will have three stages:
- Criminal tax evasion by the taxpayer (legal or natural persons) under existing criminal law;
- Criminal facilitation of this offence by an associated person;
- Failure by the relevant body (to take appropriate action).
This facilitation could be done by a person acting in the capacity of a person associated with the corporation, defined as 'someone acting on its behalf'.
BACs produces summary of Q1 survey of fraud in Direct Debit Guarantee scheme
The body responsible for ensuring the integrity of the Direct Debit system, BACS, has produced a summary of the findings of a Q1 survey on the level of fraudulent abuse of the Direct Debit Guarantee scheme. It found that abuse occurred in around 22% of Direct Debit indemnity claims, representing 9% of the value of those refunded Direct Debits.
Complaints handling changes took effect on 30 June
New complaint handling changes came into effect on 30 June. The most important changes are:
- Extending the 'next day business rule' for less formal complaint handling to three business days;
- A new 'summary resolution communication' in relation to FOS rights and a new complaints return, which will require firms to send data to the FCA twice a year; and
- The requirement to report all complaints including those handled within three days.
FCA regulated fees and levies
Following feedback on CP16/9 and 'made rules', the FCA has announced that there will be no change to minimum fees for limited permission and full permission firms, nor to the variable fee for limited permission firms but an increase to the 2014 full permission variable fee of £0.78 by £0.52 to £1.30 (68%).
FCA Regulation update
On 15 June the FCA hosted an event providing updates on its supervisory and policy work. Various issues were discussed, including:
- An update on authorisations;
- Supervision and what it will mean for newly authorised firms;
- An update on the expected reporting dates for Thematic Reviews on Staff Remuneration (Q3 2016) and Early Arrears (Q4 2016);
- Background information on the work of the Unauthorised Business Department; and on-going consumer credit policy work covering remuneration of credit brokers;
- Credit worthiness and affordability research and the use of default notices in guarantees.
Financial Ombudsman Annual Review
The Financial Ombudsman Service's 2015/2016 Annual Review has been published. It revealed that the Ombudsman took 1,631,955 enquiries from customers, one in five of which went to a more detailed investigation. 75% of people whose complaints were resolved rated the service positively.
Interestingly, the report revealed that more than half of the total number of complaints received involved four banking groups - while 4,076 financial businesses accounted for just 3% of complaints.
European Parliament Report on securitisation and publication of the Financial Stability Board's shadow banking peer review
A Working Document on the European Commission's proposed simple, transparent and standardised (STS) securitisation framework was published on 19 May. The G20's Financial Stability Board (FSB) has also issued a report making a number of recommendations to the FSB and FSB jurisdictions, including establishing a systematic process involving all relevant domestic authorities to assess the shadow banking risks posed by non-bank financial activities or entities. The report also discusses removing impediments to cooperation and information sharing between authorities including on a cross-border basis.
FCA publishes Policy Statement giving feedback to main issues from consultation paper on Consumer Credit
In Policy Statement 16/15, the FCA has provided feedback on Consultation Paper 15/33 'Consumer credit: proposals in response to the CMA's recommendations on high-cost short-term credit (HCSTC)'.
The Policy Statement includes final rules for price comparison websites which compare HCSTC products, which come into force on 1 December 2016. Other areas covered include quotation searches and the role they can play across the wider consumer credit markets.
The FCA has agreed to undertake joint research, in collaboration with the BBA and UK Cards, on the extent to which recent market innovations in quotation search tools facilitate the ability for consumers to shop around, and identify areas for further enhancements.
Call for Evidence on improving consumer switching
The Government has produced a Call for Evidence on Improving the Consumer Landscape and Quicker Switching. Among other things, the document examines how switching suppliers can be made quicker across all sectors, including mortgages.
One of the proposals considered is whether the current typical period of four to seven weeks to switch a mortgage could be reduced to seven days.
General Data Protection Regulation finalised
The General Data Protection Regulation was finalised and must be implemented by 25 May 2018 (on the assumption that the UK's withdrawal from the EU has not completed by this date).
The Regulation contains a number of onerous obligations which will take some time to prepare for. This includes expanding the territorial reach of data protection legislation to data controllers and processors outside the EU who are monitoring the behaviour of EU subjects, or offering goods and services to the EU.
The Department of Culture Media and Sport will lead the implementation process, which is expected to include a consultation in the autumn.
Money Advice Service issues revised 2016/17 business plan
Following on from the March 2016 Public Financial Guidance Review recommendation that the Money Advice Service (MAS) be replaced with a new, slimmed-down Money Guidance Body, the Money Advice Service has launched its revised 2016/17 business plan.
The plan focuses on developing robust evidence of 'what works' to improve financial decisions, through innovative trials and pilots delivered by third-party organisations. The plan also looks at ensuring that the transition to the new body is as effective as possible, in co-ordination with the Treasury and the FCA.
Revised FLA Business Finance Code approved
At the FLA's AGM on 17 May 2016 the revised Business Finance Code was approved, along with the associated guidance and non-bind guidance for intermediaries. The Code contains five key commitments:
- Treat customers fairly and follow all relevant laws and regulations;
- Take reasonable steps to encourage responsible trading between intermediaries and customers;
- Provide customers with appropriate and timely information about the business finance agreement, including the options available at expiry or termination, in a manner which is clear, understandable and not misleading;
- Provide effective and accessible customer service throughout the period of the finance agreement;
- Operate an effective complaints procedure and ensure this is transparent and easily accessible for customers.
House of Commons Committee of Public Accounts (PAC) publishes report into Financial Services mis-selling
The report criticises the Financial Conduct Authority, HM Treasury and Financial Ombudsman Service for being too slow in taking responsibility for the PPI mis-selling episode and makes six recommendations for further action, namely:
- HM Treasury and the Ministry of Justice should report publicly on the effectiveness of their actions in reducing the role of claims management companies in PPI compensation;
- By the end of July 2016, the Financial Services Ombudsman should set out publicly a clear timetable for reducing and ultimately eliminating its backlog of PPI claims;
- The FCA should outline the actions it will take to improve cultures in financial services firms, and report to us on their effectiveness in a year's time;
- The FCA should set out what more it will do ensure firms check consumer understanding of the products they purchase and of their rights to claim compensation, particularly for vulnerable consumers;
- HM Treasury and the FCA should develop 'real-time' indicators of the extent of mis-selling;
- HM Treasury should outline a timetable for proposing legislation to give the NAO access to information.
Details of enforcement actions in Q1 2016 taken by the Claims Management Regulator
The report reveals that in the first quarter of 2016 the regulator took the following action:
- 13 investigations started
- 1 licence cancelled
- 84 warnings issued
- 75 audits carried out
- 299 visits conducted
FCA Occasional Paper on access to financial services in the UK
The FCA has released an Occasional Paper on Access to Financial Services in the UK.
It looks to engender discussion and 'foster a culture of access and inclusion throughout retail financial services'. Whilst recognising that consumers do not have an absolute right of access to financial services, the paper identifies a number of issues which may affect consumers' ability to access such services.
These include product complexity, quality of communication, physical barriers to access, poor digital literacy and limited internet access.
Report into cyber crime released
The CityUK cyber taskforce has released a report into cyber crime, which sets out an action plan to make the financial and professional services in the UK more aware and resistant to cyber-attack. It highlights three types of attack: against individuals, firms and the financial system.
The report also lists a number of actions and recommendations, including a ten-point cyber check list for boards.
FCA publishes feedback statement on responsible lending in the mortgage market
The FCA has released Feedback Statement 16/3 on its earlier Call for Input on Competition in the Mortgage Market. In the statement, the FCA reveals that it has decided to undertake a targeted market study focused on consumers' ability to make effective choices. There will also be three other pieces of follow up work looking specifically at the themes emerging from the Call for Feedback:
- Contributing to the next phase of the Council of Mortgage Lenders (CML) and Which? work on the transparency of mortgage fees and charges, with the aim of ensuring that relevant concerns raised by stakeholders during the CfI are appropriately taken into account;
- Acting on specific aspects of the FCA's current regulatory regime where there is a case for change to improve competition - and considering the effect of our regulatory regime in the course of our planned competition work; and
- Working with industry to increase competition law awareness in the sector.
In case you missed it...
Gowling WLG's lawyers give their one-stop shop on all things Brexit at our Brexit Untangled page, where you will find detailed insight from lawyers in a wide of range of different sectors.
Greg Standing considers the particular implications of Brexit on the automotive sector in his most recent update. Greg has also recently written on the new General Data Protection Regulation and the recent developments on increased accountability of individuals in finance services firms.
Our latest insolvency litigation briefing considers Hosking & McKay (as joint liquidators of Hellas Telecommunications (Luxembourg) II SCA (In Liquidation) v Slaughter & May (a firm), in which it was held that liquidators cannot have expenses already agreed by administrators to be assessed by the court. You can also see the May update here.
The case of Brookman v Welcome Finance Services Limited, which looks at quantifying redress for failure to disclose PPI commission, is the subject of an update by Greg Standing previously published in Motor Finance magazine.
Last month's finance litigation briefing looks at the case of Nelmes v NRAM PLC on an unfair relationship following non-disclosure of commission payment, as well as other cases.
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