As part of its new three-year strategy to improve outcomes for consumers and markets, the FCA is also undertaking targeted supervision of principal firms across the whole financial services sector, using improved data and analytical tools to focus its work. It’s also increasing scrutiny on firms applying for authorisation and as they appoint ARs.
Duty is made up of an overarching principle and new rules firms will have to follow. It will mean that consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.
While the Bank of England interest rate increased to a 13-year high of 1.25%, the rate is widely expected to increase further. While such a move may not impact existing fixed-rate finance agreements, the cost of finance for new borrowers is likely to rise as money costs rise. At the same time, as people's disposable incomes are eroded by rising costs, default levels are set to increase, something the Bank of England has already forecast for unsecured loans.
There can be no doubt that the proposals will require significantly more time, effort and cost for dealers. It will also mean that principals, as the regulator recognises, will require sufficient resources to maintain the "adequate" controls required. Indeed the FCA references the need for principals to have the necessary people, processes, technology, facilities and information and, by implication, financial backing to oversee the AR's activities and potential liabilities.
The FCA said that it would generally expect firms with a direct relationship with the end user to have greatest responsibility under the Consumer Duty; dealers and brokers need to be thinking about how well their existing model embraces the outcomes sought by the FCA. These are the governance of products and services, price and value, consumer understanding and consumer support.
Advice comes from iStoreDOCS following news of the introduction of a new Consumer Duty by the Financial Conduct Authority, which will be backed by a data-led approach for intervention on practices that do not support customers. Dealers and brokers who fail to meet compliance standards face large fines or the removal of their permission to sell financial products.
Support continues to be available for those experiencing financial difficulties because of coronavirus. This could mean taking a payment holiday or receiving tailored support and applies to motor finance, including hire-purchase and leasing agreements.
Consumer credit firms will be able to repossess goods and vehicles from 31 January 2021. However, this should only be as a last resort, and subject to complying with relevant government public health guidelines and regulations, for example on social distancing and shielding.
FCA said it is important that borrowers who can afford to make repayments continue to do so and urged consumers not to contact their lender until the enhanced measures are in place. Lenders will soon provide further information. Under the FCA’s proposals, borrowers would have until 31 January 2021 to request an initial payment deferral.
A survey of more than 7,000 people, conducted by the FCA during the Coronavirus pandemic, found 12 million people in the UK had low financial resilience, meaning they may struggle with bills or loan repayments. The data shows 2 million of those who are not financially resilient have become so since February. The FCA has put in place a package of support for people in difficulty to ensure help is available after 31 October
A move to short and daily rental highlighted in the latest LBF Quarterly Research is likely to be down to the current period of uncertainty as customers are reluctant to sign up to long contracts. Brokers have experienced more demand for shorter term solutions from businesses as well as consumers
New guidance from the Financial Conduct Authority covers users of credit cards and other revolving credit, personal loans, motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products and overdrafts.
The FCA's January deadline is only a few months away and more uniform processes and disclosures may prove to be a much more difficult task than first imagined. Lenders have different commission models across their product ranges and as such the ‘nature’ of these, to use an FCA term, needs to be disclosed against each of them.
FCA proposes that customers buying a policy online should be charged the same price as a new customer buying online. Firms would be free to set new business prices, but they would be prevented from gradually increasing the renewal price to consumers over time (known as 'price walking') other than in line with changes in customers’ risk.
Quotevine Chief Executive Daniel Layne said some concerns remain over areas of the ban, and more clarity is needed – including specific definitions around which vehicles it applies to – as well as the potential for unintended consequences such as dealers exploiting the loophole left by excluding personal contract hire (PCH) from the changes, in order to make up lost revenue.