Cycle insurance provider gives undertaking to the FCA on the fairness of a term

On 26 June 2019, the UK Financial Conduct Authority published an undertaking given by ETA Services Limited about the fairness of a term in its cycle insurance policy. The undertaking was given under the Consumer Rights Act 2015.

The FCA’s concern was over the transparency of a term allowing ETA Services Limited to reject a claim if a bicycle had not been secured using an approved lock. This term appeared to conflict with another term saying a claim would be rejected if the bicycle had been left in a communal building and not secured to an immovable object (so no mention of an approved lock).

ETA Services Limited told the FCA that since 1 April 2019, the terms had been revised so that, to be covered, a bicycle needed to be secured using an approved lock when left in communal buildings. ETA Services Limited, and the insurer, also assured the FCA that redress had been paid to consumers who had claims rejected because they did not use an approved lock in communal areas.

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.

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).

ECJ decides an employer offering a loan to an employee is a supplier for the purposes of the Unfair Contract Terms Directive

On 21 March 2019, the European Court of Justice gave its decision in Pouvin v Electricité de France (Case C 590/17) on whether a French electricity provider (EDF) was a supplier for the purposes of the Unfair Contract Terms Directive (93/13/EEC) (the UCTD).  EDF provided a loan to one of its employees and his spouse to buy a house.  The ECJ decided EDF was acting for purposes relating to its “trade, business or profession” and was therefore a supplier for the purposes of the UCTD.  

Because the employee was classed as a consumer, the French court must therefore consider if the terms of the loan are fair under France’s laws implementing the UCTD.  The broad interpretation of the definition of “supplier” helped achieve the UCTD’s objective of protecting the consumer (as a weaker party) and making sure there was balance in the relationship.

FCA publishes its final report on the review of the retained provisions of the CCA

On 25 March 2019, the UK Financial Conduct Authority (the FCA) published a press release and its policy paper on its long-awaited ‘Review of retained provisions of the Consumer Credit Act 1974’ (the Paper). The Paper has been presented to the Government and follows on from the FCA’s interim report (published in August 2018).

The devil is, of course, always in the detail (particularly where consumer credit is concerned). However, and somewhat frustratingly, it appears the FCA’s views in the Paper broadly follows its views set out in the interim report.

For example, the FCA says certain ‘rights and protections’ need to be maintain in legislation (but some rights and protections could be transferred to the FCA’s handbook) (see Chapter 5). But it seems the awfully complex modifying agreement provisions in Section 82 of the Consumer Credit Act 1974 (the CCA), which have long-since passed their sell-by date and often cause lenders headaches when they want to do ‘the right thing’, will remain (see para 5.23).

Similarly, the FCA says the information requirements provide an “appropriate degree” of consumer protection and should be kept. But the impact of the sanctions, and some of the information, needs further consideration (see Chapters 6 and 7).

But what the Report overlooks is the fact that the current regime is complicated for both consumers and lenders (and the sanctions are more serious than those which apply to a mortgage lender). Even a very experienced Court of Appeal, in McGinn v Grangewood Securities Limited [2002] EWCA Civ 522, said (in para 1) that the appeal in that case raised “a number of issues under the [CCA] which has recently provided so much work for the courts. Like others, this case demonstrates the unsatisfactory state of the law at present. Simplification of a part of the law which is intended to protect consumers is surely long overdue so as to make it comprehensible to layman and lawyer alike. At present it is certainly not comprehensible to the former and is scarcely comprehensible to the latter“. Since that decision, we have had further significant changes in 2005, 2007/2008, 2011 and 2014 (none of which have made the regime any easier to understand). No doubt the Court of Appeal will have more to say on this in the future.

CMA leads Europe-wide action on car hire providers

On 25 March 2019, the UK Competition & Markets Authority published a press release announcing it had taken Europe-wide action against car rental providers to ensure they give consumers clear information about charges and other key information.

This work follows earlier work by the CMA in 2015.

The CMA’s action was based upon the Consumer Protection from Unfair Trading Regulations 2008 and the Consumer Rights Act 2015.

Interestingly, the CMA says if “a firm sells to UK customers, they do so under UK law and must answer to it” and it is “prepared to act if we find any that any company is misleading UK customers – be it based in the UK or abroad“.

High-cost short-term credit, Brexit and financial promotions – another decision from the ASA

On 20 March 2019, the Advertising Standards Agency (the ASA) published a decision deciding an advertising email sent by Cash On Go Limited t/a was irresponsible by saying “… no one really knows what’s going on with this whole Brexit malarkey … and some say it could affect the amount of food available … We do not want to believe that Brexit will impact the amount of food available but it’s still a good idea to have a little stockpile ready. That way you’re always prepared for the worst … Things can pop up even when you think everything is going swimmingly … That’s when you might need a little extra help“.

The ASA acknowledge the email used “a light hearted tone“, “did not use definitive language regarding the future” and “concluded that credit decisions should be made after careful consideration“. However, it considered the overall approach was likely to put “emotional pressure on readers” so they would “go further than they would otherwise have been able to afford by taking out a loan and that, if they did not, they risked being unable to feed themselves or their families“.

This is another robust decision by the ASA – it is starting to be increasingly more difficult to publish complaint financial promotions.

Speech by Jonathan Davidson on what the consumer credit sector can expect from the FCA

On 21 March 2019, the FCA’s Executive Director of Supervision – Retail and Authorisations, Jonathan Davidson, gave a speech on what the consumer credit sector can expect from the FCA.

There are some key messages including:

– There has been a lot of change in the sector.

– The FCA will continue to focus on affordability, business models and culture.

– Brexit will not change the way the sector is regulated.

– The FCA’s focus in the high-cost sector is on (a) re-lending and (b) affordability (particularly on guarantor lending).

– The Senior Manager & Ceritifcation Regime will help improve culture.

The speech ends by saying: “My top top for today is to keep ahead of the rules, you can invest in expensive tick box compliance or you can get on top of your culture., A healthy purposeful culture will be the best way to deliver value for you, your clients and your business”.

Private parking tickets in Scotland could “become fully enforceable” in Scotland

Private parking tickets apparently incurred by drivers often cause lenders under motor finance agreements some practical issues.

In England and Wales, the Protection from Freedoms Act 2012 came into force on 1 October 2012. It effectively banned clamping vehicles on private land but allowed landowners to pursue a vehicle’s registered keeper for unpaid parking charges (subject to certain conditions).

The position in Scotland is, however, different: parking charges on private land are not recoverable from the vehicle’s owner. However, The Courier has today claimed the Transport (Scotland) Bill (which is currently being considered by the Scottish Parliament) could change the position. It’s one for lenders to keep an eye on.