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.
Financial Conduct Authority decides to take action on certain motor finance commission complaints
🚨 So yesterday was an interesting (and busy) day for motor finance lenders and dealers. Firstly, the FCA decided to intervene into motor finance commission complaints. Secondly, two Ombudsman decisions were published on discretionary commission arrangements entered into before 28 January 2021.
🗞️ So what happened?
✍️ The FCA published a webpage about motor finance commission complaints and a press release too.
✋The FCA has paused the 8 week deadline for responding to motor finance complaints where (a) there was a discretionary commission model in place for an agreement before 28 January 2021 and (b) the complaint was made on or after 17 November. This pause lasts until 25 September 2024.
🤔 The lack of any consultation means there are many unanswered questions. For example, what happens to letters of claim? Is there any impact on litigation cases? And what steps should firms take to investigate paused complaints (the Ombudsman has already been in touch on that!).
🕵️ The FCA is using its powers under Section 166. This means some firms will have a skilled person looking into their practices. We know from our clients that meetings are already being booked in today and on Monday.
🪧 But what has the Ombudsman done?
The Financial Ombudsman Service has issued two detailed decisions from an Ombudsman upholding complaints (and one which was not upheld). They both conclude that discretionary commission models are unfair and the customer should effectively only pay the interest at the rate at which the dealer would receive no commission.
There’s much to say on this but some initial points:
(a) It hard to reconcile that guidance and a principle meant that firms should have done significantly more than CONC 4.5.3R required (either before or after the changes in 2021
(b) The approach bears very little resemblance to our experience of dealing with hundreds of similar claims before the Court.
(c) The proposal on redress takes no account of the complexity and reality of a customer’s decision to get a car on finance.
📋 So, what next?
Given it’s fashionable to do three point slogans then mine is: reflect on the developments, prepare for next steps (including, probably, more customer communications) and clearly decide and implement your strategy.
FCA publishes policy statement and finalised guidance on its Consumer Duty for retail firms
On 27 July 2022, the UK Financial Conduct Authority published a press release, a webpage, a policy statement and finalised guidance on its consumer duty for retail firms. The FCA is clear that it will “set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first“.
Together with my fellow partners, Noline Matemera and Robin Penfold, we’ve prepared a one page infographic on six key takeaways:
There is no doubt that there is a lot of work for firms to do between now and implementation.
FCA urges consumers struggling with price rises to seek help
On 6 July 2022, the UK Financial Conduct Authority published a press release urging consumers struggling with rising prices to seek help from their lenders. This press release follows the publication of a recent ‘Dear CEO’ letter, and press release, to consumer lenders.
The FCA and MoneyHelper are urging consumers to:
– contact their lenders if they are struggling to make their payments;
– contact MoneyHelper if they are worried about money
The FCA and MoneyHelper have also published five top tops:
– open up and talk to someone about your challenges
– work out your debts
– prioritise your debts
– shop around for affordable credit
– set a budget
This press release is in a long line of financial difficulty communications from the FCA. 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 publishes financial promotion case studies
On 9 July 2021, the UK Financial Conduct Authority published financial promotion case studies (which were updated in October 2021). The FCA said it recognised “the need to provide information for firms to understand the financial promotions rules that apply to particular products and services“.
It has therefore published two short video case studies:
– the first is a case study for a hire purchase agreement which includes common mistakes the FCA often sees firms making; and
– the second is a case study for claims management companies offering their services for financial service products which includes common mistakes the FCA often sees firms making.
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 urges Claims Management Companies and High Cost Lenders to work better together
On 31 March 2021, the UK Financial Conduct Authority published a news story encouraging claims management companies (‘CMCs’) and high cost credit lenders (‘HCC lenders’) to work better together.
The FCA is aware of:
– some CMCs having presented a claim to a HCC lender where the customer had never taken out a loan with them;
– some HCC lenders suspending lending whilst the complaint is being investigated;
– some CMCs using ‘catch all’ letters of authority; and
– some HCC lenders being unwilling to share information efficiently.
The FCA has reminded CMCs that:
– they must not make or pursue a claim if they have reasonable grounds to suspect the claim does not have a good arguable base or is fraudulent, frivolous or vexatious;
– they should take “all reasonable steps to investigate the existence and merits of each element of a potential claim” before making or pursuing a claim; and
– their investigations should enable them to make representations when presenting a claim which: (i) substantiate the basis of the claim; (ii) relate to the nature of the claim and are specific to the claim; and (iii) are not false, misleading or an exaggeration.
FCA updates its webpage on its duty of care consultation
On 15 March 2021, the Financial Conduct Authority updated its webpage on its duty of care consultation and other possible approaches. The webpage now says the FCA aims to “consult on options for change in May 2021”.
FCA publishes portfolio letter to debt purchasers, debt collectors and debt administrators
On 18 January 2021, the FCA published a ‘portfolio letter’ to debt purchasers, debt collectors and debt administrators.
The FCA identified seven key ways in which consumers may be harmed:
– firms failing to recognise and address the needs and challenges facing vulnerable consumers and failing to ensure they obtain the same fair outcomes as other consumers;
– consumers’ needs not being adequately assessed meaning consumers may not receive appropriate forbearance;
– consumers not receiving clear information about, or resolution to, their dispute or complaint and being incorrectly pursued for debts;
– firms taking disproportionate action when seeking to pursue a judgment (for example, seeking judgment where a consumer is vulnerable);
– firms continuing to seek or accept payments on extinguished debts; and
– firms exhausting all available resources, failing to meet its obligations and existing the market in a disorderly fashion.
The FCA said it will focus its work on:
– firms’ treatment of customers (particularly on vulnerable customers, forbearance and due consideration and disputed debts);
– firms pursuing litigation and unenforceable debts; and
– firms’ prudential resources.
The FCA has also reminded firms that when making a notification under Principle 11, firms should be aware of the requirements and guidance in SUP 15. These are important provisions which say, for example, that a notification should be made where there is a “significant” breach of the Consumer Credit Act 1974 and its regulations. The FCA also usefully gives some guidance on the types of situations where it expects to receive a notification.
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.