 Consumer Investments Package
The UK has one of the world’s leading financial services industries, offering consumers access to a wide range of investment products. In some areas, however, the consumer investment market is not working as well as it should. Too often, consumers are offered unsuitable advice or inappropriate products.
Protecting consumers and making sure they have confidence in the products and services they receive is a key priority for the FCA. We expect firms to meet our regulatory standards and play their part in reducing harm to consumers.
We’ve published our Consumer Investments 2020 Data Update, highlighting some of the work we’re doing in this area.
Our work from January to October 2020 included:
- almost 1 in 10 applications for authorisation stopped
- 1,500 supervisory cases looking at scams or higher-risk investments
- over 24,000 reports of unauthorised activity and over 1,000 consumer alerts published
We’re also calling on firms to ‘use it or lose it’ with regard to regulatory permissions. It’s crucial that firms notify us and amend their permissions as necessary. Incorrect or out-of-date permissions increase the risk of harm to consumers as they can mislead people about the level of protection offered or give credibility to unregulated activities.
We’ve also published an update on our work in the Defined Benefit (DB) pension transfers market. While this data shows some signs of improvement, this market is particularly susceptible to consumer harm and will continue to be one of our focus areas.
Restricting CMC charges for financial services and products claims
Competition Law
We recently uncovered evidence that suggested a potential competition law infringement by two trading venues. This related to a suggested/potential joint approach to commercialise market data. We issued formal ‘on notice’ letters to these firms.
Firms need to make sure they comply with competition law. We remind regulated firms of their duty to notify us if they have or believe they may have committed a significant infringement of competition law (under Sup 15.3.32 and following). We also encourage firms and individuals to use our whistleblowing regime.
For more information about our competition activities, please refer to the FCA’s Approach to Competition.
Publication of Directory Persons data for solo-regulated firms on the Financial Services Register
On 14 December 2020, we began publishing Directory Persons data for solo-regulated firms on the Financial Services Register. Solo-regulated firms must submit this data via Connect by 31 March 2021. Submissions of 10 persons or more using the multiple upload function must be done between 11 January and 18 March to make sure submissions are processed by the deadline. We’ll incrementally display data from solo-regulated firms as it is submitted. There are more details on our website.
Updating the Dual-regulated firms Remuneration Code
On 17 December 2020, we published a policy statement with our final rules on updating the Dual-regulated firms Remuneration Code and relevant non-Handbook guidance, to take account of the Capital Requirements Directive V (CRD V).
Our final rules and guidance on remuneration for dual-regulated firms remain broadly consistent with the Prudential Regulation Authority (PRA) in a way that supports our own objectives. Our changes help to make sure firms approach remuneration in a way that drives positive behaviours and healthy cultures, and deters behaviours that are likely to harm consumers or markets.
Daily updates
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Draft guidance on approach to repossessions
We’ve published draft guidance setting out our proposed approach to repossessions from 31 January 2021.
For mortgages, we’re proposing to extend our guidance so that firms should not enforce repossessions, except in exceptional circumstances, before 1 April 2021.
For consumer credit, we’re proposing that firms will be able to repossess goods and vehicles from 31 January 2021. This would be only as a last resort, and subject to complying with relevant government public health guidelines and regulations, for example on social distancing and shielding. Firms will also need to consider the impact on vulnerable consumers before taking repossession action.
Insurance – flood and storm damage
On 12 January 2021, we set out our expectations on the handling of insurance claims arising from flood and storm damage, in view of potential operational challenges presented by coronavirus (Covid-19) and the impact on customers. We expect insurers and firms who handle claims on insurers’ behalf to have sufficiently robust plans to continue to operate effectively when there is an increase in customer contact and claims volumes, and to handle and settle claims in line with our requirements. We also expect firms to recognise that some customers may be facing financial difficulty, and to respond appropriately to this when dealing with their claim.
Coronavirus Financial Resilience Survey
On 7 January 2021, we published the results of our coronavirus financial resilience surveys, which were sent to 23,000 regulated firms. The surveys are giving us insight into the real-time effect the pandemic is having on the finances of the firms we prudentially regulate. This will help us identify emerging risks of harm to consumers, the market and competition within it, and enable us to better mitigate those risks.
On 8 January, we also updated that we’re preparing to repeat this survey for the third time, with relevant firms receiving the survey between 13 and 19 January.
Updates to web statements
On 8 January, we updated our statement on Market Trading and Reporting to clarify our expectations on recording calls when working from home.
On 8 January, we updated our statement on Financial crime systems and controls during coronavirus situation to note that from 7 February 2021 this will no longer apply.
ISDA Protocol
The International Swaps and Derivatives Association (ISDA) has published its IBOR Fallbacks Protocol for adherence, which comes into effect on 25 January 2021. In light of the announcements made by IBA, LIBOR’s administrator, we remind firms that the Protocol is an important tool in facilitating transition for legacy derivative contracts to alternative rates when LIBOR ceases or is no longer representative. The FCA, Bank of England and Risk Free Rate Working Group strongly support and encourage early adoption of the Protocol among market participants, where appropriate. Globally, more than 5,000 entities are signed up to the protocol so far.
Debt Purchasers, Debt Collectors and Debt Administrators – Portfolio letter
We recently published our Debt Purchasers, Debt Collectors and Debt Administrators Portfolio Strategy Letter.
The letter sets out our supervisory strategy for firms and our view of the key risks debt purchase, debt collection and debt administration firms pose to their customers or the markets they operate in.
Firms should consider these risks and the degree to which their firm presents such risks, and assess their strategies for mitigating them.
Making Transfers Simpler
PS19/29 – Making Transfers Simpler sets out new rules to make sure consumers have the opportunity to request an in-specie transfer and, where necessary, a unit class conversion, when transferring between platforms.
The original deadline for the implementation of the new rules was 31 July 2020, but, in the light of the coronavirus (Covid-19) pandemic, the FCA Board extended the deadline to 1 February 2021. This deadline is not being extended further and firms should comply by 1 February.
These rules apply to all firms that provide a platform service, but are also relevant to asset managers, financial advisers and wealth managers.
Private motor insurance - CMA compliance report
If you’re a private motor insurance (PMI) provider or broker, each year you must, by law, submit a compliance report to the Competition and Markets Authority (CMA) by 1 February (the Annual PMI Compliance Statement). This obligation arises from the CMA’s Private Motor Insurance Market Investigation Order 2015.
The Annual PMI Compliance Statement should be submitted via the online form and by uploading the tables of ‘Average No Claims Bonus (NCB) Discounts’.
If you’re a PMI insurer or broker, please email the CMA at pmiformrequest@cma.gov.uk for more information about how to submit your compliance report.
Defined Benefit Advice Assessment Tool
We’ve published a Defined Benefit Advice Assessment Tool (DBAAT) which helps the market understand how we assess the suitability of Defined Benefit (DB) pension transfer advice.
The DBAAT is used to assess advice given before October 2020. In the coming months we’ll publish an updated tool that incorporates rule changes that came into force on 1 October 2020.
You can access the tool and find out more on our website.
Making Transfers Simpler
PS19/29 – Making Transfers Simpler sets out new rules to make sure consumers have the opportunity to request an in-specie transfer and, where necessary, a unit class conversion, when transferring between platforms.
The original deadline for the implementation of the new rules was 31 July 2020, but, in the light of the coronavirus (Covid-19) pandemic, the FCA Board extended the deadline to 1 February 2021. This deadline is not being extended further and firms should comply by 1 February.
These rules apply to all firms that provide a platform service, but are also relevant to asset managers, financial advisers and wealth managers.
Making Transfers Simpler
PS19/29 – Making Transfers Simpler sets out new rules to make sure consumers have the opportunity to request an in-specie transfer and, where necessary, a unit class conversion, when transferring between platforms.
The original deadline for the implementation of the new rules was 31 July 2020, but, in the light of the coronavirus (Covid-19) pandemic, the FCA Board extended the deadline to 1 February 2021. This deadline is not being extended further and firms should comply by 1 February.
These rules apply to all firms that provide a platform service, but are also relevant to asset managers, financial advisers and wealth managers.
Making Transfers Simpler
PS19/29 – Making Transfers Simpler sets out new rules to make sure consumers have the opportunity to request an in-specie transfer and, where necessary, a unit class conversion, when transferring between platforms.
The original deadline for the implementation of the new rules was 31 July 2020, but, in the light of the coronavirus (Covid-19) pandemic, the FCA Board extended the deadline to 1 February 2021. This deadline is not being extended further and firms should comply by 1 February.
These rules apply to all firms that provide a platform service, but are also relevant to asset managers, financial advisers and wealth managers.
Possible harm from side agreements
We’ve seen examples of motor finance broker-dealers issuing, without lender knowledge, letters to customers describing different provisions to those in the written agreement between customer and lender. These ‘side agreements’, for example specifying an earlier date when the customer may return the vehicle, may cause consumer harm.
We remind firms that they must comply with consumer credit legislation, and with our principles and rules (including CONC 2.5.3R, 3.3.1R, and 5.4.2R). Firms must treat customers fairly and make sure any communications about customer rights under a regulated credit agreement are clear, fair and not misleading.
Motor finance discretionary commission model ban
On 28 January 2021, PS20/8 will come into force, banning discretionary commission models in motor finance, and setting new commission disclosure rules.
Our work on motor finance identified widespread use of commission models that link brokers’ commission to the interest rate charged to the customer. Our findings also highlighted many incidences of firms not complying with our existing rules and guidance on the information they should disclose to customers.
Our supervisory work once the ban is in force will focus on those firms that we find to have either retained such models, or introduced models similar in nature to those we’ve sought to ban.
Debt Purchasers, Debt Collectors and Debt Administrators – Portfolio letter
We recently published our Debt Purchasers, Debt Collectors and Debt Administrators Portfolio Strategy Letter.
The letter sets out our supervisory strategy for firms and our view of the key risks debt purchase, debt collection and debt administration firms pose to their customers or the markets they operate in.
Firms should consider these risks and the degree to which their firm presents such risks, and assess their strategies for mitigating them.
Debt Purchasers, Debt Collectors and Debt Administrators – Portfolio letter
We recently published our Debt Purchasers, Debt Collectors and Debt Administrators Portfolio Strategy Letter.
The letter sets out our supervisory strategy for firms and our view of the key risks debt purchase, debt collection and debt administration firms pose to their customers or the markets they operate in.
Firms should consider these risks and the degree to which their firm presents such risks, and assess their strategies for mitigating them.
Digital Sandbox: showcase sessions
In November, we launched a pilot of the Digital Sandbox. The pilot is a 10-week programme supporting firms to develop innovative products and services, with a focus on solving challenges arising from the coronavirus (Covid-19) pandemic. Of 94 applicants, 30 were selected to take part, developing solutions for preventing fraud and scams, supporting vulnerable consumers, and improving access to finance for SMEs.
We’re hosting a series of showcase sessions on 8-10 February, where participants will present the solutions they’ve developed via livestream. We encourage any interested parties to register to view the sessions at www.digitalsandboxpilot.co.uk.
Lenders relying on static FCA Register Extract data
We’ve become aware that some lenders are relying solely on static Register Extract data to decide whether to deal with claims management companies (CMCs). However, the authorised status and permissions of firms can change daily. Relying on static data could delay customers’ claims and payment of redress where appropriate. It could also mean lenders unknowingly deal with unauthorised firms.
Lenders should always confirm the most up-to-date live status and permissions of the CMC on the FCA Register, to avoid such issues arising.
Restricting CMC charges for financial services and products claims
EEA transitional regimes
Several EEA states have introduced temporary measures for UK firms providing financial services in the EEA.
We’ve updated our information about Brexit from EEA regulators to include these temporary measures where they exist.
The list is not exhaustive, and firms doing business in the EEA should check directly with the relevant national regulator to make sure they act in accordance with their expectations and the jurisdiction’s local laws.
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