Consumer finance regulatory news, 1 April 2021

FIG Bulletin

Recent regulatory developments of interest to financial institutions with focus on consumer finance. Includes updates from the FCA and LSB. See also our Related Materials links for updates with broader application.

Contents

Following a seasonal break, the next update will be published on 19 April 2021.

COVID-19: FCA updates mortgage guidance and reports on mortgage and consumer credit firms' implementation of tailored support guidance

On 25 March 2021, the UK Financial Conduct Authority (FCA) published updated Finalised Guidance on Mortgages and Coronavirus: Tailored Support Guidance. The updated guidance sets out the FCA's expectations on repossessions from 1 April 2021.

The changes include that from 1 April 2021, subject to any relevant government restrictions on repossessions, firms may enforce repossession provided they act in accordance with the guidance, chapter 13 of the Mortgages and Home Finance: Conduct of Business sourcebook (MCOB 13), and relevant regulatory and legislative requirements.

Also, firms should have appropriate policies and procedures for the fair treatment of vulnerable customers and consider the needs of customers with protected characteristics under the Equality Act 2010. They should also consider whether any customer, or a member of their household, is at greater risk of harm from COVID-19 if they are required to vacate the property. Where this is the case, repossession should not be enforced until those risks have passed or can be appropriately managed.

The FCA consulted on the guidance earlier in March 2021. It summarises the feedback received and its response in a feedback statement (FS21/6). The updated guidance is unchanged from that proposed in the consultation.

The FCA has also published the key findings from its review of mortgage and consumer credit firms' implementation of its Tailored Support Guidance and firms' operational readiness to support customers in financial difficulty. It found that firms have progressed well in implementing the guidance. To follow up on its findings, the FCA will be implementing a workplan over the next year to assess whether firms are effectively implementing their policies and procedures. Where it has identified concerns with a firm's approach, the FCA states that it will follow up through the usual course of its supervisory work, taking robust action to stop and prevent harm.

Claims management companies and high cost lenders: FCA statement

The FCA has published a press release urging claims management companies (CMCs) and high cost lenders (HCLs) to work better together. The FCA states that it has become aware of tensions between CMCs and HCLs arising from CMCs handling customers' complaints against HCLs. It provides examples of some of the issues that have caused tension, including HCLs suspending lending to clients making complaints while a claim is being investigated, the use by CMCs of "catch all'" letters of authority to pursue claims against more than one HCL and an unwillingness by HCLs to share information efficiently with CMCs that are exploring potential claims.

The FCA reminds HCLs and CMCs that it expects them to work together to resolve disputes and disagreements in the interest of their customers and it encourages CMCs and HCLs to agree streamlined claims handling processes with each other, where possible. Firms should have regard to previous decisions of the Financial Ombudsman Service when they are dealing with complaints.

The FCA also reminds 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 that substantiate the basis of the claim, relate to the nature of the claim and are specific to the claim and are not false, misleading or an exaggeration.

The FCA states that all firms should consider the points in its statement to ensure consumers' interests are not compromised and to ensure firms can demonstrate they comply with FCA rules. It also reminds firms of its Dear CEO portfolio letters relating to HCLs and CMCs.

Credit card market remedies: LSB summary report on thematic review

The Lending Standards Board (LSB) has published a summary report on its review of how the package of remedies set out in the FCA's final report on the credit cards market has impacted consumers' use of their credit card. The FCA published its final report in July 2016.

Overall, the LSB concluded that the remedies were having a positive impact. Where breaches have been identified, this was in isolated cases and no industry-wide systemic non-compliance with the remedies was found. However, it did find a number of areas for improvement, which it details in its report.

The LSB suggests that further work is needed to draw out the effectiveness of the remedies, and that they should be included within its Standards of Lending Practice for personal customers. It also proposes that additional guidance should be formulated to draw out the expectations relating to the effective operation of the remedies. This guidance could be incorporated into the Information for Practitioners, which sits alongside the Standards of Lending Practice.

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Authored by Yvonne Clapham

 

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