Consultation launched on guidance for fair treatment of vulnerable customers
The FCA has launched a consultation on proposed guidance for firms on the fair treatment of vulnerable customers. The guidance sets out what the regulator believes is required of firms, according to the FCA Principles. The aim is to ensure vulnerable customers are consistently treated fairly across financial service sectors, with this embedded firmly in the culture of all firms.
Organisations will need to think about what the guidance means for them and their customers, and what they’re doing to understand and support the needs of vulnerable customers at all levels of the business. The regulator is consulting on the guidance in two stages, asking for comments on the first stage by 4th October 2019.
Report on alternatives to high-cost credit
Following its review of the high-cost credit market, which identified significant potential harm to consumers, the FCA has published a report into the alternatives available to consumers. In its November 2018 Consultation Paper the regulator highlighted that consumers who turn to high cost credit due to being unable to access mainstream credit options may be experiencing detriment. Now the regulator has published an update on the key issues identified in that paper.
The report covers the following:
- An examination of the alternatives to high-cost credit, looking at consumer demand and the availability of credit and non-credit options
- The action the regulator has taken following its high-cost credit activity, published at the end of 2018
- An explanation of the FCA’s role, and the role of other regulators, in supporting alternatives to high-cost credit.
The report sets out the ways in which the FCA will promote the availability and awareness of alternatives. But it also recognises that, due to its remit, it isn’t always the most appropriate authority to address some of the issues around alternatives to high-cost credit. They suggest that others, such as the Money and Pensions Service, take the lead in many areas.
FCA responds to latest report from the Complaints Commissioner
The FCA has reviewed the findings in the latest report from the Complaints Commissioner’s Office. In 2018-2019 the FCA received 1,075 complaints against it, almost double the number from previous years. The regulator puts this down to two firms which went into administration, prompting 550 complaints from their investors.
A complaint can contain several allegations, which are investigated individually. The 1,075 complaints consisted of 1,584 allegations, 967 of which have been closed. Of the 967 investigations closed:
- 130 were upheld or partially upheld, meaning the FCA agreed with all or some of the allegations made
- 249 were not upheld, where the FCA has not agreed with the allegations
- 352 were deferred, as the complaint related to an ongoing action by regulators
- 236 were not investigated, for various reasons, e.g. the allegations were outside the scope of the complaints scheme, or the allegation was better pursued through legal proceedings.
Provider fined £30 million for non-advised pension sales failures
A provider has been fined £30,792,500 by the FCA for failures related to the non-advised sale of annuities. The complexity of annuities means that customers need accurate information when choosing to buy. This is especially the case for non-advised sales.
The provider did not have adequate controls in place to monitor and ensure the quality of calls between its call handlers and non-advised customers. What’s more, the organisation offered call staff financial incentives to sell annuities, encouraging them to prioritise their own interests over those of the customers they were serving and giving rise to the risk of customers purchasing a product that was unsuitable for their needs.
Feedback statement on fair pricing in financial services
Following its discussion paper from October 2018, the FCA has published a feedback statement to set out its thinking about the issue of fair pricing throughout financial services. In the discussion paper the regulator set out a framework for assessing the fairness of pricing practices, and gave its view on the fair pricing in retail markets. The feedback received related to three key themes:
- Feedback about the questions in the framework.
- How the framework will be applied in practice, including how the FCA intends to address any harm it identifies.
- How it intends to embed its thinking into its regulatory approach, and what it will require of firms.
The first application of the framework will be in the General Insurance Pricing Practices Market Study, from which the regulator will publish the findings later this year. The FCA will also begin to formally embed its thinking into its regulatory approach, reviewing its principles as part of its Handbook Review.
A further Discussion Paper on the review of the FCA’s principles is scheduled to be published in Q4 2019/20.
Summary published on preparing your firm for Brexit
The FCA has published a factsheet summarising what’s currently known about Brexit preparations for financial services firms. As the UK will leave the EU without an implementation period on 31 October if no deal is agreed (a so-called ‘Hard Brexit’), the regulator has provided information and guidance around the following topics:
- Doing business in the EEA
- Passporting into the UK and the Temporary Permissions Regime (TPR)
- Being aware of regulatory changes that affect your firm
- Servicing customers in the EEA as a UK firm
- Contacting customers affected by Brexit
While the advice the FCA shares isn’t necessarily new, the factsheet compiles useful links and information into one place.
MoU between FCA and Bank of England published
The regulator has published an updated memorandum of understanding (MoU) between the FCA and the Bank of England (when exercising its functions through the Prudential Regulation Authority (PRA)). The MoU was first agreed in 2013. It establishes a framework for the PRA and FCA to work together in carrying out their responsibilities. The updated version sees changes to reflect the expansion of the regulators’ remit, as well as organisational changes since 2013.
The title of the MoU has also been changed to reflect the PRA becoming fully integrated into the Bank of England.