In today’s bulletin:
- General update
- CP24/19 submissions
- Vulnerability is not a buzzword
- Ombudsman update – H1 2024 complaints
- Collaborations
- Events
General update
PayPlan respond to The Insolvency Service report on early IVA failures
PayPlan reinforced the DEMSA position to The Insolvency Service and the FCA that there should be a distinction in the report between FCA-regulated debt solution providers and debt-packagers, as defined by the FCA under PS23/5 (debt packager rules).
They have also confirmed that they are an early adopter of the Consumer Duty Services (CDS) IVA sustainability score after being one of the initial data providers and pioneers in testing the API and score outcomes. John Fairhurst spoke at the event on 3 October 2024 and returns to the stage at the IPA conference on 28 November 2024 featured under ‘Events’ below.
Link: https://www.linkedin.com/pulse/comment-insolvency-service-research-report-ivas-payplan-vsz0e/
Consumer debt and mental health
Stakeholders have proposed future policy considerations, including integrating debt and mental health support, the role of financial technology and addressing wider systemic issues around financial resilience. Worth a review.
October is Cyber Security Awareness Month
Link: https://aryza.turtl.co/story/perspective-5-compliance/page/8/1
9 million people caught out by financial scams in the past year
Apparently, one in five people across the UK fell victim to a finance scam – such as a fake pension or investment opportunity – in the last year, Citizens Advice has revealed. The charity estimates 9m people have been affected.
Firm shut down for falsely offering ‘early resolution’ to IVA debt solutions
McKenzie Jones Associates charged fees to help end customers’ IVAs early. The company promised full refunds if IVAs did not reach an early solution, but investigators found no evidence that refunds were made. Investigation found the firm had taken almost £55,000 in fees for this service, but a lack of company records prevented its full financial position from being uncovered.
Emerging consumer trends: the challenge of modelling affordability
Some useful insights from 4most, who have supported events that Chris and I have run over the last 2 years through the cost-of-living crisis.
“Establishing affordability is complex but there are benefits to be derived from evaluating approaches and challenging assumptions considering the insights recent volatility has brought, both for customers and lenders.”
Link: https://4-most.co.uk/insights/emerging-consumer-trends-the-challenge-of-modelling-affordability/
Volkswagen – FCA intervention
Chris and I covered this in our webinar on 22 October 2024. It now feels like old news, but a continuation of the high-profile fines and redress being paid out by well-known financial services brands. I have summarised this above. The post is gaining traction.
Blog by Dylan Jones on PS24/2
A well-timed Blog by Dylan, in the same week that the CSA reminded their members of the imminent deadline of 4/11/2024. These align with many of the points covered by Chris and I on the webinar of 22 October 2024. Gareth attended and vocalized the important of data sharing and consistent I & E assessments.
The CSA has reminded all members of the significant updates to the CONC sourcebook taking effect on 4 November. They have reinforced that the changes are primarily designed to improve the support available to customers facing financial difficulties.
The revised CONC Handbook will introduce several new provisions aimed at ensuring that customers who are experiencing financial hardship receive more comprehensive and effective assistance.
Key changes include:
- Enhanced Communication Protocols: Firms will be required to adopt clearer and more empathetic communication strategies when dealing with customers in financial distress.
- Tailored Support Measures: There will be an emphasis on providing personalised support plans that address the specific needs and circumstances of each customer.
- Improved Access to Resources: Customers will have better access to financial advice and resources to help them manage their debts and financial challenges more effectively.
- Stricter Compliance Requirements: Firms must adhere to stricter guidelines to ensure they are fully compliant with the new regulations, thereby enhancing the overall quality of customer care.
DEMSA has extensively covered the changes in previous bulletins and regular recorded webinars.
If you would like access to these recordings and the one from 22 October 2024 then please drop Chris an email and we can issue a link with a coupon. Chris is copied on the visible circulation. We are currently initiating several gap analyses around the FCA Stage 2 Customer Support RFI, offered in previous bulletins.
CP24/19 submissions – deadline 31/10/2024
CP24/19 reflects the proposed changes to the FCA Consumer Credit Regulatory (CCR) returns. This applies to the permissions around Credit Broking, Debt Adjusting, Debt Counselling and providing Credit Information Services.
It is aligned with the ‘Big Data’ changes around PS24/3 (Product Sales Data) for lenders and debt buyers in 2025.
DEMSA has responded this week to the consultation. Some firms have had some direct feedback from the FCA where they are looking at questions where there may be some ambiguity around how to respond.
The changes are substantial and impacted firms received a link to the prototype form including the new ‘branching logic’. The only question that is mandatory is around the permissions you hold that drives the branching logic at the highest level.
The prototype allows users to understand the types of questions asked and the data items we would like to collect as well as to submit sample data for testing. We therefore anticipate the following benefits:
- Allowing you to better understand the branching logic of questions and visualise the future returns to provide valuable feedback.
- Enabling you to understand exactly which questions will be relevant and which would not.
- Enabling you to understand the context and supporting information for questions to aid your interpretation.
- Providing an opportunity to submit specific feedback on individual questions or sections.
- Helping us to identify any questions which may pose challenges for individual, or particular groups of, firms to submit in order to consider whether any improvements can be made.
Key challenges on MI ahead of January 2025
- Staff incentives – split between salary and commission, including whether this is paid on a debt solution outcome
- Marketing spend by channel
- Consumers engaged with – non-specific around whether we know their identity or not
- Debt remedies serviced within DMC, including Scottish debt remedies (see image above)
- Client money reconciliation by time band
- Contact centre MI is very much aligned with Stage 1 and Stage 2 Customer Support RFIs (Stage 2 closed last week)
- Split between FTEs and contract resources
- Churn of staff in period
Firms need granular stats on contact channels. Detail required on referral channels. Nothing on vulnerability.
Broken DMP defined by FCA as 3 consecutive missed payments, which may or may not be helpful.
Given that the FCA request around Fair Value Assessments (FVAs) closed on 18 October 2024, the prototype highlights the level of data that needs to be captured from January 2025 for the first full year submission. I have outlined Question 93 for ‘manufacturers’. The same process applies for ‘distributors’.
DEMSA recommends that for-profit and not-for-profit firms regulated by the FCA with any of the permissions above complete the prototype by the deadline. Forewarned is forearmed.
Given the recent StepChange communications around the state of the DMP market, this is likely to open up an interesting debate around the value of revisiting a ‘DAS/DPP’ type scheme for England & Wales that is free-to-consumer, but with a sensible Fair Value Assessment (i.e. 15% for DMP administration and 5% for payment distribution). The whole DPP universe is just over 18,000 cases, which can be readily aligned to the commercial sector apart from a couple of larger firms. Average debt balances, disposable income and survival rates can all be readily aligned.
It should become apparent from the future CCR returns the reliance on external donations by ‘Fair Share’ providers and the outcomes of MaPS funded debt advisers, where I am not expecting a huge number of IVA or DMP recommendations. I am sure this will open up another conflict-of-interest debate beyond the one recently re-opened with The Insolvency Service early IVA failure report covered in the DEMSA bulletin last week. As ever, this may well be kept close to the chest of the FCA, who will sit on all of the ‘Big Data’ unless we do something about this. Data-driven change can only come from data sharing with positive intent, like vulnerability data sharing.
The return includes splits between permanent and contract staff. It also looks at remuneration schemes. It may be worth looking at FG18/2 again.
“We should now be more focused on QA Frameworks and Training & Competence Schemes linked to good customer outcomes and the treatment of customers with the characteristics of vulnerability. Many of the recent FCA redress announcements have reinforced this. In a parallel universe, The Insolvency Service report on early IVA failures in October has brought this to everyone’s attention again.” – me on LinkedIn
Link: https://www.fca.org.uk/publications/consultation-papers/cp24-19-consumer-credit-regulatory-returns
Link: https://www.fca.org.uk/publications/finalised-guidance/fg18-2-proposals-staff-incentives
FCA confirm that Vulnerability is not a ‘buzzword’
My post is beginning to pick up some traction. An important topic ahead of Q1 2025, as reflected in the DEMSA bulletin last week on the FCA regulatory grid for Q4 2024 and Q1 2025.
“One criticism of regulators is we’re long on diagnosis and short on prescription.”
Graeme Reynolds, director of competition at the FCA, spoke at the Personal Investment Management & Financial Advice Association (PIMFA) Wealth Vulnerability event on 24/10/2024. He also spoke at the IWG event on 23/9/24 at the FCA offices. Along with Chris Leslie of the CSA, I was able to ask him several questions around vulnerability data sharing initiatives, referencing platforms like the Vulnerability Registration Service (VRS) and Experian SupportHub. Daniel Spenceley of the CSA also attended. He was author of their discussion paper entitle “Vulnerability: The Inconsistency Problem” in October 2023. We are now a year on, with not a lot of progress to show for it.
Industry driven data sharing schemes have been encouraged to progress in 2025. The FCA confirmed that vulnerability management remains a priority, as reflected in their latest regulatory grid for Q1 2025, where the review of the implementation of FG21/1 overlaid by the Consumer Duty will be communicated to regulated firms. We saw the FCA vulnerability surveys conclude in May 2024.
We continue to see more FCA regulated firms become BSI ISO 22458 accredited, including in the debt management space.
This speech was targeted at the wealth management sector, which has been picked up by Andrew Gething at MorganAsh, who are used by debt management firms. It feels like the FCA is referencing the MARS platform. The synergies are strong – it is all about trust and integrity.
As Graeme Reynolds said:
“It’s about the events that can happen to us all – ill health, bereavement, job loss. About resilience to unexpected financial or emotional shocks, and capability and capacity to make good decisions about money management, including in times of personal stress or difficulties.”
“It’s about financial firms being able to proactively recognise those characteristics and take action to address the increased risk of financial harm they might entail.”
Portfolio managers identified just 5% of their clients having characteristics of vulnerability in the FCA 2023 wealth survey. This had doubled since the survey in 2022!
The FCA is testing firms’ understanding of the Duty:
- client needs, and monitoring
- training, skills and capability of staff
- product & service design
- communications and client service
- alignment with Fair Value requirements
They have actually seen some firms adopt a ’tell us once’ approach to minimise the number of times a customer must inform them about their vulnerability such as in the case of a bereavement.
Bereavement
This looks like a fairly straightforward use case to progress where this can be applied around dealing with the affairs of the deceased party as the executor and/or next of kin. It can also be used with regard to being one of the surviving parties, which can be routinely experienced in administering joint DMPs when removing the deceased party from the plan. Consideration is given as to whether the surviving party would consider themselves ‘vulnerable to’ something. Further loss of income can be common situation, along with wellbeing issues that need to be taken account of. Historically, moratoriums may have been considered with dialogue with creditors and future check-in points established as part of a ‘tell us once’ approach. Creditors would respect the moratorium.
A number of data providers on the circulation offer deceased data to verify information provided. I suspect that it is one of the easier change in circumstances that you can apply the FCA expectations to above. Financial and non-financial vulnerability may apply.
A number of key messages to reflect on that relate to the opening comment on ‘prescription’. We need the regulator to support energizing some of the existing cross-sector data sharing schemes that have merit.
I have snapshot a poll being run by James Edmonds at the moment, which may provide some clues on why vulnerability initiatives lack momentum.
Link: https://www.fca.org.uk/news/speeches/vulnerability-not-buzzword
FOS H1 2024 statistics – Complaints jump by 40% year on year
Ahead of the aftermath of FCA interventions and the recent court ruling on Motor Finance Commissions, FOS has reported that complaints have jumped 40% compared to H1 2023.
Overall, they received a total of 133,019 complaints between 1 January and 30 June 2024 compared to 93,114 complaints in the same period in 2023. Banking and credit continues to be the most complained about sector and is the only sector that saw a year-on-year increase in complaints. In the first six months of 2024, consumers lodged 101,031 banking and credit complaints, including disputes about credit cards and unaffordable lending, car finance woes as well as fraud and scams. Over half of all banking and credit complaints were brought by professional representatives (e.g. CMCs).
FCA statement on Court of Appeal judgment in Hopcraft, Johnson and Wrench
This will undoubtedly have an impact in the Motor Finance Commission space.
Link: https://www.financial-ombudsman.org.uk/news/complaints-jump-40-year-year
Link: https://www.fca.org.uk/news/statements/court-appeal-judgment-hopcraft-johnson-wrench
Collaborations
I have been reviewing Rob Bell’s book on the Consumer Duty. I will provide a summary in the coming weeks. The regulatory world continues to move on at a pace with interventions into many sectors.
Link: https://www.linkedin.com/pulse/practical-guide-fca-consumer-duty-robert-bell-5xyse/
Link: http://www.lawbriefpublishing.com/product/fcaconsumerduty/
FourNet CX events into 2025
Following on from events in September and October 2024, I am continuing to support FourNet with whitepapers and interactive events around embedding the Consumer Duty in both the front-office and back-office. The extract above looks at some of the messaging from Luke Cuthbertson at the recent CX workshop on speech and conversational analytics.
The recording of our recent event is below along with a couple of whitepapers.
Link: https://fournet.co.uk/content-hub/fca-identify-and-report/
Link: https://fournet.co.uk/content-hub/consumer-support-under-the-fca-consumer-duty/
Link: https://fournet.co.uk/content-hub/translating-good-culture-into-evidenceable-frontline-practices/
Events
Review of FCA Handbook following the introduction of the Consumer Duty – deadline 31/10/2024
As featured in previous bulletins, this deadline is fast approaching and DEMSA has been engaging with the FCA during October 2024 without much feedback.
My current feeling is that the direction of travel is around intense scrutiny around PRIN 2A, where the Duty will be overlaid on any existing sourcebook. The CONC 8 review may mean that the sourcebook is ripped up or that we will see very focused work around aspects like fee charging and the alignment with the fair value requirements. Whether account is taken of the digital transformation that has taken place since the last version of the OFT DMG remains to be seen.
I had intended to revisit the DEMSA code of conduct in light of the Duty and other recent policy statements. The code was last reviewed in detail in 2015/16 during the first thematic review (TR1) and DEMSA subsequently withdrew from the Trading Standards Institute (TSI) Code Approval Scheme as the FCA didn’t really acknowledge it. DEMSA ceased to have a role in the complaint handling process very early into the FCA regime to align with DISP.
Talk Money Week: publishing the Debt Functional Standard v3 – 5/11/2024
Credit-Connect Think Tank – Manchester – 7/11/2024
I am attending the Think Tank and the Awards dinner (as a judge) on 7 November 2024 at the Midland Hotel in Manchester. Chris Warburton is chairing the day again. The event falls just after the implementation of PS24/2 (Borrowers in Financial Difficulty) and the changes to CONC 7 on 4/11/2024. It will be interesting to hear how regulated firms, and their providers have adapted around data sharing, the expanded spectrum of risk around vulnerability, credit reporting and updated policies & processes around affordability assessments.
Link: https://thinktank.credit-connect.co.uk/
Link: https://thinktank.credit-connect.co.uk/agenda/
IPA conference – 28 November 2024
I am speaking at this year’s event. A number of familiar faces on the speaker panel. This conference is recommended for personal insolvency practitioners, the debt advice and legal sectors, creditor sector and service providers. The event provides 6 hours’ CPD plus the opportunity to network with peers and prominent people in the sector.
Link: https://insolvency-practitioners.org.uk/event/ipa-personal-insolvency-conference-2024/
RO-AR insider newsletter
Receive notifications of new RO-AR content notifications: Also subscribe here - unsubscribe anytime