Further to my thought piece on the HM Treasury consultation around Statutory Debt Repayment Plans (SDRPs), Colin White of Credit-Connect has published this on his website.
My thanks to the teams at In Control Debt Solutions, Moneysolve, Refresh Debt Services and The Debt Advisor/Bennett Jones for their time in reviewing the SDRP consultation this week following on from sessions that I held the week before. If you are interested in a Teams call then drop me a note.
The FCA has published its May 2022 regulatory roundup. There is nothing in this that we haven’t covered in respect of sector news for consumer credit. It reinforces the FCA concerns that some firms have been using misleading terms like ‘loan guaranteed’, ‘pre-approved’ or ‘no credit check loans’ in their marketing. They have reminded firms that adverts must not give consumers the impression that they will automatically get a loan if they apply, or that they can get a loan without the lender checking that they can afford it. Firms also need to include required information and risk warnings in their adverts.
I am sure there will be more breaking news in the BNPL sector as firms like Klarna lay off staff. As BNPL plans for FCA regulation, there will be a number of considerations around financial and operational resilience which will be relevant to the UK Finance blog below around what the Consumer Duty means for digital channels, where the majority of BNPL customers are onboarded digitally. Fast fashion retailer Missguided is on the brink of collapse after being issued with a winding-up petition by creditors. Other fashion retailers are under stress. Klarna has warned of a probable recession, which reflects some of the comments by economists in the last week.
UK Finance – Consumer Duty – what it means for digital channels
This UK Finance blog suggests that the introduction of a new FCA Consumer Duty will be one of the biggest shake-ups to retail financial services regulation in over 15 years. This mirrors their response to CP21/36 earlier this year that DEMSA shared.
They have posed the question of “What is different about digital channels?”:
- New, more detailed real-time data on customers
- The choice architecture of digital channels—the way in which choices and options are framed—is highly influential in affecting decisions
- The ability to quickly test (and then improve) different variants of online/app choice architecture
- The need to train fewer customer-facing staff (although well-trained staff are still required for webchat, etc.)
As discussed in recent DEMSA thought pieces, this creates the necessity to ‘build in’ the right conduct risk controls and QA frameworks.
There is a linked blog to this one.
UK Finance is running a Consumer Duty workshop on 23 June 2022.
Link: https://www.ukfinance.org.uk/news-and-insight/blog/consumer-duty-what-does-it-mean-digital-channels
Link: https://www.ukfinance.org.uk/news-and-insight/blogs/consumer-duty-force-good-if-done-right
Congratulation to the Perch Group team on their MBO announcement last week. This includes the creation of a significant new committed facility provided by Quilam Capital. The MBO will see the incumbent management team comprising Craig Hinchliffe, Andrew Bartle, Gary Edwards, Max Houghton and Simon Unsworth together with Quilam Capital take control of the fast-growing ‘digital led’ financial services Group. Mark Robins will also be joining the board as a Non-Executive Director. It was good to catchup with a number of the team at the recent CCTA event.
To date the Group has acquired over 160 portfolios with a total face value in excess of £500m across 600,000 customer accounts.
ReachOut collaboration with Nationwide
Nationwide has become the first bank or building society to offer ReachOut, a free service for the Society’s members to provide support, reassurance and confidence to those impacted by financial hardship. We have featured several case studies, including the Anglian Water project and David Murphy has been featured several times.
This initiative follows on from Nationwide leading the creation of the Inclusive Economy Partnership’s Code of Best Practice for Debt Collection & Recovery in 2021.
Specialist ReachOut advisers, known as Pathfinders, offer a confidential space, where they take the time to listen and understand each member’s unique circumstances. They then offer guidance towards certain charities who can help with applying for specialised grants or that provide financial, mental and physical wellbeing support. At no point is money ever requested, or a debt asked to be repaid. Their sole aim is to give those who are referred the knowledge, support and encouragement needed so that they feel empowered to take more control of their situation and improve their ability to manage all of their debts, before gently facilitating a conversation back to Nationwide. This announcement follows an initial trial where ReachOut and Nationwide helped more than 100 members get back on track.
A great example of inclusive design as we try and promote the take-up of BSI ISO 22458 (consumer vulnerability) and the wider Consumer Duty challenges in Financial Services. Sigma Connected Group and ReachOut seem well placed in all 3 of the target markets for the international standard (i.e. Financial Services, Energy and Water).
The Nationwide release also features the work they are doing with IncomeMAX, PayPlan and StepChange. The story has some traction on LinkedIn.
VCX add ‘Income maximisation’ page to The Signpost Vulnerability Toolkit
Further to the Arum post around wider use of income maximisation tools, Chris Jones of VCX has added an income maximization page to the ‘The Signpost Vulnerability Toolkit’.
Open Banking in the Utilities sector
My thanks to Faith Reynolds for picking up on this initiative by United Utilities. United Utilities has seen 1 in 2 customers sign up to the open banking scheme it launched in July 2021 according to new CEO, Louise Beardmore. The initiative seems to align with the KCOM case study with PrinSIX (reported on recently by DEMSA) where the United Utilities process relies on an income-verification tool that allows them to check if a customer qualifies for social tariffs by gaining consent to access their bank account data. United Utilities and Eon are among the pioneers of the technology in the utilities sector.
Louise Beardmore said: “We can now get someone on a support scheme in less than 7 minutes by simply by talking to customers about open banking”
United Utilities has unveiled a package of financial support for struggling households worth £280m to enable the company to assist more than 200,000 customers. The measures were announced alongside the company’s full-year results, which included a commitment to £400m of additional investment.
Link: https://utilityweek.co.uk/open-banking-rolled-out-to-50-of-uu-customers/
Lantern certification to ISO 14001
Congratulations to Denise and the Lantern team for receiving certification to ISO 14001, an internationally agreed standard that sets out the requirements for an environmental management system. It is good to be able to reference ESG and sustainability examples in our wider sector with the aim to improve environmental performance through more efficient use of resources and reduction of waste. Quite a lot of traction on the LinkedIn post.
This certification complements the ISO 27001 (cyber-security/resilience) certification and aligns to their ESG policy & framework. I have attached a recent thought piece that I drafted around the increasing necessity of this work as a regulated firm.
ISO 14001 standard provides guidance on how to consider multiple aspects of your business (e.g. procurement, product development, service delivery, technology platforms etc.) so that it reduces its impact on the environment. It also drives you to evaluate how you manage emergency response, customer expectations, stakeholders and your relationships with your local community.
Link: https://www.bsigroup.com/en-GB/iso-14001-environmental-management/
IPA post on Google advertising
Dave Holland posted this week around advertising for debt advice services that contains content that is unhelpful to individuals seeking help and information about possible debt solutions. He has referenced the MAT guide to reporting misleading advertising. He has drawn attention to Google only allowing ads promoting debt services where the advertiser and provider of these services are appropriately authorised (i.e. either a licensed insolvency practitioner regulated by an RPB or authorised by the FCA to carry on debt adjusting and debt counselling).
Following on from the announcement today that from 21 June 2022, Google will update the enforcement procedures for repeat violations of it advertising policies. To help improve standards further it is important that breaches are reported.
Link: https://support.google.com/adspolicy/answer/11366242?hl=en&ref_topic=29265
Link: https://moneyadvicetrust.org/media/documents/Reporting_misleading_adverts_for_debt_advice.pdf
Major data breach by Clearview AI
The ICO has fined facial recognition database firm Clearview AI more than £7.5m for breaching UK GDPR.
MaPS survey around community debt advice – survey closes 30/5/2022
To get the most out of this engagement MaPS is looking for help in establishing the priorities for community-based debt advice, both nationwide and more locally.
MaPS has also been promoting the MoneyHelper toolkit.
Link: https://maps.org.uk/wp-content/uploads/2022/03/find-your-way-forward-messaging-toolkit.pdf
Chancellor announces further cost-of-living crisis relief measures on 26 May 2022
Chancellor Rishi Sunak announced on the evening of 26 May 2022 a £15 billion package of measures intended to ease the impact of the rising cost-of-living for the most needy. DEMSA welcomes this initiative and hopes that sufficient time has been allowed to implement this in a timely manner.
Every household in the UK will be given £400 by the government in October 2022, to help with the expected rise in energy costs. Poorer households will also get a one-off payment of £650 paid directly into their bank accounts in 2 lump sums in July 2022 and in the Autumn. It is important that these funds are used for essential expenditure. UK households will get the £400 by way of a grant which will reduce energy bills by £400 from October 2022. This has been clarified in the latest BBC update. The discount will be made automatically by your energy supplier. There is no need to apply. Customers with pre-payment meters will have the money applied to their meter or paid via a voucher.
Other measures include separate one-off payments of £300 for pensioner households and £150 for individuals receiving disability benefits.
The emergency support packages announced by the government so far this year will largely shield lower-income households from increased energy bills, according to the Resolution Foundation. The think tank said households in the bottom three income deciles, the poorest 30%, will see 93% of their increased energy costs offset.
Richard Lane of StepChange confirmed that in April 2022, 15% of customers identified cost-of-living increases as a reason for their problem debt. 29% were in arrears on their electricity bills and 24% on their gas bills – both 2% up on the average in 2021. He has also flagged the challenges of deficit budgets, where there are limited debt remedies available.
Link: https://www.stepchange.org/media-centre/press-releases/cost-of-living-package.aspx
The cost of the relief scheme will be partly offset by a 25% windfall tax on oil and gas firms’ profits. Based on the Credit-Connect story, initial reactions appear positive with a more targeted approach to low-income households.
Link: https://www.moneyadvicetrust.org/latest-news/money-advice-trust-welcomes-scale-cost-living-support/
Debt solution providers will need to factor this into annual reviews of pre-existing products like DMPs and IVAs. Horizon scanning is becoming increasingly important around the sustainability of formal and informal debt solutions as we see new customer demographics with problem debt.
Further to DEMSA’s bulletin covering ‘Vampire’ devices, PayPlan has published an update on how to reduce energy costs.
SFS update – 30/5/2022
I have now received the SFS update from MaPS that will be published to SFS users tomorrow. Keep an eye out for this hitting inboxes. The new figures are due to be deployed by 20 June 2022.
The Chancellor’s relief scheme will now need to be factored in to affordability assessments by debt advisers as customers undertake annual reviews or in-year reviews of their existing debt solutions like a DMP or an IVA (DPP or Protected Trust Deed in Scotland). Criteria for additional relief will need to confirmed, as many debt advice providers are doing for low-income households around eligibility for social tariffs and other entitlements.
DEMSA is seeing more engagement between providers of affordability tools and providers of income maximisation & benefit assessment tools. We actively encourage these collaborations and increasing the range of payment options to customers.
Identity & Verification (ID & V) – Customer portals
The ICO has guidance on security as part of the guide to UK GDPR, and the ICO/NCSC Security Outcomes, for general information about security under data protection law.
Information security is a key component of the ICO’s AI auditing framework. The ICO is planning to expand its general security guidance to take into account the additional requirements set out in the new UK GDPR proposals that were referenced in the Queen’s speech. This guidance will not be AI-specific and will cover a range of topics that are relevant for firms using AI, including software supply chain security and increasing use of open-source software. MaPS are due to release their SFS open-source software in June 2022.
We also discussed passwords as part of the discussion around Strong Customer Authentication (SCA) yesterday. The ICO suggests looking at whether there are any better alternatives to using passwords and Article 25 of the UK GDPR also requires you to adopt a data protection by design approach, which we have flagged as part of our approach to fair and inclusive by design to align with the FCA Consumer Duty.
Multi-factor authentication
I have been running tailored training around how to embed best practices into ‘digital first’ strategies, including dealing with vulnerable customers and what good looks like in this space. From previous presentations at VRS events and the recent BSI launch of ISO 22458, it is clear that trust is a critical factor in the take-up of self-serve capabilities and customer portals more generally, notably where they will include consent to access open banking and adopt new payment technologies. Strong customer authentication and 2-step verification are part of building this confidence in core services used by a consumer, who may have a range of vulnerabilities. The ICO and NCSC has provided guidance to firms and consumers around security matters which may be relevant in future proofing key consumer engagement tools.
Link: https://www.ncsc.gov.uk/guidance/setting-2-step-verification-2sv
The ICO has referenced the 3 main ways of authenticating people to a system – checking for:
- something the individual has (such as a smart card);
- something the individual is (this is usually a biometric measure, such as a fingerprint); or
- something the individual knows.
For vulnerable customers I cover the risks of ‘credentials stuffing’ where the ICO has referenced the proliferation of online services requiring individuals to create an account. This has created a risk that people become overwhelmed with access credentials and default to reusing a short and memorable password (often coupled with the same email address as a username) across multiple websites. The significant risk here is that if one service suffers a personal data breach and access credentials are compromised, these can be tested against other online services to gain access. They have referenced the LinkedIn hack.
I have had recent demonstrations of a number of innovative consumer facing tools that work really well on smartphones. A single sign-on (SSO) approach is now frequently used by a number of consumer portals where the consumer is likely to be using a smartphone.
Link: https://www.getsafeonline.org/personal/articles/passwords/
Whilst the routine changing of passwords is not recommended, unless the accounts to which they apply have been hacked, in which case they should be changed immediately. This also applies if another account or website for which you use the same login details have been hacked. They recommend using a different password for every website.
The security of the documents and data held in a client portal is of upmost importance for UK GDPR and reputational reasons. This increasingly means ensuring the customer portal offers bank-level encryption both in transit and at rest.
SCA guidance by FCA for consumers
https://www.fca.org.uk/consumers/strong-customer-authentication – consumer guidance
Events
I attended an Equifax event (Market Pulse #8: Cost of living, its impact and outlook: the economy, debt and financial vulnerability) last week (24/5) where Rachel Duffey of PayPlan was on the panel along with an economist and Beth Whelan from TDX Group. Beth discussed the significant uptake in engagement with open banking. Rachel provided an interesting perspective on what PayPlan is seeing at the moment. She referenced that around 20% of consumers they engaged with in April 2022 had deficit budgets and that 26% had priority arrears. Of concern was consumers cutting payments to key insurances and other costs that would normally be prioritised (e.g. TV licence). Andrew Goodwin of Oxford Economics provided a number of slides around the economic outlook which strongly referenced the decline in consumer confidence. He highlighted how rising inflation dis-proportionately hits lower-income households.
Vulnerable CX Coach, Carolyn Delehanty, talked with TMAC around her approach and strategy to identifying and dealing with vulnerable customers.
ICO guidance on AI and Data Protection
Senior AI experts at the ICO led a webinar earlier this week to launch our AI and Data Protection Risk Toolkit, which includes a video. This will be important in the proposed data protection reform announced in the Queen’s speech and will be part of future horizon scanning for those involved in AI/ML propositions. The toolkit is designed to provide further practical support to firms to reduce the risks to individuals’ rights and freedoms caused by of their own AI/ML system.
The Vulnerability Registration Service’s next Webinar ‘The Vulnerability Jigsaw’s Next Piece: Identification, Integration & Implementation’ is on 14/6/2022 and promises to be very well attended. The agenda is now available with a plethora of speakers of which I am one covering an update on the BSI international standard – ISO 22458 (consumer vulnerability).
Latest BSI link promoting ISO 22458 in the Financial Services, Energy and Water sectors.
Credit-Connect 2022 Credit & Collections Technology Awards – entries close 7 July 2022
The Vulnerable Customer Identification & Screening Solution was promoted this week. This should be a competitive category.
The countdown to entering the awards continues. This year’s entry process closes on Thursday 7 July 2022. The 2022 Awards dinner will be held on Thursday 17 November 2022. It was a very enjoyable event last November.
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