From the desk of Kevin Still
In today’s bulletin
- General update
- MaPS debt advice trends in 2022
- MaPS Financial Wellbeing Barometer
- Creditfix response to CP21/30 – Debt Packagers
- MAT response to the FCA Consumer Duty
- ISO 22458 update
- ISO 27001 – IE accreditation
- Breathing Space update – newsletter
- Digital debt resolution
- AML – IPA 2022 checklist
- Cyber-attacks
- Event feedback
General update
Events in Ukraine and the cost-of-living increases in the UK have been dominating the headlines. The Money Charity February 2022 update focuses on the cost-of-living crisis. Amongst a number of factors reducing disposable income for millions of households, they have featured increasing rents across the UK as another indicator of the crisis. The MaPS survey (see below) also features this for both social and private renters. 18.5% of households live in homes that are privately rented. Low-income households living in privately rented homes spent an average of 56.4% of their income on rent.
Lending Standards Board (LSB)
The Lending Standards Board (LSB) has provided some considerations for financial services firms as the cost-of-living crisis mounts. They state that firms need to have a well-designed and effective financial difficulties policy and process in place. To best support customers, the first line needs to work within a set framework of when to offer forbearance, signposting or other help.
DEMSA is continuing to provide examples of going beyond signposting with collaborations between creditors, debt solution providers and innovative service providers providing affordability, vulnerability and income optimisation integrations. Trusted consumer portals are increasingly featuring.
Link: https://www.retailbankerinternational.com/analysis/banks-strategy-cost-of-living-crisis/
Virgin Money / PayLink / PayPlan collaboration
We are beginning to see more examples of more pro-active engagement between creditors and debt solution providers with embedded affordability, CRA and open banking integration. The recent collaboration between Virgin Money, PayLink and PayPlan has been on LinkedIn this week. This goes beyond sign-posting.
Sigma Connected/ReachOut service for Anglian Water
Following a successful pilot, ReachOut will see Sigma’s team helping around 600 vulnerable people in debt every month by engaging with them, raising awareness of support and guiding them to charities such as the Samaritans, StepChange, MIND, Turn2us and Macmillan. The charities help with any underlying challenges often linked to debt, with Sigma’s ReachOut team also guiding customers back to the support Anglian Water has to offer those in poverty.
Good picture of David Murphy in the article attached. The 3-year contract award is the first for ReachOut in the water industry.
FCA regulatory round-up
The FCA issued its February 2022 regulatory round-up this week and there were a few items of interest that we haven’t covered in earlier bulletins. One that is close to my heart is the Credit Information Market Study and the FCA provided an update on this after the study was resumed in July 2021. They have referenced below some of the external research they previously commissioned around what the sector and usage would look like by 2030. I was disappointed when the document was published around the limited breadth of engagement with the providers and users of credit information, including the limited engagement with the established CRAs.
Due to additional work involved, the publication is now scheduled for Summer 2022. The study will take account of the Woolard Review recommendations to the FCA, which should bring in BNPL.
Link: https://www.fca.org.uk/publication/research/future-credit-information-market-report.pdf – it is worth looking at the 4 scenarios painted for 2030 and see where you stand
I have reviewed the document again and searched for BNPL or terms other than short-term, high-cost credit. They are conspicuous by their absence for a report that is fueling a regulatory review of the position in 2030. Even a study of 2022 would have highlighted the focus on BNPL being regulated and the affordability challenges that have been referenced across many industry responses to the HM Treasury consultation that DEMSA responded to.
The research was meant to engage emerging technologies representatives from industries operating in the fields of AI, Big Data, block chain, FinTech and representatives with expertise in information security and cybersecurity. I have written to the FCA to get more involved as a trade body and subject matter expert.
Some of the factors that have been short-listed are very relevant to this audience and some of the topics touched on in the VRS update below. Ethical and regulatory considerations on personal data relates to the principles of using new information sources (e.g. social media), as well as new ways of obtaining and processing data (e.g. by using ML/AI). Consumer attitudes to privacy and data sharing refers to a consumer’s willingness to concede a certain amount of privacy in favour of opportunities for greater access or the penalties on accessibility if consent is not provided. Opening up of new data sources relates to using non-traditional data sources (e.g. social-media data and council tax payments) for a variety of purposes including credit risk, affordability, identity verification, etc. This could include Open Banking, Open Finance and Smart Data and could enable the sector to make more precise decisions and contribute to greater financial inclusion. This whole topic is probably worthy of an Opinion Blog.
On 10 February 2022, the FCA launched their new ScamSmart Investments Campaign. The campaign is live until 31 March 2022 and is designed to help protect consumers from investment fraud and aims, to increase awareness and educate consumers on the signs of an investment scam, and increase use of the Warning List. This tool details the risks associated with an investment opportunity and lists firms they know are operating without authorisation.
Helen Pettifer TCF article
I spotted an article by Helen Pettifer entitled ‘FCA Guidance: Are Vulnerable Customers Being Treated Fairly?’ She looks at this through the eyes of a vulnerability specialist. She is seeing good practice in:
- Recording and reporting measures
- Creating a ‘tell us once’ policy and capturing the relevant information to support the customer
- Shifting focus from the diagnosis or circumstance to fully understanding how that impacts the customer and what support is needed to achieve a good, fair outcome
- Using insight and lived experience to drive change within the processes, systems and practices
She also reflects that firms she works with are now investigating and sharing tools, techniques, processes and ideas.
MaPS research – Who needs debt advice in 2022?
Just as we await more announcements from MaPS next week, they have just published an article by Debt Insight Manager Paul Das about how many people need debt advice in 2022. The survey looks a little tired already given the reality of the cost-of-living increases and upward trajectory of energy prices, inflation/cost-of-living and fuel costs. It is fairly clear that pay rises and benefit increases are not keeping pace and worse is still expected, notably with energy and fuel costs.
Given the recent MaPS update on 14/2/2022 on debt commissioning, any insight into projected demand level by debt advice channel is useful (this is not part of the survey). It is not only the consumers and micro-businesses new to debt advice that is of concern. Our leading debt solution providers are concerned that reductions in disposable income through 2022 may impact the continuity of existing debt solutions like DMPs and IVAs. The RPBs for IVAs and PTDs will need to be looking at the impact on these portfolios and whether variations will be enough. There may be genuine cohorts of clients that will become eligible for DROs in England & Wales where a combination of energy cost increases and a few other factors wipe out surplus incomes. For those that are FCA regulated, record-keeping and evidence of portfolio reviews are going to be crucial. I am sure that debt purchasers will be looking at existing time-to-pay schemes and those already in a managed debt solution to see the levels of sensitivity to these financial shocks from April 2022.
Some of the data has informed MaPS responses to the BNPL consultation.
They identified 16% (around 8.5m) of the UK adult population needed debt advice. This was before the most recent increases in inflation, energy prices and tax rises.
The results show regional ‘hot spots’ as well as factors where demand for debt advice is dis-proportionately high, for example, some age groups, ethnicity and those households with children. Tenants, low-income households and those subject to furlough feature strongly. Use of BNPL by households needing debt advice is much higher than the UK average.
There is a recording on the page.
Link: https://moneyandpensionsservice.org.uk/2022/02/23/who-needs-debt-advice-in-2022/
MaPS Financial Wellbeing Barometer – Contract Finder
The Financial Wellbeing Barometer tender opportunity was published on 22/2/2022 (closing 21/3/2022) and will provide a dynamic method of monitoring the status of financial wellbeing – as defined by the 5 ‘Agendas for Change’ in their National Strategy:
- financial foundations
- nation of savers
- credit counts
- better debt advice
- future focus
MaPS wants to appoint an agency to help build a comprehensive review of this initiative and to undertake a feasibility study with a deliverable roadmap to creating a digital portal capable of hosting the Barometer. They want to understand how they would establish this initiative in the marketplace and how the data sources would be acquired and implemented according to their requirements and those of financial wellbeing partners.
I spotted a US definition of financial wellbeing as having control over day-to-day and month-to-month finances, being able to absorb a financial shock, being on track to meet financial goals and having financial freedom. As we approach April 2022, the barometer may hit storm Eunice levels as multiple cost of living pressures hit millions of UK households with a limited ability to absorb more financial shocks. If financial wellbeing is about how people feel about the control they have over their financial future and their relationship with money then many will feel that ‘control’ is not in their hands (e.g. Energy & fuel prices, supply chain problems, tax rises, hybrid working). Events in the Ukraine put all of this in perspective.
This article from the recent CCTA magazine by The Money Charity provides some useful context to Financial Wellbeing and ‘Wellbeing Hubs’.
Link: https://www.ccta.co.uk/magazine/the-vision-helping-everyone-achieve-financial-wellbeing-the-money-charity/
The Money Charity believe that financial education and financial capability are the key tools to unlocking financial wellbeing and financial resilience, which DEMSA supports. Given the imminent cost of living financial shocks, UK consumers do need to be making use of free budgeting tools where they can undertake an ‘open and honest’ assessment of income & expenditure, as suggested in the article. Thanks to IE Hub for their input to this post.
If over 50% of larger UK firms don’t have a Financial Wellbeing strategy in place already (as suggested by the charity) then the FCA Consumer Duty ‘gap analysis’ may draw out some major transformation challenges, including embedding inclusive service design and capturing outcomes. It is one of the reasons DEMSA is exploring ISO 22458 (consumer vulnerability – based on BS 18477) with affiliates.
Link: https://www.linkedin.com/feed/update/urn:li:activity:6902272158819606528
CP21/30 – Debt Packager conduct requirements – Creditfix response
DEMSA followed up with the FCA this week on the Debt Packagers consultation CP21/30 that closed on 22/12/2021. This is still with the policy team to put before the FCA board taking account of industry feedback, including that of DEMSA.
Creditfix Limited, the largest volume IVA provider, has announced the way it remunerates IVA introducers, which may beg more questions than it answers. The IPA has reminded IPs about the limitations of their exclusion from FCA regulation and that IPs should not lend their names to debt advice websites without the realistic prospect of their own appointment. As a minimum, this would need to be as nominee, and the advice needs to be documented.
Link: https://insolvency-practitioners.org.uk/a-reminder-to-insolvency-practitioners-about-the-limitations-of-their-exclusion-from-fca-regulation-newsfeb22/
The FCA intervention essentially stopped RPBs like the IPA and ICAEW in their tracks in November 2021 when the review of SIP3.1 closed. The Joint Insolvency Committee (JIC) consulted on changes to Statement of Insolvency Practice 3.1 – IVAs. This included requiring an FCA authorised firm with debt advice permissions to be involved in the process.
Original PR by the FCA discussed wanting to implement new rules by April 2022, we are now approaching March. There has been much speculation as to how the volume IVA sector would respond. DEMSA is also monitoring whether regulated ‘debt packager’ firms are looking to divest their FCA permissions. DEMSA warned of unintended consequences in its response to the FCA.
I did an interview with Chris Warburton after CP21/30 was published and this is the extract relative to Debt Packagers.
Link: https://vimeo.com/654062579/18e3cc913c
This covers the influence a few major volume IVA providers have on debt packager marketplace. DEMSA has continued to communicate to policy makers that only tackling the firms inside the FCA perimeter (PERG) will not address the problem. As previously reported, there were, on average, 6,281 IVAs registered per month in the 3-month period ending January 2022 (10% lower than same period ending Jan-21, but 5% higher than 2020). IVA numbers have remained fairly stable at around 6,000 to 7,000 per month over the past 12 months.
Money Advice Trust to CP21/36 – FCA Consumer Duty
As part of the ongoing monitoring of responses to the FCA Consumer Duty consultation (CP21/36), I have provided the link below to the MAT response. Nothing unexpected in this and it is very much consumer protection focused with a reinforcement of the need for regulated firms to focus on inclusive service design.
Extracts:
“We are pleased to see the acknowledgement of the importance of firms adopting the inclusive design principle in the paper. We think the guidance could be clearer on the fact that, whatever the product, service or market, there is likely to be a diverse range of needs and potential vulnerabilities present in the target market.”
“Some of the worst outcomes we see are for people who have protected characteristics, and another characteristic that places them at greater risk of harm (vulnerability). Research by Fair By Design and the University of Bristol’s Personal Finance Research Centre has found that people on low incomes and with certain protected characteristics are more likely to be paying extra costs for essentials such as credit and insurance. This is the case even when compared with low-income households as a whole – suggesting that the marketplace is discriminating against groups of people, albeit indirectly.”
As with the DEMSA responses to CP21/13 and CP21/36, MAT has urged the FCA to include more examples from the consumer credit market within the good and bad practice examples in the non-handbook guidance. They have reflected that many of the examples relate to investments and insurance and financial advice products. For consumers in vulnerable circumstances, their main financial products are likely to be related to credit, overdrafts and high-cost credit and debt collection as well as dealing with debt and how creditors treat them when they are in financial difficulties.
Contrary to many of the responses I have reviewed, MAT believe the implementation window of April 2023 is fully achievable.
Link: https://mailchi.mp/moneyadvicetrust.org/design
ISO 22458 – Consumer Vulnerability – Pilot cohort enrollment
I am pleased to say that we seem to be gathering momentum on a pilot cohort for ISO 22458 and I have copied Jo and Kiren from BSI on this email. They are helping us with this process and hopefully some publicity in June 2022 to coincide with the next VRS webinar, where VRS are one of the volunteers with their consumer facing proposition. I am hoping that IE Hub and Sigma Connected/ReachOut will follow on as well. We are still recruiting, so please don’t hesitate to contact ISO directly or drop me a line.
I also picked up on a post by Jo today around delivering fair and inclusive services to all your customers. This probably builds on some of the key messages from the MAT response on the Consumer Duty above. The link below references a case study by Steve Crabb – Consumer Vulnerability – Centrica. The article can be downloaded from the link below.
ISO 27001 accreditation – congratulations to IE Hub
Well done to Jill and the IE Hub team for their ISO 27001 accreditation this week. I am hoping this inspires them in joining the first cohort for ISO 22458.
Breathing Space update
I have attached the latest newsletter. I have included the notifications by month by method above. This was from the stakeholder session in January 2022 before the January 2022 figures were published.
Digital Debt Resolution
I have selected a Firstsource case study from the US around a BPO provider and a financial services firm adopting a ‘digital first’ approach to debt resolution. This involved their Digitally Empowered Contact Centre (DECC) solution supported by on-shore and off-shore collections teams. More than 60% of the clients’ accounts now come through the digital stream.
We have a number of providers on the circulation list with both near-shore and offshore capabilities, notably in South Africa and India. I have worked with a number around both GDPR and SYSC 8 challenges, which may become more focused with the FCA Consumer Duty, notably with some of the new cross-cutting provisions and customer service rules.
This provides a good example of the components of the ecosystem, including operational resilience infrastructure, scalability, data analytics and some of the digital components, including emerging payment options.
Link: https://www.firstsource.com/insights/case-study/improving-collections-through-digital-modernization
The Digital DRA has also been active and announced changes to their website. They have focused on ‘customer’ benefits where these are indebted consumers of creditors, debt buyers and DCAs.
Link: https://www.digitaldra.co.uk/
AML – IPA 2022
I have attached their latest checklist that may be of wider use. IPs should be aware of paragraph 4 of Regulation 18, which states, “A relevant person must keep an up-to-date record in writing of all the steps it has taken under paragraph (1) [to compile the risk assessment], unless its supervisory authority notifies it in writing that such a record is not required.“
The ICO has posted around Financial Crime. The participating organisations are working with the ICO to explore how information sharing can be undertaken under UK GDPR, with appropriate data privacy mitigations. The overall effectiveness of such information sharing will also be assessed, and outcomes used to make recommendations for future implementation. Another one to watch.
FOS Quarterly complaints data
The Ombudsman has published the latest complaint data as part of Ombudsman News (Edition 169). In line with the MAT comments around Consumer Duty, current accounts were the most complained about products with 5,522 in the period. Short-term lending had the highest uphold rate at 80% against an average of 38%.
Top-5 in Q3 2021/22:
- Current accounts – 5,522
- Credit cards – 3,263
- Car or motorcycle insurance – 2,178
- Personal loans – 1,824
- Packaged bank accounts – 1,477
In terms of debt counselling, debt collection and debt adjusting we barely trouble the scorers.
| Product | Enquiries | New cases | Cases referred for an ombudsman’s decision | % of cases upheld |
| Debt Adjusting | 12 | <10 | <10 | <30 |
| Debt Collection | 507 | 239 | 47 | 22% |
| Debt Counselling (inc. Debt Management Plans) | 29 | 14 | <10 | <30 |
Link: https://www.financial-ombudsman.org.uk/news-events/ombudsman-news-169
Link: https://www.financial-ombudsman.org.uk/data-insight/quarterly-complaints-data
Cyber-attacks – SME action planning
Events in the Ukraine may make some of the threats more tangible where small firms may get caught up in global and international disruption.
Link: https://www.ncsc.gov.uk/guidance/actions-to-take-when-the-cyber-threat-is-heightened
Link: https://www.ncsc.gov.uk/news/organisations-urged-to-bolster-defences
Event feedback
VRS event on 24/2/2022
DEMSA attended the VRS event on Thursday which was really well attended and there were some good presentations from across the sector with another insightful presentation from Cath Wohlers of the Illegal Money Lending Team (IMLT) and the potential value of this unique dataset in VRS. Kim Hopkins, Specialist Support Customer Manager of Welsh Water, also provided insight on how they are collaborating with VRS and answered some of the audience questions around the UK GDPR basis for processing personal data, which is a common topic. Ascendant Solutions also provided a good demo of how vulnerability data can be embedded in core systems used by local authorities. This also reflected how Elanev’s services are used and John Willoughby provided further insight during the Q & A. Rosie Lyon provided a very personal perspective of the challenges she has faced.
Some of the key messages:
- Know the basis you can share data (e.g. IMLT = law enforcement)
- Know the integration points for accessing and collecting vulnerability data
- Adopt industry best practices
- Properly train the people that are accessing the data
- Always respect the rights of the individual and that vulnerability may be transient requiring ongoing engagement
- Understand how data can be enriched to deliver more value and insight
- For those in debt, they may be repeating the same messages over and over again, which can be very frustrating and stressful – we need to respect the good work done by others if shared
The presentations from Ben Furlong of Estate Search and Cath Wohler highlighted the close ties between vulnerability and fraud. The personas of vulnerable people are often linked to fraud where their bank account is used as a conduit for money laundering and other financial crimes.
On a related note, the ICO has issued a reprimand to both the Scottish government and NHS National Services Scotland of their failure to provide people with clear details about how their personal information was being used by COVID status apps. This highlights the thought and communication strategy work required to successfully deliver some of these initiatives where they are clearly launched with the right intent, but with evidence of poor execution. What is generally not clear with regulator or policy maker interventions is whether any volumes of consumers actually complained or were inconvenienced by the transgressions. The taxpayer bill for the remedy could be significant.
The ICO had a number of concerns, principally plans to let the app share the images and passport details of Scottish users with the software company providing the facial recognition technology behind it. As with NHS Digital last year, the ICO has focused on areas that may undermine consumer trust in how their data is shared, which DEMSA supports if we are to encourage more data sharing, potentially involving special category data.
Link: https://www.bbc.co.uk/news/uk-scotland-60521934
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