FCA registration numbers
The FCA is planning a move to seven-digit FRNs and PRNs for all newly registered firms and funds. Firms that have previously been allocated a six-digit FRN or PRN will keep that number. They won’t change. Seven-digit numbers will start to be allocated for new applications and notifications once our six-digit range is exhausted. They haven’t fixed a date for when this will happen, but state that they are on track to make the necessary changes to internal systems in good time.
We have a few on the circulation going through or about to start the application process.
Inflation hits 9.1%
ONS has confirmed that UK inflation reached 9.1% in the 12 months to May 2022, from 9% in April. The Bank of England has warned inflation will reach 11% this year.
Link: https://www.ons.gov.uk/economy/inflationandpriceindices
ONS has also confirmed that results for Census 2021 will be released in stages, starting on 28 June 2022.
HM Treasury response to regulation of BNPL – 20/6/2022
On 20 June 2022, DEMSA posted a reaction to the HM Treasury press release on LinkedIn.
Klarna has already welcomed the news from HM Treasury, but suggests that it needs to be on a more aggressive timetable. Given its complexity, the government will publish a consultation on draft legislation toward the end of 2022. Following this, the government aims to lay secondary legislation by mid-2023, after which the FCA will consult on its rules for the sector. This will be after the implementation of the Consumer Duty (April 2023).
Klarna UK boss Alex Marsh has criticised Barclays for publishing “mind-boggling” and “irresponsible” research exploring mounting buy-now pay-later debt levels in the UK. Barclays Partner Finance issued research alongside debt charity StepChange warning that 876,000 Brits could be plunged into unmanageable debt this year as a result of BNPL products. The 2 organisations called on retailers to intervene and learn more about the products they are offering to customers as a payments method. However, Marsh criticised the research from Barclays as an attempt to push its own “high-cost” instalment product. He said: “The conclusions in this report from Barclays are hugely patronising to UK retailers who already choose their credit providers based on responsible lending practices and quality of service.”
Marsh added that it was “unsurprising that UK retailers, like their customers, are ditching the old banks.”
The government’s approach is to tailor the application of the Consumer Credit Act 1974 (CCA) to these products, and the elements of lending practice most linked to potential consumer detriment. They have focused on affordability and that ‘financial promotions’ are fair and clear.
DEMSA welcomes the progression, but would like to have seen faster progress given the current cost-of-living crisis. I anticipate many of the larger BNPL providers adopting industry best practices given the ‘heads up’ on expected conduct set out by the FCA.
Operational resilience
On 8 June 2022, HM Treasury (HMT) published a policy statement on how it intends to mitigate the risks from critical third parties to the finance sector, notably cloud providers.
The Bank of England’s Financial Policy Committee (FPC) concluded in 2021 that “the increasing reliance on a small number of cloud service providers and other critical third parties could increase financial stability risks without greater direct regulatory oversight of the resilience of the services they provide”. HMT has since been working with the Bank of England, the PRA and the FCA to understand what ‘direct regulatory oversight’ of critical third-party services might involve. They have come up with a framework to enable them to manage the risks to financial stability and their statutory objectives.
UK Finance has previously published articles on ‘Outsourcing and third-party risk’ and ‘Cyber-security and third-party risk’. We have a number on the circulation that provide white labelled cloud solutions for regulated firms of varying sizes. This is a risk management challenge for firms of all sizes.
Christians Against Poverty (CAP) has published their 2022 Client Report with some very useful statistics and insights into the customers that they work with, which reinforces the diversity of customers seen across the debt advice sector and helps provide perspective when discussing new government initiatives like the Statutory Debt Repayment Scheme (SDRP).
UK consumer confidence falls to lowest level since records began
Confidence among British households in the economy has fallen to the lowest level on record as surging inflation hits finances. The monthly consumer confidence survey by GfK dropped one point to -41 in June, as households reported falls in their personal financial situation and level of savings.
Institute of Directors (IoD) – Voluntary Code of Conduct – June 2022
The IoD is calling on the UK Government to commission a high-level working group which would draft a voluntary code of conduct for directors. All UK directors would be encouraged to become signatories to the Code, and voluntarily commit themselves to its principles.
Bryan Foss confirmed in his response on LinkedIn that he doesn’t think that this has been widely circulated.
HM Treasury – SDRP consultation
As previously communicated in the mid-week bulletin, I attended the HM Treasury/Insolvency Service open session on 21 June 2022. I have attached the presentation and the questions from the event. It was evident that many hadn’t read the consultation in detail or the impact assessment and draft regulations. There were a number of local authority attendees, as well as government agency attendees (e.g. HMRC, DVLA).
We now have 3 more HM Treasury events between now and the end of July 2022, including a ‘deep dive’ session as we approach the end of the consultation period (5 August 2022).
I have also been in dialogue with the IPA after their first SERL working group session around SDRPs on Monday 20 June 2022. I am attending at least one of the Arum/Just events on 11 July (Public sector) and 12 July (Private sector).
MAT – Inclusive design in essential services
The Money Advice Trust and Fair By Design are working in partnership to lead a programme exploring inclusive design in credit, insurance, energy and other essential services markets. I am hoping that this is aligned with the work being undertaken by BSI in ISO 22458 (consumer vulnerability and inclusive design) where they are focusing on essential service providers in financial services, energy and water.
There is a short video at the link above explaining what is meant by inclusive design, especially around those showing characteristics of vulnerability or those with low financial resilience.
Many specialist providers may want to review the guidance for essential service providers with a view to how they can support this ecosystem more effectively, assuming there is a mindset by firms regulated by the likes of Ofcom, Ofwat and Ofgem to improve their services and evidence inclusive design, which is fairly well communicated in the FCA ‘Dear CEO’ letter to over 3,500 lenders.
Chris Fitch has just posted a blog around how the FCA expect firms to design out vulnerability. Chris chaired one of the recent panel sessions at the launch of ISO 22458 (consumer vulnerability) on 5 May 2022.
“Knowing Your Vulnerable Customer (KYVC) is absolutely key here. This means that good design is about good data (another FCA concern), good analysis of these data, and an ingrained and greater understanding across an entire firm of who our vulnerable consumers actually are, what challenges they face, and what part we can play in meeting these.”
On a related note, Experian has just posted a blog around affordability in telecoms.
Ofgem plans
Dr Elizabeth Blakelock has circulated a post by Jonathan Brearley, CEO of Ofgem, around the announcement of further measures to stabilise the energy market to prevent supplier failures which cause unnecessary extra costs and worry for consumers. He published the blog on 20 June 2022.
He has highlighted that many energy suppliers have been treating customers’ credit balances like a company credit card, using the money as an easy source of interest free capital. This was a big issue when a supplier failed and takes those credit balances with them. By forcing suppliers to protect consumer credit balances they hold on their customers’ behalf and green levies they collect for the government, Ofgem will ensure failures do not cost consumers any more than they have to. Last year, the 31 suppliers that went out of business added an extra £94 on consumer bills this year.
Ofgem is also looking at direct debits to ensure suppliers are not putting them up by more than needed. Suppliers do need to increase direct debit payments as prices go up and to allow their customers build up a surplus of credit in the summer to be spent over the winter when their use is higher. This is a sensible way of spreading costs and flattening spikes for individual customers. However, Ofgem is clear that direct debits need to be set at a reasonable level, and suppliers need to communicate clearly with their customers before making changes. So, Ofgem will take action where suppliers have upped their direct debits too much or are sitting on excessive credit balances.
According to the BBC, Ofgem has been blamed as supplier failures lead to higher energy bills. The National Audit Office (NAO) said Ofgem had allowed a market to develop that was vulnerable to large shocks.
ICO – How does data sharing apply to the acquisition or transfer of databases and lists?
I thought this ICO post may be of interest.
ASA/CAP – Enforcement Update – Debt Management Ads
This has been picked up by a number on the circulation list this week. The Advertising Standards Authority (ASA) published on 23 June 2022 a new Enforcement Notice about Debt Management (IVA/PTD) Ads by Insolvency Practitioners and Lead Generation Companies. DEMSA has previously communicated the inconsistencies and issues when responding to the FCA in the most recent ‘Debt Packager’ (CP21/30) consultation.
The ASA has confirmed that previous rulings related to ads that were not placed by FCA-authorised debt advisers, but by lead generation companies or insolvency practitioners. The ads targeted consumers with problem debt problems. They had the potential to cause serious detriment if they did comply with the advertising rules.
From Monday 25 July 2022, the ASA compliance team will take targeted enforcement action to ensure a level-playing-field. Where advertisers are unwilling to comply then there will be referrals to Trading Standards or an appropriate RPB.
In summary, ads must:
- Clearly state the risks and fees involved
- For lead generators, include a clear and prominent statement that they are a lead generation company which will pass on customer leads to third parties
Ads must not:
- Imply association or approval from government, debt charities or regulated advisory bodies
- Claim that customers “can write off up to 85% of their debts” or similar in the absence of robust documentary evidence
- Exaggerate the simplicity or speed of the process or claim that customers can “Lower your debt today” or similar
Whilst this is not directly intended for FCA regulated debt solution providers, the ASA has reminded firms that if you advertise in this market then please review the Notice and take immediate steps to check your advertising and make any changes as needed.
StepChange has welcomed the Notice and so has the IPA. Dave Holland of the IPA has been fairly vocal on this.
Requirements for IPA members
There are 2 clear and important requirements from the Ethical Code for IPs in respect of advertising:
- That an IP ‘shall be satisfied that any advertising, marketing or other form of promotional activity’, ‘pursuant to which the insolvency appointment might have been obtained … has complied with relevant codes of practice and guidance in relation to advertising’ (R360.6). The Enforcement Notice and this notice is an important piece of guidance. It is important that IPs are aware that the principles apply to all forms of insolvency appointments and not just those that advertise in respect of IVAs and PTDs.
- Where an insolvency practitioner or the firm obtains work via a third party or a third party conducts marketing activities on behalf of the insolvency practitioner or the firm, the insolvency practitioner shall be responsible for ensuring that the third party follows the application material above. IPs should review and retain evidence of checks undertaken in respect of advertising by any third parties they engage with. The third parties should be made aware of the IP’s responsibilities. These requirements apply through the whole customer journey, whether that is via regulated or unregulated entities and ideally it is expected that IPs either retain evidence of this journey on every case or must be able to demonstrate the journey to their regulator.
Payment Systems Regulator (PSR) – Unlocking account-to-account retail payments
My thanks to Faith Reynolds for pointing this article out.
The PSR Interim Head of Policy suggests that Open Banking offers the potential to develop account-to-account payments beyond direct debit, delivering new payment solutions and additional benefits to retailers and consumers. This includes people using account-to-account payments to pay for goods and services in shops and online. The PSR want to ensure that innovations like these can reach their full potential, so that payment systems are accessible, reliable and secure, and represent value for money.
Many on the circulation are horizon scanning around key trends in open banking that will need to be adopted to remain competitive over the term of their 3-5 Business Plans.
On 21 June 2022, the PSR sets out its plans showing how it proposes to carry out 2 market reviews focusing on card fees. One looks at scheme and processing fees, and the other at cross-border interchange fees.
The reviews focus on Mastercard and Visa as these 2 card payment system operators account for 99% of debit and credit card payments in the UK.
UK Finance – get ready for the New Payments Architecture (NPA)
NPA will be a new way of processing payments in the UK. It replaces the existing Faster Payments scheme and lays out the framework for a replacement to the BACS scheme. By providing a modern payments infrastructure, the NPA intends to provide an innovative, competitive and secure payments environment.
The first phase will be the replacement of the Faster Payments infrastructure, now 17 years old, which uses the ISO 8583 cards messaging format – a small message format, and structure. The NPA will replace this with instant Single Credit Transfers, utilising the ISO 20022 data model that is information rich. This has been re-scheduled several times. The UK Finance post recognises that delays and reduction in scope has led to innovation happening outside of the project and consequently further reduction in scope.
Events
Chris Warburton has recently featured an interview with Helen Lord of the Vulnerability Registration Service (VRS) around ‘Can you model vulnerability’.
The June 2022 edition of the CCTA magazine is now available online. This includes an article by Denise Crossley on planning for the cost-of-living crisis. She makes several important points around agent engagement with people in existing payment plans and their ongoing sustainability. Jason Wassell also has an article on ESG.
Trustfolio second podcast – James Jones of Experian
It feels like Lee and Peter are on a roll. This time they are featuring James Jones of Experian. Episode 2 is being promoted at the moment on LinkedIn.
Aveni – Consumer Duty webinar – 5 July 2022 between 12 and 12:45
I have registered and you can register by clicking on the link above. Very topical with the recent FCA ‘Dear CEO’ letters in the financial service sector, including insurance. A nice picture of Joseph contemplating his presentation and their recent funding round. They’ve successfully raised £2.75m in funding to accelerate growth. Investors include vision TriCapital, LLC Scottish Enterprise Old College Capital and new investors Par Equity. Congratulations to all involved.
Arum webinars on SDRPs for both the public (11/7) and private (12/7) sector
I have provided the link from Steve Coppard, Director of Arum/Just, on their SDRP consultation webinars on 11th (public sector) and 12th (private sector) July 2022. DEMSA is registered to attend. I will have attended the next HM Treasury workshop by then.
Citizens Advice Cost of Living Briefing – 28 July 2022
Clare Moriarty is joined by a panel of experts from the Citizen’s Advice data team and the frontline, for their first Cost of Living Briefing. They will share data insights on how the cost of living crisis is affecting their clients and any early insights they have about whether the government’s support package is helping.
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