FEATURES | NEWS BRIEFLEGAL NEWS | YOUR CCTA MEMBER NEWS | MEMBER ONLYINDUSTRY STATS

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NOTE: With diverse contributing authors, the views expressed in this magazine are not necessarily the views of CCTA.

CONTACTSGreg Stevens, Chief Executive greg.stevens@ccta.co.uk

Graham Haxton-Bernard, Head of Legal, Compliance and Regulatory Policy graham.haxton-bernard@ccta.co.uk

Anne Threapleton, Head of Marketing and Communications anne.threapleton@ccta.co.uk

Debbi Gower, Head of Finance, Complaints and Conciliation debbi@ccta.co.uk

Phillip Harding, Membership Services Manager phillip.harding@ccta.co.uk

Consumer Credit Trade AssociationA company limited by guarantee and registered in England. Registered Number 00034278.

VAT Number 232 4655 76. Registered Office Address

Airedale House, Aire Valley Business Park, Dowley Gap Lane, Bingley, BD16 1WA

T: +44 (0)1274 714959 F: +44 (0)1274 928365 www.ccta.co.uk

REGULARS:Member Only 19

News Brief 20

Member News 28

Your CCTA 31

Legal News 32

Stats 39

Greg StevensChief Executive, CCTA

| FEATURE

AT OUR ANNUAL TWO DAY CONFERENCE WE TOOK STOCK OF WHERE WE WERE AS AN INDUSTRY, AS A TRADE ASSOCIATION, AND WHERE THE REGULATOR IS, TO ENSURE THAT WE ARE ALL POINTING IN THE SAME DIRECTION.The new Financial Conduct Authority (FCA) landscape has required a radical rethink of both the purpose and the direction of travel for CCTA, in order to maximise our policy, regulatory, and public affairs agenda. As we approach our 125th anniversary year, we can take great comfort in the guidance, support, training, and lobbying that we have provided during that long period. However, the industry under the FCA is a completely different proposition going forward.

Sadly we have seen a number of small firms and good association friends exit the industry due to the onerous and intrusive nature of the new regulatory regime, the additional costs of compliance and systems, plus increased fees. Many of these small firms were true

community lenders, and provided a variety of consumer credit products to

satisfied consumers over the years. Unfortunately we expect that many

more will exit over the coming months, for the same reasons.

The FCA will not change tack. There is no doubt that

regulation will continue to distort and delete

parts of the current industry.

At CCTA we are working hard to protect both you and the general credit arena. With a strong nucleus of over 360 members, including many new to us this year, we remain a potent force in lobbying the FCA and other stakeholders. Applications are strong and, as ever, we welcome new voices to the fold.

We believe that eventually the FCA will be predisposed to work with larger TA’s that understand the markets, the complexities and diversities of industry business models. The new proposed combined banking trade association is testament to that direction, therefore boutique associations could find their lobbying powers severely diminished in the future.

At the conference we discussed ‘black swan’ events, or the impact of the highly improbable. Empirical reality will signify that the change of regulator and the resultant FCA Rules & Principles have moved way beyond normal risk. First and foremost the risk could be classified as an outlier, outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. So to summarise, it is real, it is rare, it carries an extreme impact with retrospective dangers. Sound familiar?

As the world gets smaller, and more technological, with advanced and faster communications ‘black swan’ events are on the increase, but are not being spotted early or dealt with quickly i.e. Arab spring, mass migration, cyber attacks, and then there was the credit crunch.

Now is the time, more than ever, that our collective voice needs to be heard so that unintended consequences for the consumer and industry are discussed and understood in the corridors of power, so that we have the fair, proportionate and appropriate regulation we were promised in 2012.

The natural process of evolution occasionally needs a kick, and we have taken size nines to the fabric of our association. In 2016 you will see an ‘ever ready‘ CCTA executive, where new sectoral committees feed into lobbying, focus and direction. This isn’t change for changes sake, but a move to ensure that your voice is heard loud and clear, both with the regulator, and in the corridors of power. The new committees will be up and running in early 2016, make sure you have your say.

As an industry we are bruised and suffering. Regulation at the moment appears to be onerous and on occasion inappropriate and disproportionate to real or perceived risks. Banking services and products are now receiving a lighter touch, although we know from the aftermath of the credit crunch that the risks in that sector are far greater. We await the final report on the FCA credit card review to see if fairness and proportionality is being applied evenly across all sectors, and that the regulation of perceived detriment to consumers is not decided by consumer groups.

At CCTA we have given a great deal of thought to a single statement which captures our ongoing ethos and the DNA of the association, not only for 2016, but for the future. ‘Stronger Together’ is who we are today, who we were yesterday, and who we will be.

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STRONGER TOGETHER

BLACK SWAN EVENTS ARE ON THE INCREASE

AS AN INDUSTRY

WE ARE BRUISED AND SUFFERING. REGULATION AT

THE MOMENT APPEARS TO BE ONEROUS AND ON

OCCASION INAPPROPRIATE AND DISPROPORTIONATE TO REAL

OR PERCEIVED RISKS.

The CCTA annual two day conference took place the 4 and 5 November at the Nottingham Belfry Hotel. It set the ball rolling on a trilogy of events which will take us through to the end of 2017.

MAKING THE FCA CUT – PART ONE THE WORK - 4 NovemberFollowing a sectoral approach, on day one we dealt with the practicalities of making a business work under the FCA, putting those with the greatest perceived risk under the microscope. In light of the fact that the authorisation of our industry is taking longer than we anticipated at our 2014 conference, for those still ‘in the process’, we aimed to highlight the risks, map the course and provide the tools needed to succeed and grow.

THE VISION - 5 November The second day covered a vision of the future. An aspirational look beyond authorisation, when the dust has settled and the wrinkles have been ironed out. We expanded on an achievable horizon, where the maintenance of regulatory equilibrium stems from the top of the tree. Although we are not out of the woods quite yet, this new ‘way of living’ is within reach, and is, no doubt, where we will all be when this current trilogy has run its course.

On the following pages is the full report of the event from Nostrum. Being a sponsor and exhibitor, we felt their unedited blog of the days, offered a truly objective view.

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Following another successful event, CCTA would like to extend a heart-felt thank you:

to our speakers for their passion and their unrivalled industry knowledge

our supporters for their friendly professionalism and unstinting involvement

and last but not least, to the delegates for their investment in the future of the industry.

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STRONGER TOGETHEROur 2015 conference was based around the work and the vision required in ‘Making the FCA Cut’. In 2016, the second part of this trilogy will look at how as an industry, our future strength will come from embracing a unified ethos. An attitude that puts the 11 principles of business and the six ‘treating customers fairly’ outcomes, front and centre of our day-to-day dealings and thinking. Further details will be available on our website in the New Year.

Dates: Wednesday 2nd and Thursday 3rd NovemberVenue: Nottingham Belfry Hotel, NG8 6PY

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C C T A 2 0 1 5 C O N F E R E N C E

MAKING THE FCA CUT OVERVIEW

CCTA CONFERENCE

2016MAKING THE

FCA CUT PART TWO

Today saw the start of this year’s Consumer Credit Trade Association (CCTA) annual conference. It was perhaps fitting that the event commenced on a day that itself started with heavy fog around the North of England, a theme that was to define the day.Greg Stevens, CEO of CCTA, opened with the event with a short address which set the scene for the day ahead. He reminded the audience that at the event last year it was predicted that 60% of members would have gone through authorisation by now. In reality the process has proven to be more taxing, slower and more expensive than was predicted. Many firms have exited, more are expected to follow in the coming months.Greg said that the ongoing bedding in of the Financial Conduct Authority (FCA) regulation will undoubtedly “distort and delete” parts of the current market, and said that life is currently “very unusual”, with considerable uncertainty around the industry and regulatory landscape.In closing Greg also noted that 2016 will be 125th anniversary of CCTA and that it will work more closely with the Federation of Small Business and Confederation of Business Industry moving forward.Jeanette Burgess of Walker Morris reflected on the demise of the payday lending industry and how it has been rebadged by the FCA as High Cost Short Term Credit (HCSTC). She said the pace of change has been “exhausting”, but change takes time and the industry is still adjusting to the new environment in which it must operate. Her opening line “We’ve come a long way baby!” seemed more and more apt as the day progressed.Jeanette covered a range of topics including lead generation, affordability and fair treatment of customers in financial difficulties.“It’s been tough” she noted, “some didn’t make it, and some didn’t try”.Affordability was to be a consistent theme throughout the day, and a number of catalysts for problems in this area were identified, including: insufficient checks; information

not properly checked; written policies not being implemented; and checks which

rely on the judgement of employees rather than written guidelines.

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Greg Stevens, CEO of CCTA, introduced day two with some reflections on the first day. He stated that yesterday’s focus on compliance was reality and it is necessary to face reality, but today would focus on leadership and vision.Greg outlined CCTA’s intention to work closely with the FCA to address the unintended consequences of regulation. The industry is closest to the consumer and best placed to guide the FCA’s thinking. There has never been a more important time for the industry to stand up.

FCA AUTHORISATION AND SUPERVISIONJeanette Burgess of Walker Morris spoke about the challenges of operating under a principles vs rules based regime. She highlighted that being ready, willing and organised to abide by the principles is critical for successful authorisation, adding that the principles simply reflect the way that we would all like to be treated as individuals.The following were given as examples of common TCF failings:• consumers are unclear on the status of the

firm they are dealing with and the fees and charges

• key product features are not sufficiently well explained

• loans are unaffordable/borrowers are trapped in a cycle of debt

• those experiencing repayment issues are not treated with adequate forbearance

• advice provided not in consumer’s interests.We couldn’t help but think that technology can play a significant role in addressing these issues, but that’s a topic for another blog.Firms were encouraged to have an open and proactive relationship with the regulator. The FCA doesn’t expect firms to operate without occasional issues, but they look for a high degree of integrity in terms of making them aware of issues quickly and in full.Adrian Plowman, from the Consumer Credit Department at the FCA, spoke about how the regulator supervises firms who have achieved authorisation. He reminded us of the FCA’s three objectives: to protect customers; ensure market integrity and promote effective competition.Adrian spoke in detail about how the FCA monitors and supervises firms in respect of its 11 Principles of Business and its six TCF outcomes, making the point that although some firms will receive very little contact, all should be prepared to engage with the regulator at any time.He also explained how the FCA approaches changes to the rules. This typically involves a consultation and cost benefit analysis, although the FCA is able to make changes without consultation if it deems this appropriate. Adrian assured delegates that the FCA is not looking to trip people up, rather it is concerned solely with getting positive outcomes for consumers.

THE ROLE OF STRATEGY AND CULTURENigel Waite of The Canford Centre took a forward looking view of the challenges facing the industry, talking about the importance of having a strategy for sustainable business

Finding better real-time data sources will play a key role in credit decisions and underwriting.” Andy questioned how prominent a role social media data could play in identifying vulnerable customers.Harry Cummine of Initial Finance walked through his firm’s journey to achieving FCA authorisation, a process which took about six months. Having had presentations from several advisers over the course of the last two days, it was fascinating to hear Harry’s first hand account. He highlighted the main challenges he faced as being the amount of time involved, and the amount of learning and documentation required. In closing, Harry said that his firm welcomed FCA regulation and that it had forced them to challenge their thinking and make positive changes to their business.Simon Brown of Volkswagen Financial Services shared his thoughts on how firms can bring compliance to life within a business and embed it within the day to day culture. He stressed the importance of keeping abreast of regulatory developments, because the landscape will continually evolve and there may be developments in non-consumer credit industries which have implications for firms to consider. Simon also highlighted how important it is to establish a training and competency programme, and a compliance monitoring plan that is focused on customer outcomes.

George Wilkinson of George Wilkinson Associates talked through the myths and unknowns of affordability. He said that in ideal world it would be possible to conduct an accurate, stable estimate of an individual’s future repayments, based on full reliable information, which would deliver a complete dynamic personal cash flow. In reality this is neither practical nor effective.

George also challenged the notion that credit is too easily obtained, stating there are over 50 million declines per year.

Ian Renard of Callcredit spoke about vulnerable customers, defining these as customers who have one or more of bad credit, affordability, or high cost credit. He explained that communication, forbearance and the conversion of high cost revolving credit into a loan are all tools that can be used to manage these customers.

In the panel discussion that followed it was suggested that customers applying for credit may inflate their income, whereas when they are in financial difficulty they may aim to downplay their earnings. Consequently a post event analysis can show that there are discrepancies. Lending against verified vs unverified income has been proven to perform better, regardless of the income level of the client.

Graham Haxton-Bernard, CCTA’s regulatory guru, told the audience that the FCA is researching 200 firms in respect of how they are currently addressing affordability. Consult in early 2016 on the CONC rules, with a view to providing further guidance on the rules in respect of good and bad practice.

TRUST AND FAIRNESS

Nigel Waite of The Canford Centre spoke about the need to install trust and confidence in your customers, the regulator, and all other stakeholders, and to treat your customers fairly. On the face of it, fairly obvious topics, but he managed to explain each to a depth that encouraged greater understanding.

John Lappin, former editor of Money Marketing, used his experience in the mortgage broker and IFA markets to provide the audience with some context by talking about the historical impact of FCA regulation on that sector. He encouraged the audience to use the FCA principles within their business to their advantage and put themselves in a better position with the regulator.

John Fellows of First Response Finance reflected on his own organisation’s journey through regulation, citing: a lack of certainty; hindsight driven regulation; regulatory creep; difference of opinion and the sheer volume of regulatory documentation as key challenges the industry faces.

All in all an interesting day and certainly one that showed the progress the industry has made in the last 12 months, since the last time we reported from this event.

success. He walked delegates through the process of defining a strategy, and some of the critical success factors.Nigel outlined how businesses can benefit from a clear and coherent strategy by increasing income, reducing costs, increasing consumer advocacy, and giving themselves peace of mind in their day to day operations.Clive Cary of Huntswood delivered a presentation about leadership, culture and TCF that asked the question: ‘What’s the difference, that makes the difference?’ He said that competency and experience are important, but they are not enough. Firms need to employ high quality people with the ability to adapt to constant change and with a passion for giving customers what they want and need. He also spoke about the difficulty in measuring behaviour and identifying what constitutes acceptable behaviour.

FINTECH AND DATAKicking off the afternoon session, Nostrum CEO Richard Carter spoke about FinTech and digital lending, topics that are of course close to Nostrum’s heart. He deciphered FinTech for the audience, giving a simple definition of ‘the use of software to provide financial services’. (We have written a separate blog about the presentation.)George Wilkinson of George Wilkinson Associates spoke about data and its future role in the credit decision process. Following on from the previous slot, he agreed with the Richard Carter’s view that the likes of Amazon could become major players in the credit industry. After all, once the functionality for finance exists, it makes perfect sense that these retailers will not only want to use it to facilitate the buying of small items like books, but will want to scale it up for greater commercial benefit.George spoke about the huge volume and complexity of data now becoming available, creating a ‘data tsunami’, and stressed the need for the industry to put in place processes and controls to ensure this data is appropriately managed. He called for the regulator to give the industry some certainty around what it expects in terms of acceptable lending and data processes, and highlighted the importance of being able to trust scorecard models and data quality in order to arrive at appropriate lending decisions.Helen Lord of Regulatory Strategies spoke about changes to the regulatory landscape for data, discussing how data breaches need to be handled and how the changes to data protection will require organisations to obtain ‘exploit permission’ in order to use individuals’ data for things like email marketing. Larger organisations will need to appoint Data Protection Officers. Fines for data breaches and misuse are currently limited to £500k but will be able to be as high as 2% of global turnover in future.Andy LaPointe of CashEuroNet UK spoke about FinTech and how the short term lending industry had effectively created the foundation for FinTech in the lending industry. He said that: “the ability to accurately measure credit risk and affordability were critical for the future prosperity of the short term credit industry.

THE VIEW OF THE REGULATOR

FCA’s David Fisher took to the stage and spoke about the impact of authorisation. He stated that of 29,000 aplications that have been fully processed to date, over 94% have been authorised. Almost all of the rest withdrew their applications (often at the guidance of the FCA), and some have been refused. Fewer than 30 firms have formally been refused authorisation.

Applications have been received from a significantly higher number of new entrants than expected, 85% more than expected. There was later some debate around whether it is easier for new entrants to get authorised. David assured the audience that all firms have to go through the same process, but that in the case of those migrating an existing business the FCA inevitably has more to consider due to the existing operations and customer base.

David addressed concerns about delays in authorisation by explaining that 2,500 applications are open at any one time, and there are often delays in assigning case officers, which was reflective of the resource constraints at the FCA. Greg Stevens later revisited this point and questioned whether there is going to be a bottleneck for those applications still to be concluded, which are inevitably the most complex and challenging ones.

Simply put “The better quality the application, the easier it is to assess.”

FROM AUTHORISATION TO SUPERVISION

Rachel Corcoran of H&T Group agreed with the previous speakers that the consumer credit industry is still feeling its way with the new regulator as it moves through the authorisation phase. Her tips included: don’t just pay lip service to the rules; document your rationale; have appropriate controls and checks; challenge your existing policies and procedures; prepare for regulatory change as early as possible; maintain focus, and keep investing in compliance.

Nick Ross of Huntswood delivered a session on supervision, something which is likely to be a central them to next year’s conference. He spoke about the FCA’s eight principles of good regulation and 11 principles of business, and their six ‘Treating Customers Fairly’ (TCF) outcomes.

THE AFFORDABILITY DEBATE

The afternoon session kicked off with a discussion around affordability and how this initiative has come to prominence in recent years. Karl-Magnus Wadsack of Equifax said that in the most basic of terms measuring affordability amounts to a need to capture income and expenditure information, and to have an ability to meaningfully evaluate it.

He also spoke about the increasing need to be able to conduct a real-time evaluation of affordability, making the point that the only way to accurately do this was using real-time data. Increased granularity and transparency are expected to feature strongly in the future, especially when the big banks open up their APIs to enable greater visibility of data across the industry.

THE NOSTRUM BLOG | CCTA CONFERENCE 2015 DAY 1

THE QUEST FOR CLARITYCCTA CONFERENCE 2015 DAY 2

LOOKING TO THE FUTURE

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OUR THANKS TO NOSTRUM FOR THEIR PERMISSION TO PRINT THE BLOG IN FULL

NOSTRUMGROUP.COM/NEWS

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JOHN LAMIDEYSenior Partner, Arminius Associates Speaker and Chair

Affordability - The Ultimate Regulatory Creep

JOHN FELLOWSHead of Compliance & Audit

First Response Finance

KARL-MAGNUS WADSACKPrincipal Consultant, Alternative Lending, Equifax

Making Affordability Pay

GEORGE WILKINSONConsumer Credit Consultant and Strategist

Transportable Data: A Cause for Concern?

GREG STEVENSCEO, CCTA

What’s Happening?

GREG STEVENSCEO, CCTA

Where Are We Heading?

GEORGE WILKINSONConsumer Credit Consultant and Strategist

Afforbability - Myths and Unknowns

HELEN LORDDirector, Regulatory Strategies Ltd

Radical Data Protection Changes: Are you Ready?

JEANETTE BURGESSPartner and Head of Regulatory Services, Walker Morris LLP

High Cost Short Term Credit: Where Are We Now?

JEANETTE BURGESSPartner and Head of Regulatory Services, Walker Morris LLP

The Eleven Commandments: A Bedrock for Sustainable Business

IAN RENARDBusiness Product Manager, Callcredit

Identifying and Managing Vulnerable Customers

RICHARD ELLISONPartner, Shakespeare Martineau LLP

The Legal Aspects of Data Sharing

DAVID FISHERHead of Credit Authorisations, FCA

Being Regulated

ADRIAN PLOWMANConsumer Credit Department, FCA

Being Regulated

PROFESSOR NIGEL WAITECEO, Canford Centre for Customer Development

Principles for Principals

ANDY LAPOINTEPolicy Director, CashEuroNet.UK

Technology and Leadership in an FCA World

ADAM SHINEBROOMChief Operating Officer, Mr Lender

Enabling a Great Culture

PROFESSOR NIGEL WAITECEO, Canford Centre for Customer Development

Towards the Horizon: Leading the Vision

JOHN LAPPINEditor, Mindful Money

What Consumer Credit Firms can Learn from other Regulated Sectors

HARRY CUMMINEDirector, Initial Finance Ltd

The Journey So Far

RACHEL CORCORANHead of Compliance, H & T Group

A Lenders Perspective: Principles and CONC

CLIVE CARYHuntswood’s Head of People and Culture

Leadership: What is the Difference That Makes the Difference?

AMANDA HULMEPartner & Head of Financial Regulation, Addleshaw Goddard LLP

What Is ‘Principles Regulation’ Anyway?

SIMON BROWNHead of Compliance & Governance, Volkswagen Financial Services UK

The Capture and Dissemination of Information

NICK ROSSPrincipal Regulatory Consultant, Huntswood

Athorisation to Supervision: Succeeding in the New Regulatory Environment

RICHARD CARTERChief Executive, Nostrum Group

FinTech and Digital Lending

JOHN FELLOWSHead of Compliance & Audit, First Response Finance

A Shared Understanding

CONFERENCE SPEAKERS

DAY ONECONFERENCE SPEAKERS

DAY TWO

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John LamideySenior Partner,

Arminius Associates

ARMINIUS ASSOCIATES | FEATURE

and then having no current model to assess! It has taken the FCA time to understand (and interfere with) HCSTC business models and this has slowed down the process.

The FCA has been working on one ‘lead case’ to model as a good affordability assessment process which, once tested, will be used as a benchmark for all other HCSTC firms. Once this work is done, there will be an ‘unblocking’ (quite soon apparently) of HCSTC authorisations. The implication is that we will see a raft of authorisations and refusals of HCSTC firms all at the same time. As at 2 November 2015, two HCSTC firms had been authorised (they both had unique and really unusual business models says the FCA), one firm had been refused authorisation, but 101 HCSTC firms had withdrawn their applications.

PLAYING IN THE SANDThe FCA was asked to investigate the feasibility and practicalities of developing a regulatory sandbox for financial services by HM Treasury. In 2016 the sandbox will extend the FCA’s Project Innovate which was developed to foster competition and growth in financial services. In its first year, Project Innovate helped over 175 innovative businesses, but only five of them have actually been authorised to undertake regulated activities.

The FCA believes that a sandbox could deliver a number of benefits to innovators, including reducing the time it takes for innovative ideas to come to market. The benefits to firms should lead to better outcomes for consumers, such as an increased range of products and services. The sandbox also enables the FCA to work with innovators to ensure that appropriate consumer protection safeguards are built into their new products and services before these reach a mass market.

Sandboxes were initially used in the construction of the Eifel Tower in Paris in 1889. The metalwork had been prepared with the utmost precision, but to carry out small adjustments to align the legs precisely, they had been intentionally constructed at a slightly steeper angle than necessary, being supported on boxes of sand. The sand could be trickled out of the boxes until each leg reached its precise angle. I do hope that the FCA sandbox will result in precise engineering of credit innovation, rather than just be a sand pit for playing around with new toys.

PEER-TO-PEER IDEAS TO PROLIFERATEThere are between 50 and 90 Peer-to-Peer (P2P) lenders in the UK but the largest, and best known three are Rate Setter, Zopa and Funding Circle. They are moving from individual

Bankpeers and credit card providers are not going to be taken to task over zombie accounts or loan repayments and overdrafts that drag on for years and years, costing the customer far in excess of the 100% to which high cost short term lenders are restricted, neither by the Competition and Markets Authority (CMA) retail banking market investigation report in April, nor by the Financial Conduct Authority (FCA) credit card market study around the same time. No action at all seems likely to change the situation where it remains possible to run up a large debt on a credit card and make only the minimum repayments. With a credit card maxed out at £10,000 with monthly interest at a middle of the road 1.313%, by paying only the minimum repayment (2% per month of the balance outstanding or £10 whichever is the greater), it will take 502 months to pay off (nearly 42 years!) and the total amount repaid will be £27,806.84 for the £10,000 borrowed.

FCA AUTHORISATIONAs at 30th June 2015 1,060 firms in the consumer credit sector withdrew their Authorisation application and a further

23 firms were refused. 98 firms cancelled their permission after being authorised

(including 50 new-to-market firms). 16,096 had been authorised,

of which 5,057 were new-to-market. A further

1,472 applications from new-to-market firms

were in the process of being determined.

report to make efforts to get rid of the problem sector of the card market, despite a tranche of up to 10% of customers suffering significant detriment. This makes the FCA argument that negative events are ‘just being part of the card market’ untenable. There is a distinct part of the market that could be excised if the FCA were to regulate consistently.

The FCA is likely to propose a range of remedies. These includes measures to help consumers find the best deal by enabling better access to their transaction data, boosting the role of comparison sites and ensuring consumers can search the market without damaging their credit score. The FCA wants firms to prompt consumers when they are nearing the end of a promotional period. These remedies are neither earth shattering nor novel. They are the same style of remedies that have been trotted out by regulators and the CMA for a decade – have there been dramatic improvements as a result?

ONE BRIGHT IDEA THAT WILL PROBABLY NEVER GET OFF THE GROUNDFrom January 2016, Selfcert.co.uk (based in an unnamed Eastern European country and founded by a former UK payday lender) forced out of business by the FCA, will offer self-certification mortgages to UK borrowers. These are effectively now banned in the UK, but Selfcert.co.uk says EU rules allow financial institutions in other EU states to offer their products to consumers in the UK without applying for authorisation from the FCA.

The only condition is that the company must pass the lending rules of the country in which it has based itself. It is also not allowed to have a property or a branch in the UK. Selfcert.co.uk says that skirting the FCA is so easy that it could not understand why more firms were not doing it. Estonia is thought to be a hotspot for financial firms who want to target British customers.

Apparently the FCA has confirmed that under the EU Electronic Commerce Directive, a firm located in an EU state and lending online into the UK from that country, is not FCA regulated and the FCA will not be able to intervene if something goes wrong. But such a lender will be unable to collect or enforce its debts in the UK.

investment to institutional finance. For the smaller P2P operations balancing investors and borrowers is becoming an increasing problem. Old fashioned direct mail will be used more and more to recruit new customers as there is so much digital engagement these days that digital customer recruitment does not work well.

There are strong suggestions that the likes of PayPal, Amazon and eBay could create a non-state specific lending market in some form, moving towards the globalization of lending. The 2015 Lloyds Bank Family Savings Report suggests that UK friends and family borrowing is running at £37 billion a year, a 21% increase on 2013. So there is money to be made out of enabling lending from friends and family, with Facebook perhaps soon offering such a service. I can see those with P2P experience expanding rapidly into this market. Might Amazon or eBay set up facilities to enable your purchases to be funded by your friends or bank of Mum and Dad when you are a bit short of cash? Enabling lending without having actually to lend any cash yourself, nor collect it back later, would develop existing P2P concepts to a new international level, making them impossible to regulate satisfactorily.

CREDIT CARD REVIEWCredit cards look to get away relatively pain free when the final report of the FCA Credit Card Review comes out in Spring. Chris Woolard, Director of Strategy and Competition, and an Executive Board member at the FCA, was interviewed about the interim credit card report on BBC Radio 4 Moneybox Live on 7 November. He said that the FCA did not wish to make customers who were having some difficulty with their credit card repayments unprofitable for card companies. Veteran financial interviewer Paul Lewis challenged him, saying that the interim report showed that 5.8 million people had been loaned too much by card companies so why was the FCA not making them give refunds as it had with payday loan firms? He did not get an answer to this, but Woolard asserted that affordability criteria apply exactly the same to credit cards as they do to HCSTC. I doubt if that will prove to be demonstrably correct.

The FCA Interim Report: Annex 6 – affordability analysis indicates that card companies could reduce credit card problem debt significantly by changing credit models or business rules to remove a disproportionate level of customers that pay ‘total cost credit’ of over 100% of their borrowings and customer repayments that take over ten years. The FCA was comfortable making HCSTC firms cut up to 50% of their customers to get rid of problem debt but, I suspect, will be unwilling in its final

In 2016 it will continue to be much easier to get FCA authorisation if you are a start-up with no history, than for a well established firm.

CRASApplications for full authorisation by firms that currently hold an interim permission from the FCA, must be made by 31st March 2016. One of the last to be called forward to apply will be the Credit Reference Agencies (CRAs). CRAs have not really been directly regulated before, so given the FCA enthusiasm for business models, regulatory business plans and robust governance, one might think that this will be a treat! However, I reckon that the steam has gone out of the process. The FCA vents most of its ire on the high cost short term credit sector (HCSTC), so I expect the CRAs to smooth through.

Not TeleTrack though. Its US parent has decided to close the UK operation due primarily to FCA intervention in the HCSTC market. It plans to delete its 80 million AWARE consumer records database at one minute past midnight on 1st January 2016.

This is unprecedented. No credit reference agency in the UK has simply closed down. In the past, those leaving the market have been bought out by competitors (INFØLINK was purchased by Equifax in 1995 for example), so the consumer database stays active. This does beg questions. The customers have a right of access to their data which contains historical credit applications and loan information, which are used in credit assessments for future loans. Open accounts are updated via the AWARE database, so with all the data deleted it is unclear how these can be managed going forward. Its real time data sharing will die with it, too.

HIGH COST SHORT TERM CREDITAuthorisation of HCSTC firms has been a particularly slow process, due in part to the FCA demanding major changes to business models

PREDICTION PROCESSCONSUMER CREDIT... A PERSONAL GUIDE

TO 2016

IN 2016 THERE WILL BE A NEW FCA CEO,

AND PROBABLY THE DEPARTURE OF ITS

CHAIRMAN JOHN GRIFFITHS-JONES.

ENABLING LENDING WITHOUT HAVING ACTUALLY

TO LEND ANY CASH YOURSELF, NOR COLLECT

IT BACK LATER, WOULD DEVELOP EXISTING

PEER-TO-PEER CONCEPTS TO A NEW INTERNATIONAL

LEVEL, MAKING THEM IMPOSSIBLE TO

REGULATE SATISFACTORILY.

Clive CaryHead of People and Culture,

Huntswood

| FEATURE

14 15

Lee BirketteMoneyUnion

Leaders hold a critical role in every organisation. Their ability to direct, lead, coach, communicate, inspire, and react to ever changing conditions and situations ultimately ‘sets the tone’ for the entire business.

The word ‘culture’ is often describe as ‘the way things are done around here’, so how do you know that the way things are done in your firm is aligned to the expectations of the Financial Conduct Authority (FCA)?

Consumer credit firms are clearly going through a time of transition. Some will have been recently authorised by the FCA and will be wondering what to expect in terms regulatory supervision. Others will just be starting on the ‘road to authorisation’ and will be more concerned with drafting detailed business plans to articulate their strategy and future intentions.

Whatever stage your organisation is at, what you do and the way you behave as business leaders is of critical importance.

Naturally, transition brings challenges for organisations, but it also brings an opportunity to examine a business through a ‘fresh pair of eyes’, and ask some searching questions:

• do we have a ‘proper’ business plan? Could we articulate it to a third party (such as the FCA)?

• what’s our business model and how do we make money?

Peer-to-Peer (P2P) lending is simple. It can be best described as an online savings and loans co-operative, albeit with no Financial Services Compensation Scheme (FSCS) protection. Thousands of borrowers are matched with thousands of savers on an internet platform. Savers with a little spare cash are willing to lend online (between £10 and in certain circumstances £50,000 each) to borrowers on the other side of the platform, with the aim of getting a better return on their dormant savings. It’s all about spreading the risk, and it is made clear to lenders that their capital is at risk, it’s not a bank or building society savings account.

We are all aware of the lack of lending from the banks, and to be fair, the new capital adequacy requirements restrict them from lending to anyone other than ‘super prime’. This immovable position has left a gaping hole in the lending sector which a number of FinTech players have sprinted to fill.

P2P loans funded by such players include: bridging loans; secured loans; buy to let mortgages; unsecured loans; personal guarantor loans; car HP.

The majority of the finance industry is completely unaware that the above loan agreements are not Consumer Credit Act Agreements or Regulated Mortgage Contracts (although certain secured loans will be under MCD March 2016).

• what are the main risks in our business? What challenges will we face in the next three years?

• how do we induct new people into our firm? What training and development do we provide?

• do we have a Training and Competence (T&C) scheme? How is it monitored?

• what is the leadership style in our business? How would we describe, measure and report on the culture in our firm?

At a high level, any cultural assessment takes into account the following areas:

TONE FROM THE TOPThe Senior Managers Regime (SMR) clearly signals the FCA’s intent to ‘drill down’ further into the roles of key individuals. The message is that leaders and managers must ‘shoulder the responsibility’ when issues or failings arise, and will be held to account for how the firm is run and whether their approach is effective. Consequently, senior managers must implement proportionate controls to ensure safety in the business area for which they are responsible.

Whilst SMR is indicative of the general ‘direction of travel’ for all businesses, including newly regulated consumer credit firms, this is not really a new idea, and is ultimately about good governance as articulated in the FCA’s Principles for Business.

MESSAGE ON THE SHOP FLOORAnother element in evaluating the leadership effectiveness and determining the culture of your organisation is to look at how your staff behave in performing their roles on a daily basis (including when you are not there!).

Aside from the impact of the ‘tone from the top’ and ‘pay and rations’ (see below), the way people are likely to behave in the workplace can be predicted accurately by using psychometric inventories. Behavioural questionnaires can help firms recruit people who are a strong ‘cultural fit’, helping avoid the cost of ‘bad hires’, which research indicates can cost five-to-seven times a person’s salary to put right.

Some companies also assess emotional intelligence (EQ), aptitude and ability (IQ), and even values. Some of the ‘challenger’ banks (such as Tesco Bank) deploy ‘values questionnaires’, which ask candidates to respond to a range of scenarios to evaluate their approach to customer service, internal cohesion or building strong relationships. Individual values can then be matched to the organisation’s values to ascertain whether a candidate will be a good fit.

PAY AND RATIONSYour remuneration and reward strategy is also a critical element in the cultural mix.

We all know that ‘what gets rewarded and measured gets done’, and understandably, businesses have historically focused on sales.

Whilst successful businesses will always need to deliver top line results, and there is clearly nothing wrong with rewarding good sales performance, increasingly firms are using measures of quality to help demonstrate that they are delivering fair outcomes. So, the question is: “what tangible measures should I use to evidence the type of culture that exists in my organisation?”

TANGIBLE MEASURESThe perennial need for processes, governance, controls and measures which are proportionate to the nature and scale of a business is well established. These systems would naturally include measuring what is strategically important, but what about culture?

The fact is that you are probably measuring elements of culture already in your business and governance monitoring and Key Performance Indicators (KPIs).

The following elements provide a view on the culture of a businesses:

• employee measures, e.g. recruitment data (such as values and behaviours), staff engagement surveys, HR data (including length of service, attrition, sickness)

• customer measures, e.g. customer feedback, engagement surveys, mystery shopping, customer insight programmes, market data

• business data, e.g. performance KPIs (sales, persistency, product spread etc.), Treating Customers Fairly (TCF) MI, complaints MI, customer outcomes testing.

Measuring and reporting on culture will eventually become a core element of your strategic monitoring.

SUMMARYIn conclusion, it is vital that leaders of organisations of all types take steps to evaluate the ‘tone from the top’ and ‘message from the shop floor’, their ‘pay and rations’, and also look at the tangible measures they need to have in place to enable regular ‘temperature checks’ of their culture as a ‘Business As Usual’ activity.

In October 2013 there was an amendment by parliament to the Financial Services and Markets Act 2000, Regulated Activities Order 36H, to allow P2P loan agreements to be executed on an electronic loan platform.

In April 2014, operating an electronic platform in relation to lending became a Financial Conduct Authority (FCA) regulated activity, as part of the Office of Fair Trading (OFT) transition of consumer credit to the FCA. The permission became a regulatory branch of debt administration and only those firms operating P2P platforms at that time were able to trade under the FCA, hence hardly any new entrants since 2014.

The P2P proposition has become a political darling, and HM Treasury have stated that from April 2016 a third ISA called the Innovative Finance ISA will be introduced, to increase competition in banking. P2P lending can be included in every single person’s annual ISA allowance.

If anyone needed convincing that P2P lending is here to stay, I think the government well and truly pulled the FinTech rabbit out of the hat in the last budget. I don’t know about the ‘uber’ moment for old school banks happening, it already has.

Just watch P2P grow.

A RABBIT OUTOF THE HAT? LEADERSHIP AND CULTURE

PEER-TO-PEER LENDING SET TO SPREAD

| FEATURE| FEATURE

Helen Lord Director, Regulatory Strategies

Adrian CummingsConsultant, Long Barn Associates

16 17

BE PREPARED...THE FCA IS FOR LIFE... NOT JUST CHRISTMAS

With the final details of the EU data protection regulation almost upon us, organisations should be addressing their need for a mandatory data protection officer.We are expecting the final regulation towards the end of December 2015 or early January 2016, and the consensus is that action is required now to ensure that you have trained staff to comply with the regulation which will come into force 2017/2018.This means for the credit industry, under current proposals, if you have more than 250 staff or you process information about more than 5000 ‘data subjects’ in any 12 month period, you will be required to appoint a Data Protection Officer (DPO).The individual must be appointed on the basis of ‘professional qualities and, in particular, expert knowledge of data protection law and practices’ (EU Commission, Parliament and Council’s view).From draft regulation the DPO is expected to be appointed for a term of at least two years or four years, the former is the Commission’s view, the latter is recommended in the Parliament’s text. What is certain is that the DPO may only be dismissed if they no longer meet the required conditions or for gross misconduct.The DPO will be the public face of data protection for the organisation with data subjects and the regulator.Our advice is to address this requirement now, which can be fulfilled either internally or by appointing an external consultant.In tandem with this you should be auditing your current data protection compliance. If you have a clean bill of health now, the migration to the new requirements should fit into ‘business as usual’ rather than detract from your everyday commercial activities. Without this advanced planning the much more onerous obligations, and significant penalties for non-compliance, will materially impact your business.

In October 2013 the Financial Conduct Authority (FCA) issued a consultation paper covering the proposed rules that would be implemented when they officially took over consumer credit in April 2014. The world as we knew it began to change. In February 2014, the rules, little changed from the consultation, were issued. The rules and guidance were for implementation on 1 April 2014. Many noted that this was April

Fool’s day, but was no jolly jape. April 1st also marked the day by which firms that

were licensed by the OFT and wished to continue in business must have

applied for interim permission.

In particular, we would suggest you address the following:• incident management plans should be in

place. Data breach reporting is not currently mandatory in the UK but the new regulation will require businesses to notify both the regulator and affected customers possibly within 24 hours, but certainly within a reasonable amount of time. It will therefore be essential to move quickly and without a plan in place, it is likely that wrong decisions will be made

the recent Talk Talk hacking incident highlights the amount of potential adverse publicity that a data breach can cause, it also shows that an organisation needs to be able to demonstrate that it has sufficient security in place to prevent breaches and, if they do occur, are able to protect their customers and address gaps. It is also essential to be able to effectively communicate with the press and media should an incident get into the public domain

• policies and procedures will no longer be a ‘nice to have’. Data controllers will have to have these in place so checking that data protection policies, privacy statements etc. are in place and are sufficiently robust is essential. Previous action by the Information Commissioner’s Officer has already shown that just having procedures and policies in place is insufficient, staff need to be fully trained and aware of their responsibilities

• the Information Commissioner’s Office already recommends the use of Privacy Impact Assessments/Privacy by Design in the development of any new product or new use of data. This will become a requirement and a documented process will need to be in place

• you should already have robust contracts in place with data processors to ensure that they are meeting your data protection obligations. The future will see data processors facing their own data protection obligations so it is likely that clauses in contracts will need to reflect this.

The above highlights a few key areas that are likely to impact on businesses. Taking action now will help to ensure that businesses and staff are prepared for the changes. And, as with our preparations for the FCA regime, if we leave things until the last minute all focus will be upon meeting the regulation rather than developing our businesses.

Obtaining this was a relatively painless process. A few minutes online, fee paid and Bob’s your uncle. The naive then believed that life as we knew it could and would continue for at least the foreseeable future. Some even suggested that the process could be strung out by putting in a less than acceptable authorisation application! Many however either, missed that date and let their licence lapse as they effectively were already not trading, or chose to not proceed. The numbers are clouded, but suffice it to say firms offering consumer credit services have already significantly reduced. Headlines suggested that 99% of payday lenders would go. The latest figures from the FCA suggest that in excess of 800 firms decided, not to proceed with their applications.I believe that many firms were of the opinion that once interim permission had been obtained, business could continue as usual. The application process was seen as something which involved sorting out a few policy documents, putting together the Regulatory Business Plan (RBP) paying the fee, and within six months the certificate would arrive and businesses could get on with making money again.In October 2014 the ‘landing slots’ opened in which to apply for full authorisation.

Application periods were staggered across geographic regions and category/

sub-category of business. This was supposed to smooth the process

and our expectations were that unless there were any issues with an application, a

response would ensue within six months.

A number of firms did not even start to prepare their applications until their

landing slot was imminent. Not just small firms but some substantial businesses. This

despite frequent advice from trade associations such as CCTA, and the FCA themselves. Over the past two years, I have been party to the training provided by CCTA which has taken participants through the process from the requirements when applying, becoming an approved person, complaints handling, TCF and reporting. Essentially, a sound base for firms about to fall under the gaze of the FCA, from which to move forward.I have worked with a number of firms, large and small, preparing their applications, their RBP and their online submissions. Some believed there was a silver bullet to be had. There was not. The policies and procedures for each firm are different. These of course need to be proportionate to the business and the activity it undertakes.

Many firms have applied, and after some months were eventually appointed an FCA case-worker. Not unexpectedly, applications were incomplete, there were questions to answer and data was requested. Firms advised that their application was deemed to be complete thought that approval would then be imminent. Some have been approved, but it still seems to be a trickle. Perhaps the next statistics from the FCA will prove otherwise. There is still a school of thought that believes that once the certificate arrives, and for most it will, life as we knew it will return. Not so. The authorisation process must be considered the first step of FCA supervision. Firms will continue to be supervised by the FCA for as long as they continue to offer consumer credit in any shape or form. Supervision will become more formalised once full or limited permission is received. The regular provision of data to the FCA will be a part of that process. It is expected that most firms will be subject to ‘flexible supervision’, which essentially means they will not have a dedicated supervisor at the FCA. The FCA will seek to prevent problems before they happen. They will engage with individual firms on a sample basis, through a variety of activities, to inform their judgements and influence how the market operates with respect to their objectives. If you are unsure what this means, the FCA has an overarching strategic objective to ensure that the relevant markets function well. This is embodied in their three operational objectives: • to secure an appropriate degree of

protection for consumers • to protect and enhance the integrity of the

UK financial system • to promote effective competition in the

interests of consumers. These objectives are the foundation for their approach to supervision. In their relationship with firms they want to ensure that fair treatment of consumers is at the heart of your business, and that you do not adversely affect market integrity and competition. In other words, Treating Customers Fairly. Their objectives are supported by their ten supervision principles. The bottom line is this. The FCA has clearly set out its stall. It has extensive rules and guidance which must be followed. It is (at times) forgiving of unintentional error, however you must play by the rules. As we approach the festive season when we hope that our colleagues in the industry begin to find their letters of authorisation in their stocking from Santa, remember, the FCA is for life… not just Christmas.

COUNTDOWN TO RADICAL DATA

PROTECTION CHANGES... CRITICALLY, IS YOUR DATA PROTECTION OFFICER TRAINED

AND READY?

ONCE THE CERTIFICATE

ARRIVES... WILL LIFE AS YOU KNEW IT

RETURN?

MEMBERS ONLY

exploiding digital age?

19

Back to the Future: Real–time travellers Thirty years ago Marty McFly and Doc Emmett Brown travelled through time in a flying Delorean to the ‘future’. To mark the anniversary, the actors from the Back to the Future trilogy appeared on the Jimmy Kimmel show poking fun at the lack of progress made by the human race over the last 30 years.

Doc Emmett Brown refers to himself in the film as ‘a student of all sciences’, therefore we can safely assume he studied Data Science at some point (at least for the purposes of this article anyway!). What, would he have made of the evolution in evaluating the credit worthiness of customers over the last 30 years?

He would have travelled from a time where staff were employed at Credit Reference Agencies (CRAs) to take orders from lenders over the telephone, printing credit reports out on a dot matrix printer and faxing back to the customer. Express service was delivered in less than 24 hours! This, of course met the need of our customers at the time. With the absence of the internet or email, applications for credit were typically made in branch, filling out paper forms or sent via the post.

Fast forward to the ‘future’ and nowadays things have progressed significantly. With the explosion of the digital age, information is everywhere and is expected much more quickly. Teams of analysts are employed to build highly predictive statistical models. These are deployed within automated decision engines, processing high volumes of data from a multitude of sources in fractions of a second to meet the needs of a customer applying by multiple channels.

But what about the frequency of updates to that data? Has any of this moved forward in the last 30 years? Application searches are recorded in real-time however loan performance has always traditionally been collected on a monthly cycle. This is because lenders submit their loan portfolios monthly to the CRA. Although the cycle is monthly, the CRA receives different lender portfolios every day, which is why loan performance information can change daily on a credit report.

The recording of application searches in real time means that lenders can be aware of whether consumers are applying for multiple loans on the same day. However they will not be aware if those applications have led to multiple borrowing within the same period, in some cases a new line of credit could take more than a month to become visible. One of the barriers of course is lenders’ legacy systems being unable to report to the CRA more frequently. Should risk managers be concerned? To put your mind at ease, current analysis completed on our real-time exchange indicates that only 1% of loans taken out, are from different lenders on the same day.

The FCA believes that frequency of loan reporting matters, at least when it comes to the High Cost Short Term Credit (HCSTC) market. These lenders operate predominately within the online environment where applications and decisions are made in seconds. The FCA has been fully focused on this market and encouraging these lenders to share and use real-time data. The loan terms offered by this sector are typically much shorter than standard offerings, which mean several loans could be taken out by the borrower in between the usual monthly reporting cycles. If HCSTC firms are not using real-time data, they need to demonstrate to the FCA how they are factoring consumers’ up-to-date credit commitments into their affordability assessments.

The tightening of regulation has pushed the HCSTC market to the forefront of the evolution of real-time reporting and some argue that they have a more up-to-date view of their customer than a bank or a credit card provider. This is true to some extent, however it is limited to the product line shared in real-time by their market.

By providing real-time visibility throughout the entire loan cycle, lenders are helped to complete robust affordability assessments and reduce the risk of fraud while providing better outcomes for customers. Real-time data sharing is made as easy as possible either via Application Program Interface (API) link, or daily batch upload accepted in all market formats. Will we see a future where lenders across all sectors provide portfolio updates in real-time? This would present an IT challenge for many clients, however will ultimately be driven by a combination of business and regulatory requirement.

Craig Tebbutt Head of Alternative Lending, Equifax

Anchor Computer Systems, 1 Chestnut Court, Parc Menai, Bangor, Gwynedd LL57 4FH Tel. 01248 672940 www.anchor.co.uk

Our experience and knowledge of theinstalment credit market means that ourSentinel system is capable of handling amultitude of different loan agreementtypes as standard.

This flexibility is at its core assisting you todrive your lending business forwardthrough the changes required by the FCA.

The adaptability means that it provides anend-to-end solution with web servicesenabling applications from customers, leadgenerators, brokers and affiliates and aback office function taking your customerfrom their initial application andunderwriting through payment collectionsand arrears management to settlement.

It is already the system of choice for over200 companies. Why not call us to see whythese companies chose Sentinel.

For further information onhow Sentinel can help yourbusiness contact:

Mike O’Sullivan 01248 67294007854 955070

Alternatively emailenquiry@anchor.co.uk

Can your Loan Management Systemtake your customers on a journeyPayday Loan • Instalment LoanGuarantor Loan • Secured Loan

FAST FORWARD TO THE ‘FUTURE’ AND NOWADAYS THINGS HAVE PROGRESSED SIGNIFICANTLY.

The FCA is planning to launch a consumer communications campaign to raise awareness of the new deadline to make PPI complaints, which will be funded by 18 firms who have received around 90% of all PPI complaints.

It estimates the cost of the proposed campaign as £42.2m over two years. To fund this, it is proposing a new fee rule, applying to the 18 firms (who were not named in the consultation), requiring them to pay this sum over two year. According to Which? figures, the total amount now set aside by the big five banks alone for PPI compensation is around 7.4 billion. The FCA said it would write to those firms affected by the proposed rule, setting out the total complaints they have reported and the amount of their proposed fee.

The consultation paper said: “We consider that confining the fee to these firms is appropriate because they are most responsible for causing PPI complaints, and will receive the most benefit from the certainty and other effects of the proposed deadline that the campaign will support.”

The regulator is also proposing to ask firms to support the consumer communications campaign with messaging of their own that would reassure PPI consumers about how they would be treated if they complain.The FCA first consulted on a proposed new deadline by which consumers would need to make their PPI complaints. The deadline would fall two years from the date the proposed rule comes into force, which is expected to be Spring 2016, meaning PPI consumers would have until Spring 2018 to complain.

Source: Finance News

PPI – that old chestnut?FINANCIAL CONDUCT AUTHORITY CONSULTS ON CHANGES TO PPI COMPLAINT HANDLING RULES

In a statement published on 2 October 2015, the Financial Conduct Authority (FCA) stated that it would consult on introducing a deadline for making payment protection insurance (PPI) complaints, accompanied by a consumer communications campaign, and on new rules and guidance for handling PPI complaints in light of the Supreme Court’s decision in Plevin v Paragon Personal Finance Ltd.

The FCA has now published its consultation paper on the proposals, which also outlines the proposed consumer communication campaign and how it is proposed this be funded.

Those with views on the proposals set out in the consultation paper have three months to respond. Any comments on, or evidence about, the proposals should be sent to the FCA by 26 February 2016.

Consumers who are unhappy about PPI should continue to complain to the firms concerned and to the Financial Ombudsman Service if they are not satisfied with the response.

FCA PUBLISHES REGULATORY FEES AND LEVIES CONSULTATION FOR 2016/17

The FCA has published a consultation (CP15/34) on regulatory fees and levies for 2016/17. The consultation runs until 8 January 2016. Amongst their proposals, they are planning to bring forward from 30 April to 1 April the ‘on-account’ date when larger firms pay the first instalment of their annual fees with effect from 1 April 2016.

FCA PUBLISHES NEW WEB PAGE ON ANNUAL CONSUMER CREDIT FEES

The FCA has published a web page on annual consumer credit fees. This page explains that:

• a consumer credit firm has to pay an annual fee (a periodic fee) each year the firm is authorised

• the FCA will invoice a firm for its first annual fee shortly after it becomes authorised to carry out consumer credit regulated activities

• a firm’s annual fee invoice will include fees and levies on behalf of other regulatory bodies, such as the Financial Ombudsman Service and Money Advice Service

• a firm’s annual fee depends on whether it has limited permission or full permission (which determines the ‘fee block’) and also its annual income from consumer credit activities.

ICO – super power!OXYGEN LTD, A LEAD GENERATION COMPANY, HAS BEEN FINED £120,000 BY THE ICO FOR MAKING UNSOLICITED AUTOMATED MARKETING CALLS.

They made over one million calls, playing a recorded message claiming to be a ‘government awareness call’ and offering to write off debt.

The calls related gave no indication of who they were from. After an initial 214 complaints from the public, an ICO investigation discovered the company had made over one million automated calls, without people’s consent, during April 2015. Oxygen was responsible for the marketing campaign and used another company to make the calls.

Steve Eckersley, Head of Enforcement at the ICO, said: “Companies making recorded marketing calls like this need permission, and need to be clear who is making the calls. Oxygen Ltd did neither, and even falsely implied they were part of a government campaign.

If they thought they could avoid detection by paying a separate company to make the calls, or by presenting the calls as coming from a mobile phone number, they were mistaken. The public complained about these calls, and we have acted.

This should be a lesson to all businesses, if you set up a marketing campaign it falls to you to provide proof of consent for every automated call made and to identify your business as the company making the calls. Any company acting the way Oxygen did can expect to be investigated and receive a large fine from the ICO.”

These calls were made after the change in the law around nuisance calls and texts on 6 April 2015.

Regulatory sandboxFINANCIAL CONDUCT AUTHORITY’S PROJECT INNOVATE CELEBRATES FIRST ANNIVERSARY WITH PLANS FOR ‘REGULATORY SANDBOX’

The Financial Conduct Authority (FCA) has published plans for implementing a ‘regulatory sandbox’. The sandbox will allow businesses to test out new, innovative financial products, services or business models without incurring all the normal regulatory consequences of engaging in those activities. They were asked to investigate the feasibility and practicalities of developing a regulatory sandbox for financial services by HM Treasury, following recommendations by the Government Office for Science.The publication will extend the FCA’s Project Innovate, and marks its first anniversary.

The FCA believes that a sandbox could deliver a number of benefits to innovators, including reducing the time it takes for innovative ideas to come to market. The benefits to firms should lead to better outcomes for consumers, such as an increased range of products and services. Under the plans, firms that do not yet have FCA authorisation will be able to make use of the sandbox. The FCA has suggested that these firms will be able to use a tailored authorisation process that will allow only for the testing of products and services.

The Consumer Rights Act 2015 Commencement Order has now been published confirming that the substantive provisions of the Consumer Rights Act 2015 relating to goods, digital content, services and unfair terms will be in force from 1 October 2015 (and 1 April 2016 in relation to consumer transport services contracts). The Act is intended to simplify consumer law but there will be a period of flux as firms begin to experience the practical implications of the changes.

On 28th September, the FCA published Policy Statement PS15/23 following its consultation on consumer credit published in February 2015 (CP15/6), confirming its final rules and guidance on changes to the Consumer Credit Sourcebook (CONC), including the rules concerning financial promotions in CONC 3.

The FCA have proceeded with the majority of their proposals outlined in the consultation paper and have provided a summary of the feedback received and their responses. The changes to CONC 3 came into force on 2 November 2015.

20 21

NEWS | REGs NEWS | REGs

Firms ordered to pay fee for FCA PPI campaign

Head in the cloudsFCA PUBLISHES GUIDANCE CONSULTATION FOR FIRMS OUTSOURCING TO THE CLOUD AND OTHER IT SERVICES

The FCA has published a guidance consultation (GC15/6) to clarify the requirements on firms when outsourcing to the ‘cloud’ and other third party IT services

There are particular risks associated with outsourcing to the cloud which differ from traditional outsourcing arrangements, and these risks primarily affect the degree of control exercised by the firm.

• cloud customers may have less scope to tailor the service provider

• cloud customers may also have to accept that cloud service providers will move their data around

• there is a risk associated with outsource service providers who may contract out part of their operation to other cloud providers. This may occur without the firm initially realising.

Firms should also be aware of international developments taking place that are likely to have an impact on their decision making process regarding the use of cloud services. Notably, the new EU Digital Single Market strategy and reform of EU Data Protection legislation. The consultation runs until 12 February 2016.

Changes to the rules on financial promotions

The Consumer Rights Act 2015 Commencement Order has now been published

Pulling the rug outBANKS SLAMMED FOR WITHDRAWING SME OVERDRAFTS WITHOUT WARNING

SME owners have revealed that one of their main gripes against banks is the withdrawal of millions of pounds worth of overdrafts, with no warning. Online business finance supermarket Funding Options said small businesses made 741 complaints to the Financial Ombudsman Service over bank loans and overdrafts last year. One of the most common reasons small businesses complain to the ombudsman, it claimed, is the withdrawal of overdrafts by banks without any warning.

Its research shows that small business overdrafts have been withdrawn by banks at the rate of £3.7m per day since 2011. These complaints are only the tip of the iceberg, as only the smallest businesses can complain to the ombudsman. Businesses with ten or more employees, or with a turnover of more than €2m, are not able to make complaints. This could indicate the amount of disputes between businesses and banks is much greater.

The withdrawal of funding has led to many small businesses looking to alternative finance. It believed that £76bn of alternative financing is in use by SMEs, now almost half of the amount of bank lending currently used by small businesses. In the last year alone there has been a 43% increase in SME alternative finance lending.

Source: Real Business

FINANCIAL CONDUCT AUTHORITY STATEMENT FOLLOWING PRESS REPORTS ON THE SENIOR MANAGERS’ AND CERTIFICATION REGIME

Following reports in the press about HM Treasury’s intention to extend and make changes to the Senior Managers’ and Certification Regime, Tracey McDermott, acting Chief Executive of the FCA, said: “Extending the senior managers’ and certification regime is an important step in embedding a culture of personal responsibility throughout the financial services industry. While the presumption of responsibility could have been helpful, it was never a panacea. There has been significant industry focus on this one, small element of the reforms, which risked distracting senior management within firms from implementing both the letter and spirit of the regime. The senior managers’ and certification regime is intended to deliver better decisions to help avoid problems arising. We remain committed to holding individuals to account where they fail to meet our standards.”

FCA DATA BULLETIN 4TH – 30TH OCTOBER 2015

As at 30th June 2015:

• 23,960 firms had applied for authorisation and 780 firms were grandfathered in, mainly those who were covered by group licences under the Office of Fair Trading regime

• 65% of all applications received were for limited permission

• 16,962 firms were authorised (representing 94% of determinations) but only 1,192 of these are actually lenders, the vast majority (11,629) are credit brokers with limited permission

• the number authorised includes firms that changed the way they proposed to operate (including their business model and regulated activities) as a result of conversations with the FCA

• 1,060 firms withdrew their application and 23 firms were refused

• 98 firms that were authorised have since cancelled their FCA permission (one firm that applied for full permission, 75 for limited permission and 22 firms that varied their permission)

• adjusting for the cancellations, there were 41,937 consumer credit firms as at 30th June 2015

• eight application periods had closed and two were in progress

Firms offering HCSTC (amongst others) applied in AP3 ending 28th February 2015. In this period, there were 5,505 eligible to apply for authorisation:

• 3,927 actually applied for authorisation

• 1,578 lapsed or cancelled

• 347 became appointed representatives of other firms

• 3,226 were authorised

• 49 withdrew and none were refused

• 652 firms are still to be determined.

Source: FCA Data Bulletin

FCA PUBLISHES CONSUMER CREDIT AUTHORISATION GUIDES

The FCA has released a number of guides to assist consumer credit firms applying for authorisation:

• an overview of the application process

• firm details required

• permission types and fees

• consumer credit supplement

• disclosure of significant events

• systems and controls

• compliance and financial crime procedures

• personnel information

• owners and influencers

• supporting documents

• firm declaration

There are also step-by-step video guides relating to the authorisation applications.

Source: FCA, 10 September 2015

Tidy the site...FCA TO CONSULT ON ADDITIONAL STANDARDS FOR PRICE COMPARISON WEBSITES DISPLAYING PAYDAY LOANS

On 28 October 2015 the Financial Conduct Authority (FCA) published its response to the Competition and Market Authority’s (CMA) payday lending market investigation. The CMA recommended that the FCA review its standards for price comparison websites (PCWs) which display payday loans, before a CMA Order requiring all payday lenders to list their products on at least one PCW comes into effect. The proposals include requiring PCWs comparing HCSTC products to:

• rank products in ascending order of price according to the ‘total amount payable’ and not give products greater prominence as a result of commercial relationships

• ensure any additional advertising on PCWs for HCSTC is outside the ranking tables and not interspersed with it

• enable consumers to search according to the amount and duration of loan that they require

• disclose on their website the extent of their market coverage by listing the number and names of the firms whose products they compare.

The consultation paper also addresses a number of other areas:

• the use of real-time data sharing to enable informed credit assessments

• measures to improve shopping around without affecting consumers’ credit ratings

• improved disclosure on the costs of borrowing, and

• credit broking/lead generation.

108 Loan sharks arrestedInvestigators at National Trading Standards (NTS) ensured that 108 loan sharks were arrested in England and Wales during the past year, as teams launched 365 operations. The figures are revealed in the agency’s annual report which shows the activity of Trading Standards’ Illegal Money Lending Teams (IMLTs). These teams target and prosecute loan sharks who generally lend illegally to vulnerable people deprived of access to credit.

The IMLTs’ work in the past year included:

• identifying more than 750 suspected illegal money lenders and seizing nearly £500,000 in cash and restraining assets worth over £1.2m under the Proceeds of Crime Act

• bringing charges in 28 cases from 365 new operations

• charging or opening proceedings against 43 individuals.

Along with prosecuting criminals, the IMLTs support victims and witnesses, offering emotional support and advice as well as referring on to credit unions, housing, debt advice and mental health services. The IMLTs warned that the biggest emerging threat to their work is a combined effect of the introduction of the universal credit single benefit, and the cap on payday loans.

Zombie businesses’ return to the land of the living The number of businesses just paying the interest on their debts, a key characteristic of ‘zombie businesses’, has plummeted from 154,000 in August 2014 to 69,000 now, according to research by insolvency trade body R3. This is the lowest number of businesses in this position since the survey began in June 2012, having peaked at 160,000 in November 2012.

Phillip Sykes, President of R3, says: “There has been a dramatic decrease in the number of ‘zombie businesses’ since we began our research. Encouragingly, the findings suggest that businesses are experiencing greater profitability. We are now seeing more companies able to afford to pay off the debt itself and not just the interest. This is understandable in this period of ‘non-flation’. A strong pound and lower oil prices may also be helping businesses’ balance sheets. The economic climate is rewriting the rules of recovery as we knew it. When interest rates dropped in 2009 it was never expected that they would remain at that level for so long but by doing so it alleviated some of the pressure on businesses and allowed them an opportunity to get their finances in order.”

According to the R3/BDRC research around 97,000 businesses say they have to negotiate payment terms with creditors, down from 135,000 last year.

Source: R3

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NEWS | SMEs & REGs NEWS | SMEs & REGs

To cap it all!Government has published its response to the consultation on rules to cap the fees charged by banks to their business customers for processing credit and debit card payments.

These new rules, which are part of the Interchange Fee Regulation that the EU agreed earlier this year, introduce an EU wide cap on the charges paid by a business when a customer pays for something using a card. As set out in the consultation response, from 9 December 2015, the fees banks can charge will be capped at 0.30% for credit card transactions, and an average of 0.20% for domestic debit card transactions.

Making sure that the EU has a competitive financial services industry that works in the interests of consumers and supports the wider economy is a key pillar of the UK’s reform agenda, and tackling unfair card fees was a key recommendation of the Prime Minister’s EU Business Taskforce. The agreement secured on the Interchange Fee Regulation demonstrates how Europe can ensure that business and consumers alike benefit from the single market.

There were almost 10.7 billion credit and debit transactions in Britain in 2013, and UK Cards has estimated that the UK’s approach could save British retailers (up to £700 million a year). The government would like to see this benefit passed on to consumers in the form of lower prices.

Authorisation. The facts and figures so far…

Keep your eye on the ball

A guiding hand…

Gone green…UK GREEN INVESTMENT BANK PLC (GIB) MOVES TO PRIVATE OWNERSHIP

The Government statement: “We believe the time is right to move UK Green Investment Bank plc (GIB) into private ownership. This is a natural next step for the company now it has proved itself a successful commercial enterprise. The company’s board fully supports this move and has made clear how important it considers this is to enabling the company to deliver its ambitious green business plan and have a greater impact on green investment. It makes sense for GIB investment to be funded by private capital where possible and to minimise the need for public funding. This will further help to demonstrate to investors that GIB’s business model of investing in green projects can be a profitable business and is not simply the preserve of government.”

The Chancellor of the Exchequer has made his Autumn Statement, which included announcements on the designation of credit reference agencies and the secondary market for annuities. The government will also consult on changing the scope of the bank levy to UK operations from 1 January 2021.

George Osbourne highlighted:

• full funding for the ‘five year forward view’ that the NHS itself put forward as the plan for its future

• the biggest real terms increase to the basic state pension in 15 years

• the biggest housebuilding programme by any government since the 1970s

• the phasing out entirely of the local government grant

• a new apprenticeship levy to deliver three million apprenticeships

• real terms protection of schools budget

• the largest ever investment in free childcare so working families get the help they need

• the improvement in the nation’s finances used to help on tax credits

• an average saving of £30 from the projected energy bills of 24 million households.

Source: HM Treasury, November 2015

Whistleblowing precedent?FCA INTRODUCES NEW RULES ON WHISTLEBLOWING

The Financial Conduct Authority (FCA), and the Prudential Regulation Authority (PRA), have published new rules in relation to whistleblowing. These changes follow recommendations in 2013 by the Parliamentary Commission on Banking Standards (PCBS) that banks put in place mechanisms to allow their employees to raise concerns internally and that they appoint a senior person to take responsibility for the effectiveness of these arrangements. Tracey McDermott, acting FCA Chief Executive, commented: “It is in the interests of the industry and regulators alike that wrong doing is identified and addressed promptly. For individuals to have the confidence to come forward, it is vital that firms have in place adequate policies on dealing with whistleblowers and that a senior manager takes responsibility for overseeing these policies.”

The rules on whistleblowing, which take full effect in September 2016, apply to deposit takers (banks, building societies, credit unions) with over £250m in assets, and to insurers subject to the Solvency II directive.

They are non-binding guidance for all other firms supervised by the FCA.

NEW REPORT REVEALS RECORD AUTOMATED PAYMENTS MADE IN 2014

More automated payments were made in the UK in 2014 than ever before, according to a new report published by Payments UK.

• over 7.3 billion, CHAPS, BACS Direct Debits and Direct Credits and Faster Payments were made in 2014 - an increase of 3.6% from 2013

• Faster Payments saw the strongest growth, with 1.1 billion payments processed in 2014, an increase of 14%

• in 2014 internet banking was the most popular form of remote banking, used by 33.3 million people, but mobile banking has grown significantly, overtaking telephone banking for the first time in 2014, with 15 million people using the service

• Direct Debits remain the most popular method of automated payment by volume, with 3.7 billion sent in 2014, an increase of 4%

• BACS Direct Credits were primarily used by businesses to pay individuals, 85% of these 2.15 billion payments made in 2014 were for this purpose

• CHAPS continues to account for the overwhelming share of the value of payments processed in the UK. CHAPS payments worth £68 trillion were made last year, an average of £269 billion per day, accounting for 91% of the total value of payments in the UK in 2014. The volume of CHAPS payments rose by 4.4% to an all time high of 36.5 million in 2014. CHAPS payments are forecast to be over 50 million by 2024.

Source: Payments UK

Hedging your bets?TREASURY COMMITTEE PUBLISHES FCA RESPONSE TO REPORT ON CONDUCT AND COMPETITION IN SME LENDING

The House of Commons Treasury Committee has published the FCA’s response to the report on conduct and competition in SME lending. Commenting on the response, Right Hon. Andrew Tyrie MP, Chairman of the Treasury Committee, said: “Many small businesses have been badly hit by the complex terms of the Interest Rate Hedging Products (IRHPs) offered by their bank. A significant number of those firms who were mis-sold these hedging products feel that, having been ripped off in the first place, they have now been treated unfairly again by the FCA’s IRHP redress scheme.

“The Treasury Committee’s report in June 2015 identified a number of serious concerns about the FCA’s scheme. The Committee recommended, among other things, that the FCA should collect the information necessary to establish whether there are systemic failures in the review and publish its findings. It is welcome that the FCA now recognises the merit of conducting a review of how the redress scheme has been operating. It should get on with this. Restoration of confidence in the scheme is essential. Millions of consumers and small businesses have been getting a poor deal for decades because of a lack of effective competition and genuine choice in banking. This problem is particularly acute in the SME banking market. After persistent pressure from the Treasury Committee, the FCA is now required by law to promote competition in the interests of consumers.”

Source: UK Parliament, 12 October 2015

Joined up thinking?FIVE FINANCIAL TRADE ASSOCIATIONS TO MERGE

The Financial Services Trade Associations Review Association has published their recommendations for creating a new trade association for the industry by bringing together five existing associations and also forging new relationships with two other organisations involved in payments and financial fraud.

The British Bankers’ Association (BBA) will join up with Payments UK, the Council of Mortgage Lenders (CML), the UK Cards Association and the Asset Based Finance Association. The idea is to cut costs, and increase lobbying power. The BBA represents both high street and investment banks, while the CML covers banks and building societies. It is not yet known what the new body will be called.

Nine of the UK’s biggest banks including HSBC, Lloyds Banking Group and Barclays as well as building society Nationwide, called on the trade bodies to consider merging as it was considered that they often duplicated lobbying efforts.

The Building Societies Association and the Finance & Leasing Association both said they did not want to join the merged group of trade bodies. The various trade bodies expected to merge have yet to hold a vote of their members. Should members vote to merge, the timetable would see the enlarged trade body launch in May and be fully operational by November 2016.

Source: The Financial Services TradeAssociations Review Association, 20 November 2015

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NEWS | BANKs NEWS | BANKs

BANK OF ENGLAND AND FINANCIAL SERVICES BILL AMENDMENTS TO FSMA

New clauses have been accepted into the Bank of England and Financial Services Bill inserting new clarificatory provisions into the Financial Services and Markets Act (FSMA) 2000 over the enforceability of consumer credit agreements.

• clause 24 amends section 26A FSMA to clarify that a consumer credit agreement may be enforced by anyone permitted to carry on a credit related regulated activity, including exempt persons such as appointed representatives or members of a designated professional body (e.g. solicitors)

• clause 25 amends section 27 FSMA to clarify that an agreement made unenforceable in consequence of something said or done by a third party in breach of the general prohibition will only apply if the provider knew, before the agreement is made, that the third party (e.g. a credit broker), had some involvement in the making of the agreement or in matters preparatory to its making.

Source: UK Parliament, 12 November 2015

No glasses required… That’ll

do nicely

Autumn Statement and Spending Review 2015

IOU… repeat…FCA INTERIM REPORT ON THE CREDIT CARD MARKET PUBLISHED

The Financial Conduct Authority (FCA) has published its interim report into the credit card market, including its early thinking into potential remedies. The FCA found that competition is working fairly well for most consumers. However, the FCA is concerned about the scale of potentially problematic debt for consumers who are just above default levels, and the incentives for firms to manage this. The FCA also wants to see better information for those shopping around.

The FCA found that around 6.9% of cardholders (about two million people) are in arrears or have defaulted. They estimate a further two million people have persistent levels of debt that some may be struggling to repay, and that a further 1.6 million people are repeatedly making minimum payments on their credit card debt.

The interim findings show that consumers in default are extremely unprofitable and firms are active in contacting consumers who miss payments, triggering forbearance at this point. However, consumers with persistent levels of debt or who make minimum payments are profitable, firms therefore have fewer incentives to help these customers.

The FCA is seeking feedback on how best to take forward its proposals and interested parties can share their views by contacting creditcardmarketstudy@fca.org.uk by Friday 8 January.

CMA RETAIL BANKING MARKET INVESTIGATION

Following publication on 22 October 2015 of a summary of its provisional finding, the Competition and Markets Authority has published a full report on its provisional findings following its market investigation into the supply of retail banking services to personal current account customers and to small and medium-sized enterprises in the UK.

The report which runs to over 400 pages contains detailed background and analysis. A final report is published next Spring.

Source: Competition and Markets Authority, 28 October 2015

The money tree…GROSS MORTGAGE LENDING CONTINUES TO GROW IN OCTOBER

The Council of Mortgage Lenders (CML) estimates that gross mortgage lending reached £21.8 billion in October, 8% higher than September’s lending total of £20.1 billion. In addition to the month-on-month rise, lending rose 19% year-on-year, from £18.4 billion in October 2014. This is the highest monthly figure since gross lending reached £23.6 billion in July 2008.

Bob Pannell, CML Chief Economist, comments: “As lending in the regulated mortgage space picked up over the summer months, the pace of recovery has improved. This looks set to continue over the closing months of the year with the factors helping support this recovery continuing to be low inflation, strong wage growth, an improving labour market and competitive mortgage deals.

As a result lending this year is likely to exceed our forecast of £209 billion, though affordability pressures will limit business volumes for first time buyers and movers meaning that we think the market has only modest further upside potential over the short term.”

NEWS | EXTRAs

ON 5 NOVEMBER THE FINANCE & LEASING ASSOCIATION PUBLISHED NEW FIGURES HIGHLIGHTING:

• Motor finance sees growth from new 65 registration plate

• Point-of-sale consumer new car finance was up 10% by volume and 16% by value in September, compared to the same month last year.

CONSUMER FINANCE GROWS 9% IN SEPTEMBER

9% Growth in consumer finance new business in September, in comparison to the same month last year.

32% OF UK BUSINESS INVESTED BY ASSET FINANCE INDUSTRY

Asset finance new business grew by 5% in August compared with the same month last year – the twenty-third consecutive month of growth.

Confusion cleared…CML AND WHICH? ISSUE NEW MORTGAGE TARIFF TO HELP CONSUMERS COMPARE FEES AND CHARGES

On 22 November 2015 the Council of Mortgage Lenders (CML) and Which? launched a new ‘tariff of mortgage charges’ that will introduce a standard format for how lenders communicate their fees, to make it easier for customers to understand charges and compare deals.

Following a Which? campaign to end the confusion around mortgage costs, the Chancellor asked the CML and Which? to work together to find ways to make it easier for consumers to understand and compare the costs of different mortgages with different lenders. There are two key improvements within the tariff:

• standard terminology

• common format.

The new tariff has been tested on consumers, and results show that consumers found it much easier to understand and compare costs than when they used existing versions. Lenders representing 85% of the market have already committed to introducing this tariff and putting it on their website by the end of the year.

Making a list… checking it twice!FCA FINANCIAL SERVICES REGISTER LAUNCHED

On 7 September 2015 the Finanicial Conduct Athority (FCA) launched a new Financial Services Register to make it easier to find information on firms, individuals and other bodies that are, or have been, regulated by us the FCA or the Prudential Regulation Authority (PRA). The new register will has search field to help users find a firm, individual or collective investment scheme by looking up its name, reference number or postcode. Users also be able to search for certain investment exchanges.

There is the option to filter the search results or click on a name for further information like contact details, the permissions a firm has or whether it is covered by the Financial Ombudsman Service and Financial Services Compensation Scheme. The new register also includes clearer language and help text to explain some important financial, technical and regulatory terms.

Firms that the FCA have been told are providing regulated products or services without the required authorisation, or are knowingly running a scam, will be included in the register for the first time. These firms will be highlighted in search results by red text and a warning symbol to make clear that we think you should avoid dealing with them or individuals involved. Further information on unauthorised firms includes the different details being given out and whether they are falsely claiming to be from a genuine, authorised firm. The results will include consumer credit firms that have interim permission.

FCA PUBLISHES TERMS OF REFERENCE FOR ASSET MANAGEMENT MARKET STUDY

The Financial Conduct Authority (FCA) has set out the areas it will focus on in its market study into competition in the asset management industry. Over the next year the FCA will assess:

• how asset managers compete to deliver value

• whether asset managers are motivated and able to control costs along the value chain

• what effect investment consultants have on competition for institutional asset management.

In addition, the FCA will look at whether there are any barriers to innovation and/or technological advances in asset management. The FCA will consider both retail and institutional investors in this study. The FCA aims to publish interim findings in Summer 2016 and a final report by the early 2017.

TERMS OF REFERENCE FOR A FUNDAMENTAL REVIEW OF CLAIMS MANAGEMENT REGULATION

HM Treasury and the Ministry of Justice have commissioned a fundamental review of the regulation of Claims Management Companies (CMCs). This follows concerns from consumers and affected sectors, particularly financial services, that CMCs fuel speculative unmeritorious claims for compensation and create a significant social nuisance through unsolicited calls and texts, misleading marketing and high charges. The terms of reference outline the scope of the review.

Carol Brady, a Non-Executive Director of the Claims Management Regulation Board and chair of the Trading Standards Institute, is leading the review which is due to be completed by early 2016.

BUILDING SOCIETIES SHARE 27% OF TOTAL MORTGAGE MARKET

Building societies approved over 103,000 mortgages between July and September 2015, data released on 24 November 2015 by the Building Societies Association shows. These approvals accounted for 27% of the total market, well above societies’ natural market share of 21%.

Societies advanced £15 billion in gross new mortgage lending during this period. In the same three months, net lending (gross lending minus repayments) was £3.8 billion, accounting for a 32% share of the market.

From July to September 2015, savings balances increased by £3.7 billion, giving building societies’ a 34% share. Commenting on the results, Robin Fieth, Chief Executive of the BSA, said: “Building societies have a great story to tell in terms of their two key areas of business, mortgages and savings.

The sector is performing strongly in a fiercely competitive market, offering competitive products that are being snapped up by first time buyers, second steppers, self-builders and older borrowers. In fact, from 2012 to end of Q3 2015, building societies accounted for £56 billion (80%) of net lending out of a market total of £70 billion.“

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NEWS | EXTRAs

Building society? CMA retail

banking market investigation

Advisor advice…

Finding fault?

FactorTrust announces addition of industry veteran Michael Heller as President FactorTrust, the alternative credit bureau and parent of LendProtect UK Ltd, have announced that Michael Heller, an information and analytics industry leader, has joined as president. The company also closed on a $42 million investment led by ABS Capital Partners, a leading late stage growth company investor, and MissionOG, a leading early to growth stage investor. With the investment, FactorTrust will accelerate its growth and expand its suite of offerings to enable lenders to drive desired business results in a challenging compliance environment.

Heller has more than 25 years of leadership experience in providing information services and analytics to the payments, lending and banking industries.

Hampshire Trust Bank focuses on further expanding UK broker network with new asset finance hire in ManchesterHampshire Trust Bank, the specialist challenger bank, has announced the appointment of Paul Barter as Business Development Manager in its asset finance team.

Paul, who is based in Sale, Greater Manchester, and has 10 years experience in asset finance, will focus on maintaining existing and building new broker relationships in the North of England, north Wales and Scotland.

The announcement comes as the bank passes a significant milestone, completing its 2,500th asset finance deal since it began operating 18 months ago.

Gateley LLP News round-upIn 2015, Gateley made history becoming the first UK commercial law firm to float on the AIM market of the London Stock Exchange.

It was a unique move by the company and an innovative step to fund its growth strategy. Valued at £100m, the firm raised £30m as part of its listing.

Gateley joined AIM with a strong shareholder register, comprising both growth and income funds. The IPO also received strong support from staff and significantly from clients, with approximately 10% of gross, placing proceeds being investments in the company by Gateley clients.

In addition, the firm’s asset finance team was named Leasing World’s Asset Finance Legal Adviser of the Year and has been nominated and shortlisted for the Leasing Life Law Firm of the Year award.

Equiniti Pancredit News07 September 2015 - Equiniti Pancredit, a specialist lending software provider, has been chosen by leading digital communications company, O2 UK, to deliver the technology behind its latest flexible offering for small business customers. Business Essentials will support companies with their business use mobile phone expenditure through a new finance initiative.

Broker Client Launched25 November 2015 - Equiniti Pancredit announced the launch of Broker Client, an automated secured loan sourcing solution for large brokers that promises to dramatically raise the efficiency of their operations. Broker Client automates many of today’s manual underwriting processes, enabling Financial Advisers (FAs) at large brokerages and IFA networks to initiate greater numbers of secured loan applications than ever before. In just a few seconds, Broker Client also compares an applicant’s lending profile to their firm’s entire portfolio of available loans, something that, until now, has been practically impossible for brokers and FAs operating in large organisations to achieve.

Restons Solicitors Limited assists a number of market leaders in the Debt Purchase, Finance and Utility sectors with both secured and unsecured collections.

Our fundamental understanding of commercial, reputational and compliance issues, together with a focused, proprietary interest in our clients’ receivables means that we continue to excel in terms of client satisfaction, recoveries and complaint avoidance.

To find out more about how our expertise can help you, contact Nigel Coe on 01925 661602 or npc@restons.co.uk or go to www.restons.co.uk

Balancing risk with collections

Equifax launches real-time blended consumer and commercial data service to improve lending decisions Equifax, the consumer and business insights expert, has launched a solution that provides real time, integrated data on companies and the individuals who own and run them. Equifax Business Insights assists businesses in making more robust, timely and secure decisions about companies they lend or supply to, reducing reliance on costly manual processes.

The new service allows organisations such as banks, financial institutions, commercial lenders and SMEs such as trade suppliers to better assess lending risks, underwrite credit, meet regulatory obligations and improve their overall profitability.

Nic Beishon, of Equifax Business Information UK&I, said: “The SME sector has notoriously been one of the most challenging to underwrite and lend to securely. Equifax Business Insights, is designed to provide access to this data.”

Equifax launches Progressive Authentication to combat ID fraud Equifax, the consumer and business insights expert, has launched Equifax Progressive Authentication, a suite of ID and fraud solutions which helps reduce an organisations exposure to fraud without impacting its service levels for genuine customers. The suite of solutions includes four underlying products: Equifax Identity Verifier, Equifax Bank Account Verifier, Equifax Device Verifier and Equifax Fraud Protector.

John Marsden, Identity and Fraud expert at Equifax, says: “Recent hacking incidents have highlighted the risks of personal details falling into the wrong hands and identity fraud poses a huge threat to businesses and individuals, with reported cases up by 27% in the first quarter of 2015 alone. Failing to appropriately screen customers can incur significant financial losses for any type of business.”

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MEMBER NEWS

Callcredit expands lending team to support sector growthCallcredit Information Group is pleased to announce the addition of Paul Nicholson as Business Development Executive to its lending team. Callcredit has been supporting the alternative finance sector for several years, this new appointment, demonstrates the commitment the business has to the sector and its clients.

Paul has worked at Callcredit since 2013 starting out as a Sales Consultant within direct sales, responsible for driving new business across a range of sectors including, legal, accountancy, estate agents and letting agents, early this year he was promoted to Senior Sales Consultant.

Martyn Leonard, Head of Sales and Lending, Callcredit Information Group said: “Paul brings a wealth of sales experience and an in depth knowledge in the industry to the team. As Business Development Executive he will be supporting us in driving new business and revenue as well as advising our clients on how they can provide responsible lending decisions quickly and securely.”

DWF appoint new associate Jonathan HallDWF asset and consumer finance specialist Jonathan Hall has been promoted to Associate in the firm’s latest round of senior promotions.

Working closely with the firm’s major motor finance companies, Jonathan is responsible for advising on all consumer credit matters, including compliance issues and secured and unsecured finance agreements, and his experience includes dealing with all aspects of motor finance litigation ranging from return of goods to high value complex claims, and advising clients on contentious and non-contentious matters relating to asset recovery and consumer credit. He also provides key value services to DWF clients including arranging training sessions for staff on consumer credit issues, such as complaints to the Financial Ombudsman Service, satisfactory quality issues and fraud.

Borderway Finance Borderway Finance Ltd, vehicle finance specialists and CCTA members since 1998, have recently been granted full authorisation by the Financial Conduct Authority (FCA) and they have the 1st April 2014 firmly embedded as a date in their history. For most members of CCTA, it will be long remembered as the date that the FCA assumed responsibility from the Office of Fair Trading (OFT) for Consumer Credit in the UK. However for Borderway Finance Ltd it was also the date that its business transferred from the H&H Group of Companies to the Cumberland Building Society Group.

The Managing Director of Borderway Finance Ltd, David Carruthers says: “The move to the Cumberland Building Society has allowed the business to grow and extend the range of products and finance options for existing customers and the society’s members. It coincided with the date that the FCA took over responsibility for the consumer credit market from the OFT and we are delighted to have become fully authorised by the FCA.”

Rivieres Finance in Africa implements Cassiopae Leasing Software in less than three months On 8 September 2015 - Cassiopae, provider of global asset finance software, announced that Rivieres Finance Limited in Kenya has implemented their front-to-back leasing software. The project was completed in less than three months.

Founded in 2013, Rivieres Finance Limited is a member of the Chase Group of companies and a leading leasing company in Kenya. The company selected Cassiopae software to support its growth both locally and throughout Africa.

“Cassiopae leasing software has all of our must-have features, in a single solution, including a flexible architecture that easily adapts to the specifics of the African business environment,” said Ms. Jennifer Kinyoe, Chief Executive Officer for Rivieres Finance. “We value Cassiopae’s experience and their ability to support our strategy of delivering innovative products and exceptional customer service.”

New Members...Ecashwindow Ltd Milton Keynes

S + S Finance Ltd Dudley

Berkshire Fiesta Centre Ltd Berkshire

Fleetline Finance Ltd Glasgow

Complete Money Ltd Cheshire

BANKFORYOU Ltd London

CCTA Marketing Opportunities 2016

CCTA a new face for 2016 STRONGER TOGETHER!

CCTA Conference 2016 Making The FCA Cut - Part 2

CCTA Training 2016

Our new Marketing Opportunities Brochure will be distributed early in the New Year. It will contain updated details of:

Consumer Credit Magazine Advertising sponsored magazine articles mail shot promotions website advertising general sponsorship conference opportunities CCTA’s communication and networking structure

If you are not already on our marketing list, and would like a copy, please send an email to: marketing@ccta.co.uk

Subject: 2016 MARKETING OPPORTUNITIES BROCHURE REQUESTName & job titleCompany nameEmail address

For 2016, in our 125th anniversary year, we have decided to review the general structure of the association. The natural process of evolution occasionally needs a kick, and we have taken size nines to the fabric of CCTA. Next year you will see an ‘ever ready‘ CCTA executive, where new sectoral committees feed into lobbying, focus and direction.

This isn’t change for changes sake, but a move to ensure that your voice is heard loud and clear, both with the regulator, and in the corridors of power. The new committees will be up and running in early 2016.

We will keep you in the picture via mail shot and social media, so keep an eye out for updated information, and the opportunity to roll you sleeves up and get involved.

STRONGER TOGETHEROur 2015 conference was based around the work and the vision required in ‘Making the FCA Cut’. In 2016, the second part of this trilogy will look at how, as an industry, our future strength will come from embracing a unified ethos. An attitude that puts the eight principles of good regulation, the 11 principles of business and the six ‘treating customers fairly’ outcomes, front and centre of our day-to-day dealings and thinking. Further details will be available on our website in the New Year.

Dates: Wednesday 2nd and Thursday 3rd NovemberVenue: Nottingham Belfry Hotel, NG8 6PY.

Our 2016 training schedule will begin in March. Due to the fact that the authorisation process is taking longer than was originally anticipated, and that many of our members will still be going through application, our line-up will be similar to 2015. Venues will be London, Manchesterand Birmingham.

Full details and prices will be published as soon as they are available in the New Year.

Fair for You Ltd Birmingham

AvantCredit London

SD Taylor Ltd West Midlands

Money Hotshot Ltd Manchester

James Allen’s Girls’ School London

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YOUR CCTA

MEMBER NEWS

Nostrum Group receives FCA authorisationNostrum Group, the Harrogate and London based loan management software provider, has been granted full FCA authorisation and permissions in respect of the regulated activities it conducts on behalf of its clients. Nostrum is now regulated for debt administration to cover its involvement in the servicing of customer loan accounts and handling of debt collection on behalf of the regulated clients it supports.

Although the provision of regulated servicing is only a component of Nostrum’s revenues, the company has implemented the FCA’s rules and regulations throughout its business and introduced a robust compliance framework in a statement of intent to provide an unrivalled level of service its clients.

Earlier this year Nostrum announced record results for the third consecutive year, the firm has been recruiting on an ongoing basis over this period as it has continued to experience strong demand for its highly automated software, which makes lending cheaper, faster and safer.

NEWS

Clients often ask whether there are rules about font size for their terms in consumer credit agreements. The answer always is that there are no rules that specify the size of the so called ‘small print’ in loan documents. There are however general principles set out in a variety of legislation. The Consumer Credit (Agreements) Regulations 2010 requires key information to be ‘clear and concise’. Section 68 of the Consumer Rights Act 2015 provides that contract terms must be transparent, meaning they must be expressed in plain and intelligible language and be legible. The FCA Handbook in CONC 3.3 states that a firm must ensure that its communications with customers is ‘clear, fair, and not misleading’.The FCA recently gave feedback to a client during their application for authorisation that their hire purchase agreement was in an ‘extremely small font, which makes reading it difficult’. The font size was in fact fairly standard amongst most credit providers, certainly larger than many credit card terms and slightly larger than the CCTA’s own model hire purchase agreement provided to members. The Plain English Campaign encourages the use of white space so that text can then attract more attention than if

available space is filled with large type.The structure and presentation of the agreement should be designed so that customers can easily navigate their way around the document. The use of headings and sub-headings, bold print for emphasis and the boxing of sections of information will help get information across in an effective way. The use of numbering and bullets can help to break up lengthy text. The consumer credit regulations require information in agreements to be of a colour which is readily distinguishable from the background medium. It is also important that there is a good contrast between the text and the background and also that the font type used is not of a designer type but is one of the traditional if not boring types like Arial. Consideration should also be given to the target market and whether the customers will need encouragement to engage with the loan documentation. The ancillary information and explanations provided may also be relevant. Firms should resist focusing excessively on font size as there are many other important ways they should ensure that contract information is conveyed effectively.

Robert Rosenbery Consultant

Gateley LLP

Robert Rosenberg asks whether the print size of loans agreements is what really matters.

Does my font look big in this?

LEGAL | NEWS

Joanne DavisCCTA Council Member

33

Q&ASENIOR MANAGERS AND CERTIFICATION

REGIME

What is it the Senior Managers Regime?The Treasury has announced it intends to abolish the Approved Persons Regime for credit firms and replace it with the Senior Managers and Certification Regimes that are being rolled out in other financial services sectors next year. Treasury has said the new regime will come into effect for credit firms in 2018.Instead of Approved Persons operating in Controlled Functions, firms will have Senior Managers operating in Senior Management Functions (SMFs), which currently are:SMF3 Executive Director SMF13 Chair of the Nominations Committee SMF16 Compliance Oversight SMF17 Money Laundering Reporting SMF18 Other overall responsibility SMF21 EEA branch Senior Manager SMF22 Other local responsibility

What do firms need to do?Firms will need to assess whether anyone within their business is carrying out one or more of the SMFs listed above. Whilst this is relatively straightforward for some SMFs, for others it will be more complicated, with SMF18 the most likely category to cause confusion.Individuals will be performing SMF18 if they have overall responsibility for activities, functions or areas of the business. Overall responsibility means the individual will either:i. be a member of the governing bodyii. report directly to the governing body.

What are prescribed responsibilities?The FCA has specified a list of responsibilities that must be designated to individuals holding SMFs. At least one SMF will need to be allocated each relevant prescribed responsibility.

Under the current proposals the responsibilities are:• responsibility for firm compliance with the SMR• responsibility for firm compliance with the employee

certification regime• responsibility for firm compliance with the requirements

of the management responsibilities map• overall responsibility for the firm’s policies and procedures

for countering the risk of financial crime.There are also a number of responsibilities that apply to ‘larger’ firms, being firms with assets of more than £250 million. It may be that following consultation with the credit industry the FCA applies a different approach to classifying ‘large’ credit firms.

What is a Statement of responsibility?Applications for approval as a senior manager must contain a statement of responsibility setting out the areas of the firm’s regulated business the applicant is responsible for. The regulator has suggested this statement should not be more than 300 words, although firms will have the opportunity to provide additional information to support the scope of the applicant’s responsibilities. Firms will also be required to submit a management responsibilities map describing the firm’s management and governance arrangements and setting out how its regulatory responsibilities are allocated across the business.

I haven’t had my Approved Persons authorised yet - do I still need to continue with getting them authorised or should I use the SMR instead?Credit firms will need to continue with the process of having their approved persons authorised as the new regime will come into operation for consumer credit firms during 2018, two years after most credit firms will have been authorised.

Next time – we’ll discuss the certification regime.

32

David Wood Partner DWF

The provision of loans secured on a borrower’s own vehicle has grown substantially in the last 15 years. However, as those who lend in this market will know, a recent Law Commission Consultation has identified that:

• documentation requirements are complex, based on archaic laws, creating problems for both lenders and borrowers

• borrowers tend to be sub-prime, and many are vulnerable, as they usually find it difficult to access other forms of lending

• less protection is afforded to borrowers and innocent purchasers, compared with conventional forms of secured asset funding, such as hire purchase

• Bills of Sale are inappropriately used to secure vehicle purchase.

A simpler vehicle mortgage document is proposed, which includes prominent warnings. This would be supported by mandatory registration, using one of the existing registration agencies, to replace the current unwieldy process for creating and registering bills of sale.

Borrowers will be subject to the same protection that exists in hire purchase requiring the lender to apply for a court order to repossess.

This may, but will not necessarily be, only when one third has been paid. It is also proposed that voluntary termination will be introduced, but this will go further than existing rights under hire purchase law, permitting the

borrower to hand the vehicle back without further liability at any time.

Proposals have also been made to restrict costs recovery for logbook loans and remedies available for lenders for recovering loan shortfalls, restrictions which are more extensive than lenders currently experience in relation to other products, such as hire purchase.

Similar protections which currently exist for innocent private purchasers from a hirer under a hire purchase agreement will extend to those who buy a vehicle subject to a vehicle mortgage. However, it is possible that protection will extend to those who acquire vehicles under a wider variety of transactions than exists in relation to a hire purchase agreement (i.e. not just purchase). It is also proposed that purchasers should have FOS rights, a right that does not generally exist for innocent purchasers under a hire purchase agreement, and even that the FCA should have a role in policing the treatment of innocent purchasers by lenders, who generally would not be treated as ‘customers’ and therefore not subject to FCA protection.

The consultation process finished on 9 December. Whilst some of these provisions are already reflected in the CCTA’s current code of practice for its members, logbook lenders will be at a considerable disadvantage, if some of the proposed changes are implemented, compared with those who lend under hire purchase or conditional sale agreements.

Logbook Loans - a new simpler regime offering protection for borrowers and purchasers?

NEWSA recent case heard in London has clarified what constitutes ‘personal service’ in the context of legal documents.In the case of Tseitline v Mikhelson, the question was whether Mr Mikhelson (a Russian resident) had, whilst visiting London been validly served with a claim form issued by Mr Tseitline (who lived in Israel). The litigation related to a development in St Petersburg.Two attempts were made to serve Mr Mikhelson when he visited the Whitechapel Art Gallery accompanied by his daughter and friends. The first attempt was made outside the gallery entrance. As he was getting out of his car, Mr Mikhelson was approached by a process server who held out an envelope and explained it contained court proceedings. The envelope itself merely contained the name of Mr Tseitline’s solicitors and did not describe its contents. Mr Mikhelson, who did not speak English, initially took hold of the envelope but following an exchange with his daughter (who did speak English) quickly let go leaving the process server still holding it. Mr Mikhelson and his companions were then followed into the gallery by the process server who explained to the group he was instructed to serve him with court proceedings. The second attempt occurred when the process server’s colleague lodged the envelope between Mr Mikhelson’s arm and the rest of his body. This time Mr Mikhelson did not take hold of

the envelope which ended up on the floor, either because he threw it or allowed it to drop.

The present rule (CPR6.5) simply provides that a claim form ‘is personally served on an individual by leaving it with that individual’. Case law has applied the following two stage test, ‘personal service requires that the document be handed to the person to be served or, if he will not accept it, that he be told what the document contains and the document be left with, or near him’.

The initial attempt at service did not succeed because it was not clear the envelope contained court papers. However the second attempt in the gallery was successful because Mr Mikhelson then knew (because his English speaking companions had told him) that the process server wanted to serve legal proceedings on him. It was immaterial that the envelope was in his possession for only a short period of time.

The court ruled he had been served with the proceedings even though the person attempting to serve them subsequently took the documents away.

Many court documents have to be personally served e.g. bankruptcy/attachment of earnings. Envelopes should summarise the content (i.e. court papers) and the recipient be told what the document contains and be given every opportunity to take possession of it.

Jeremy Bouchier Senior Solicitor

Restons Solicitors

A recent case heard in London, has clarified what constitutes ‘personal service’ in the context of legal documents.

Personal Service – Tseitline V Mikhelson & Others 2015 EWHC 3065

34 35

LEGAL | NEWS

The CPS used a Manchester based film company to edit videos of interviews so they could be used in criminal proceedings. The film company concerned used a residential flat as a studio which had no alarm and insufficient security. The flat was subsequently broken into and two laptops were stolen. The laptops were password protected, but crucially not encrypted.The laptops stolen housed interviews with 43 victims and witnesses covering 31 investigations, nearly all of which were on-going and of a violent or sexual nature. The laptops were finally recovered eight days later.As part of the investigation it was discovered that the CPS had used the film company concerned since 2002 and would regularly have unencrypted DVDs delivered using a national courier firm. Sometimes the sole proprietor of the company would personally collect the unencrypted DVDs from the CPS and return to the studio using public transport.The ICO ruled that the CPS was negligent as it had failed to ensure the videos were kept safe and did not take into account the substantial distress that would be caused if the videos were lost, especially since many of the victims were vulnerable and had already endured distressing

interviews with the police.This case highlights the fact that where an organisation, known as the ‘Data Controller’, controls personal information relating to individuals and passes this information on to a sub-contractor or third party, known as a ‘Data Processor, then the Data Controller remains liable for the actions of the Data Processor. Common examples of this practice include organisations using third parties for payroll, marketing, sub-contract arrangements, IT or cloud based services to name just a few.As a result the Data Controller has a responsibility to ensure that the Data Processor holds data in a secure way that complies with the requirements of the Data Protection Act. This may involve conducting due diligence on the Data Processor to check they are compliant and monitoring this compliance on an on-going basis. In addition, the Data Controller should insist the Data Processor signs up to a ‘data processing’ agreement where the Data Processor agrees to abide by the Data Protection Act in respect of the data it processes for the Data Controller. Such an agreement also gives certain other contractual assurances to the Data Controller over what it will and will not do with the data it is handling and processing.

Christian Mancier Corporate-Commercial Partner

Gorvins Solicitors

The Crown Prosecution Service (CPS) has been fined £200,000 by the Information Commissioner’s Office (ICO) for failing to keep recorded police interviews with victims and witnesses secure.

Crown Prosecution Service fined £200k for data protection breach

To recap briefly, what can constitute vulnerability goes well beyond mental health issues. Other factors such as age, physical health, redundancy, relationship breakdown or bereavement can all render a customer vulnerable at a particular moment in time. The period of vulnerability can be brief, or of a much longer duration. Regulated firms need to put in place customer vulnerability strategies, policies and procedures, and this work needs to have active engagement from senior management. The FCA’s Paper has recently been developed by the Financial Ombudsman Service (FOS) in the context of customer complaints. FOS have found that complaints often escalate because the firm does not have sufficient flexibility within its policies and procedures to identify and then deal with the extent of the customer’s vulnerability. That is of particular concern to FOS where the customer has proactively contacted the firm to seek help. It is clear in such circumstances that the firm needs to listen to the customer and then act sensitively and pragmatically when dealing with their complaint. Both the FCA and FOS have published helpful case studies to illustrate this topic. These are contained in the Occasional Paper, and in the Ombudsman News issue 127. Most of the FOS complaints were resolved in the customer’s favour. However, it is clear that, with a different

approach at the time of first contact, different outcomes could have been achieved and at least some of the complaints could potentially have been avoided altogether.

This is well illustrated by the following example. FOS received a complaint from an elderly lady who had been successfully targeted by fraudsters into withdrawing £6,000 in cash from her bank by means of several trips within a few days. The bank took the view that they had taken appropriate steps to enquire about the withdrawals before they were made. However, when FOS investigated, the bank could not produce any confirmatory evidence, and so FOS accepted the customer’s position that she was not warned of the dangers of her actions. It would have been good practice for the bank to ask an elderly, and therefore vulnerable, customer why she wanted to make what were for her, unusual cash withdrawals.

The first such occasion was not unusual on its own. However, if the bank had followed industry guidance and good practice, it was likely that the fraud would have come to light during the second visit. The bank was therefore required to refund the cash taken out after the first visit. The customer was in addition awarded interest, and compensation for the upset caused to her by the bank’s refusal to accept her complaint initially.

Richard Ellison Partner

SGH Martineau

The question of how to treat vulnerable customers fairly continues to be of major concern both to regulated firms and the Regulators, arising from the substantive review of this issue contained in the Financial Conduct Authority’s (FCA) Occasional Paper published in February 2015.

Treating vulnerable customers fairly

MEMBERS ONLY

customer is king…

37

Treating Customers Fairly – are you doing enough? It’s now an accepted truth that a cultural weakness in the financial services industry caused and proliferated the financial crises. In this ‘brave new world’ of regulation and compliance, achieving a culture of integrity, fair practice and transparency, and doing the right thing for customers’ is seen as equally important as profits. The Financial Conduct Authority (FCA) wants evidence that organisations are actually being led by individuals that are focussed on positive consumer outcomes in all aspects of their business.

A good culture not only plays a crucial role in determining successful outcomes for customers, it lessens financial and reputational risk. Establishing a happy, loyal workforce that proactively seeks out better solutions for clients helps ensure that customers remain loyal for longer, enhancing a firm’s reputation as well as the possibility of repeat business.

But while most organisations are taking steps to evidence Treating Customers Fairly (TCF), is the message truly getting through?

Last year, the Financial Ombudsman Service, recorded an increase of 39% in the number of complaints it received. Whilst a significant number were PPI related, more than 150,000 were around TCF.

The Systems and Control (SYSC) rulebook is one of the most feared in the regulatory handbook, and for good reason. Failure to comply could lead to a ‘Section 166’ probe and an ‘independent skilled person’ drafted in to investigate an organisation from top to toe, a burdensome and costly nightmare for those subjected to them. The FCA says it will: “step in earlier and act faster, when it identifies problems that risk harming customers or the integrity of the market.”

Britain’s second biggest payday lender, Dollar Financial UK has been ordered to refund £15.4m to customers after regulators found it was lending more to borrowers than they could afford to repay. The action followed an investigation by the FCA that began in 2014, when it sent in a skilled person to check if Dollar was treating customers fairly and if they could afford to repay the loans offered. It came after an initial check uncovered a number of rule breaches by the company. But in a fast moving corporate world, where employees are vulnerable to human error, even the very best run companies cannot avoid making mistakes.

Keeping customer documentation safe and accessible is crucial to proving that customers have been treated fairly in the event of a dispute or audit.

Customer on-boarding records, proof of ID and affordability, vulnerability testing, Know Your Customer checks for anti-money laundering purposes, change of circumstances and the treatment of customers in arrears and forbearance, are all red flags to the regulatory bull.

With customer information contained within a gargantuan range of silos (customer applications, emails, SMS, excel spreadsheets, paper documents etc.), how can firms’ streamline the complex process of record keeping and evidence TCF?

Banks and financial organisations are increasingly turning to technology to help manage TCF challenges and ensure a highly effective Systems and Control (SYSC) framework that streamlines processes and minimises risk.

Enterprise Content Management (ECM) software takes the headache out of evidencing TCF by capturing, indexing and archiving all documentation, regardless of source, via a single, secure, central repository to provide a single view of the customer. Corporate information is retained in accordance with legal and regulatory guidelines, providing a clear customer profile for TCF and compliance purposes.

ECM software should also be set up with Disaster Recovery and Business Continuity Planning in mind. It protects the resilience of a company against the loss of valuable TCF documentation and the legal and regulatory consequences of a company’s headquarters, server or infrastructure becoming damaged or destroyed.

At a time when the financial services industry is still learning lessons from the past, the implementation of a robust Risk Management Software solution has never been so important. An effective risk solution should meet SYSC 7, helping organisations to identify, monitor and manage TCF risk and mitigate the likelihood of a negative event taking place in the first place.

The days of simply storing risk information in spreadsheets on word documents are long gone. Now considered time consuming, error prone, inefficient and criticised by auditors, compliance departments are increasingly turning to dedicated risk management solutions to help identify and proactively address risk.

In a working environment of ever changing standards and regulations how can organisations ensure that employees are fully aware of their TCF responsibilities and have instant access to the latest version of policies and procedures?

One way to mitigate TCF risk and demonstrate ‘best practice’ is to implement a fit for purpose policy management software solution. The system should ensure the right TCF policies and procedures get to the right people, that they become accountable by signing up to them and that the entire process is recorded, providing a clear compliance trail for the benefit of board, senior management, Auditors and Regulators.

In an era of transparency and accountability, when regulation and compliance can make or break a business and the ‘customer is king’, the need for robust software solutions that help organisations achieve a culture of integrity, fair practice, and place customers at the heart of business, is no longer a luxury, it is an essential requirement.

Jeremy Crame CEO, Hitec

10074-Callcredit-DecisionsMetrics-Press ads ENGINE_MECHANICAL_DATA_A4_AW(P).indd 1 01/10/2014 16:36

TOTAL MARKET OCTOBER YEAR TO DATECATEGORY NEW USED TOTAL NEW USED TOTALPASSENGER CAR 2015 289775 268895 558670 2816157 2486271 5302428

2014 292592 258744 551336 2703019 2279791 4982810 % Change 0.96- 3.92 1.33 4.19 9.06 6.41

LIGHT COMMERCIAL VEHICLE 2015 17948 15394 33342 164069 132073 296142 2014 21278 13043 34321 171742 109542 281284

% Change 15.65- 18.02 2.85- 4.47- 20.57 5.28

HEAVY COMMERCIAL VEHICLE +3500 2015 3780 2108 5888 27833 17322 45155 2014 3760 1902 5662 23470 16357 39827 % Change 0.53 10.83 3.99 18.59 5.90 13.38

COACH 2015 173 360 533 1715 3364 5079 2014 136 336 472 1610 3642 5252 % Change 27.21 7.14 12.92 6.52 7.63- 3.29-

MOTORCYCLE 2015 5355 2967 8322 54856 30096 84952 2014 4207 2602 6809 48835 27407 76242 % Change 27.29 14.03 22.22 12.33 9.81 11.42

MOTOR CARAVAN 2015 133 480 613 1725 4186 5911 2014 101 321 422 2851 2148 4999 % Change 31.68 49.53 45.26 39.49- 94.88 18.24

TOURING CARAVAN 2015 955 1974 2929 9903 20279 30182 2014 965 2042 3007 19006 11696 30702 % Change 1.04- 3.33- 2.59- 47.90- 73.38 1.69-

STATIC CARAVAN 2015 171 122 293 1477 904 2381 2014 65 27 92 968 243 1211 % Change 163.08 351.85 218.48 52.58 272.02 96.61

AGRICULTURAL TRACTOR 2015 471 443 914 5417 4866 10283 2014 462 406 868 6675 5004 11679 % Change 1.95 9.11 5.30 18.85- 2.76- 11.95-

MISCELLANEOUS 2015 28586 8958 37544 188359 81561 269920 2014 12656 9120 21776 141881 69789 211670 % Change 125.87 1.78- 72.41 32.76 16.87 27.52

GRAND TOTAL 2015 347347 301701 649048 3271511 2780922 6052433 2014 336222 288543 624765 3120057 2525619 5645676 % CHANGE 3.31 4.56 3.89 4.85 10.11 7.20

39

HPI Receipts SummaryOctober 2015

STATS

Events calendar

There’s plenty of events happening over the next year organised by Credit Today that there’s something for every credit professional! Plan ahead with our Credit Today events calendar and make sure you don’t miss out.

Utilities & Telecoms Conference | 30.09.15 utilitiesandtelecomsconference.co.ukThe Utilities & Telecoms Conference attracts professionals operating in the credit sphere in the utilities or telecoms sector. It is the only conference dedicated to credit and collections professionals.

Utilities & Telecoms Awards | 30.09.15utilitiesandtelecomsawards.co.ukThe fifth Utilities & Telecoms Awards will place these niche sectors at the forefront of excellence in the credit industry.

I&R Awards | 21.10.15iandrawards.co.ukNow in its eighth year, the I&R Awards, sponsored by Capa, returns providing a forum to recognise and reward the achievements of firms and individuals working within a challenging sector in today’s economy.

Collections, Debt Sale & Purchase Conference | 18.11.15cdspconference.co.ukThe Collections, Debt Sale & Purchase Conference attracts the most senior across the professionals from collections and debt purchase arena who attend to network, learn and debate the sectors key issues and concerns.

Collections & Customer Service Awards | 18.11.15ccsawards.co.ukNow in its ninth year, the rebranded Collections & Customer Service Awards reward outstanding efforts and commitment to best practice in this challenging sector.

The Credit Summit | 07.04.16creditsummit.co.ukThe Credit Summit houses the largest UK credit exhibition, free content and paid for conferences including the most recent updates from the FCA.

The Credit Today Awards | 12.05.16credittodayawards.co.uk The biggest and most revered award ceremony in the sector will be celebrating 17 years of excellence in 2016.

Car Finance Conference | 09.06.16Website coming soonThe Car Finance Conference is new to the Credit Today Conference line up for 2016. The event will examine the key tasks that lie ahead for a market and deliver the must know info for every Car Finance professional. Car Finance Awards | 09.06.16Website coming soonThe Car Finance Awards takes place in the evening of the Car Finance Conference. The awards celebrate and reward the achievements and contribution to the car finance industry.

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If you would like to be involved in any of the above events please get in touch using the following details:

To ATTenD:Tel: 020 7940 4835 – press 4Email: events@credittoday.co.uk

To SPonSoR:Tel: 020 7940 4835 – press 2Email: sales@credittoday.co.uk

Recognising compliance and fairness in customer treatment

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A CreditToday event

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UTILITIES &TELECOMSCONFERENCE

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CONFERENCE

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40

The Money Charity Stats December 2015

54 mortgage possession claims and 37 mortgage possession orders are made every day.

35.5 million plastic card purchase transactions were made every day in August 2015, with a total value of £1.65 billion.

9m cash machine transactions were made every day in October with a value of £361m.

In Q2 2015, households saved an average of 4.7% of their post-tax income, including benefits, the lowest since Q3 2008.

People in the UK owed £1.456 trillion at the end of October 2015. This is up from £1.42 trillion at the end of October 2014, an extra £706.71 per UK adult. The average total debt per household, including mortgages, was £53,918 in October. The revised figure for September was £53,755.

It would take 24 years for someone on the average salary, saving the average amount per household every year in an average instant access savings account, to afford the average first-time buyer deposit. If they saved into a cash ISA at the same rate it would take 23 years.

According to the Office for Budget Responsibility’s July 2015 forecast, household debt is predicted to reach £2.551 trillion in Q1 2021. This makes the average household debt £94,481 (assuming that the number of households in the UK remained the same between now and Q1 2021).

The population of the UK grew by an estimated 1,223 people a day between 2003 and 2013.

1,206People reported becoming redundant every day in Q3.

Total credit card debt in October 2015 was £62.8bn. Per household this is £2,324, for a credit card bearing the average interest, it would take 25 years and 5 months to repay if you made only the minimum repayment each month.

The minimum repayment in the first month would be £56 but reduces each month. If you paid £56 every month, the debt would be cleared in around 5 years and 5 months.

41

25 properties are repossessed every day, or one every 57 min 40 seconds.

The number of mortgages with arrears of over 2.5% of the remaining balance fell by 56 a day.

£552 millionThe credit card debt written off by banks and building societies in Q3.

Payment card spending amounted to £52.7 billion in September, up by £0.5 billion on August. Spending online grew by 1.1% to £11.6 billion; representing 22.1% of total card spending, up from 20.9% in September 2014. The number of purchases also increased and reached 1.1 billion transactions, up by 0.8% during the month. The number of purchases made via the internet rose by 1.5% to reach 134 million, accounting for 11.7% of total card purchases, up from 10.8% a year ago.During Q3 of 2015 consumers made 85 million more purchases and spent £1.9 billion above the level recorded in Q2. The increase in card spending was despite a slight slowdown in economic performance, following growth of 0.5% in GDP1 on Q2, and up 2.3% on the same quarter a year ago. Seasonal factors also contributed to growth with back-to-school spending for over 12 million pupils2 and students3 as well as a boost in demand for autumn clothing ranges.Growth in payment card spending continued to gather pace, growing at an annual rate of 8.2% in September –the strongest performance in more than three years. This robust growth could, in part stem from increasing levels of household disposable income following decreasing unemployment to a seven-year low4 and rising wages. An added factor could be benign inflation since February, which slipped back into deflation after declining to -0.1% in the year to September5, down from 0% in August.Annual growth in debit card spending continued to exceed that in credit card spending with registered growth rates of 8.7% and 6.9% respectively. However, growth in credit card spending has been recovering recently, boosted by payments on foreign-issued credit cards, in particular, at educational establishments.Within the sectors, the entertainment sub-sector rose by 15.2%, remaining the fastest-growing category since January. In contrast, spending on automotive fuels has been on a downward trajectory for over a year, decreasing by 7.9% in September, reflecting falling world oil prices6 alongside the ongoing supermarket price wars7.Meanwhile, the annual growth rate in the number of purchases of 10.9% continues to outstrip that of spending since March 2014. This trend is also evident within the digital space where the number of online

purchases grew by 23% compared to a year ago, while spending increased by 16%.There was a slight uptick in the average transaction value (ATV) on all payment cards between August andSeptember, rising by 5p to £46.19, but still below the ATV of £47.48 a year ago. The retail sales ATV declined by 6p to £32.20, while the ATV for services picked up by 13p to £74.62. Within the merchant sectors, the largest decrease came from the vehicle sales & services sub-sector, which recorded an ATV fall of 62p, while financial services registered the largest increase of £3.04 during the month.The ATV on all payment cards via the online channel amounted to £83.32 in September, down from £85.27 in August, and compares to £94.47 a year ago. In contrast, the ATV on contactless cards reached £7.35, up by 23p on August, coinciding with the maximum limit increase from £20 to £30 from the beginning of September.Despite the recent uptick, there has been a persistent decline in the ATVs evident since 2011, likely reflecting changing consumer spending patterns coupled with continuing supermarket price wars8 that has been reinforced by recently absent inflation. Another factor has been the ongoing migration of low value cash payments to cards, accelerated by the adoption of contactless payments, which accounted for 8.9% of total card purchases in September, up from 3.2% a year ago.The number of transactions within the retail sector increased by 5.0 million to 764 million, with the corresponding spend rising by £113 million to £24.6 billion. Meanwhile, the number of transactions in the services sector grew by 4.5 million to 376 million, corresponding to a rise in spending of £383 million to

£28.1 billion. The highest increases in retail spending came from the food & drink and other retail sub-sectors, where spending amounted to £9.3 billion and £4.0 billion respectively. Despite the evidence of falling prices9, the food & drink category recorded a rise of £38 million, driven by increased spending in supermarkets. The major contributors to growth of £20 million in the other retail sub-sector were chemists and direct sales merchants. There was however, a decrease in spending in automotive fuels.The largest growth within the services sector was registered at other services; an increase of £134 million to £8.0 billion, driven by a surge in spending at educational establishments. The travel sub-sector was also a strong contributor to growth after increasing by £72 million to £4.2 billion, mainly due to higher spending on railways and airlines, which could, in part be attributed to England hosting the Rugby World Cup. Meanwhile, the strengthening automotive market10 was likely the main driver of growth in the vehicle sales & services subsector, recording the strongest growth in eight months.The strongest monthly increase in spending was recorded at educational establishments, boosted by the start of the new school year. There were also notable rises in spending at merchants related to transport such as railways and vehicle sales. In contrast, travel related merchants selling foreign currency and travellers cheques as well as auto rentals and camping grounds registered decreases when compared to August. The popular visitors destinations such as amusement parks, aquariums and other tourist attractions recorded the largest percentage decreases, marking the end of the summer holiday season.

At a glance key figuresfor September 2015

Total spending(£ billions)

2015 2014

52.7 48.5

37.3 34.2

15.4

All payment cards

Debit cards

Credit cards 14.3

Annual growthrates for spending

2015 2014

8.2 7.8

8.7 8.5

6.9 6.2

Number ofpurchases (Millions)

2015 2014

1,140 1,021

872 783

268 238

BUSINESSES AND CONSUMERS PUT THEIR FOOT ON THE GASRichard Woolhouse, Chief Economist at the BBA, said:

“These statistics show that housing market activity remained strong in October, with gross mortgage borrowing 26% higher than a year ago and at its highest level for seven years.

“Consumers remain confident and their incomes are growing. Mortgage rates are at multi-year lows and people are snapping up the very competitive deals being offered by banks.”

HIGH STREET BANKING – OCTOBER 2015

UK CARD EXPENDITURE STATISTICS – SEPTEMBER 2015

1 ONS, GDP Preliminary Estimate Q3 20152 The Guardian, Billions of pounds and millions of students3 Higher Education Statistics Agency4 ONS, UK Labour Market, October 20155 ONS, Consumer Price Inflation, September 20156 The New York Times, Oil prices: What’s Behind the Drop?

7 City AM, UK supermarkets Asda, Morrisons and Sainsbury’s in petrol price war8 Kantar Worldpanel, Grocery price war boosts savings to £589 Reuters, UK high street prices fall harder10 The Guardian, Car sales at September record as demand for petrol vehicles soars11 Actual monthly total and online growth rates for spending at educational establishments (220% and 169% respectively) are not fully covered in chart in order to illustrate the majority of changes within the given scale.

Overall personal deposits are growing at an annual rate of 3.5%.ISA deposits rose by £29m in October 2015.Annual growth in unsecured borrowing is at 5.0% with both elements of credit card borrowing and other unsecured borrowing (personal loans and overdrafts) matching that rate.

Gross mortgage borrowing was £12.9 billion in October, 26% higher than in the same month last year and the largest since August 2008.After seeing slower demand in the second half of 2014, the overall mortgage stock is now 1.9% higher than a year ago.

209 people a day are declared insolvent or bankrupt. This is equivalent to one person every 6 minutes 53 seconds.

It costs an average of £29.91 per day to raise a child from birth to the age of 21.

In Q2 2015, households in the UK spent £89.11m a day on water, electricity and gas, or £3.34 per household per day.

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Lending growth expected to slow in 2016, but digital continues to thriveRecent research by the Finance and Leasing Association (FLA) suggests total gross consumer lending is set to have increased by 9.55% in 2015, up from 7.7% in 2014.

The big growth areas are in credit card spending (up 3.2%) and unsecured personal loans (up 1.1%).

Areas where spending growth has been depressed on 2014 numbers include used car finance (down 10.3%) and retail finance (down 2.7%), but these sectors have experienced growth overall. 2015 numbers can be considered very impressive, especially as we have seen periods of negative inflation caused by depressed fuel prices and other low priced consumer goods.

The forecast for 2016 is for a general slowdown in lending growth, although total gross consumer lending is still expected to rise by 3.5%.

WHAT DOES THIS MEAN FOR LENDERS IN 2016?

The focus on affordability is set to increase in 2016, which might partially explain the reduced growth forecast.

The Bank of England forecasts average annual wage growth to increase by 3.8% next year on top of inflation estimates of between 1% and 2% in 2016. Low inflation, low unemployment, improving wages growth and a low interest rate environment are expected to support growth in private consumption of 2.8% in 2016.

Furthermore, business investment is due to rise by 5.8%, which should further boost consumers at a time when record employment statistics have just been released. The forecast also comes on the back of two years of very impressive growth of 7.7% and 9.5% in 2014 and 2015 respectively.

Lenders can be broadly optimistic of a good year in 2016 though. Growth might not move at the same pace as in 2014 and 2015, but the cyclical nature of consumer confidence and affordability means 2016 could be the year of more targeted lending and where retention becomes even more important than new customer acquisition.

When looking at specific sectors, after a couple of strong years for car finance, credit for new cars is expected to be flat vs 2015 and used cars an increase of just 0.4%. However, unsecured personal lending is set to rise by 7% and with popular peer-to-peer sites like Zopa and Ratesetter citing car finance as one of their top reasons for a loan, we could see cars bought, just through less traditional routes, with customers organising their finance outside the dealership.

One influencer for lenders to bear in mind is a rise in interest rates, which is likely to affect a lot of borrowers on base rate linked products, like tracker mortgages. Affordability in the mortgage sector is arguably as good as ever, but the shock of a rate move could trigger demand for short term credit, the trick for lenders will certainly be in underwriting these cases and spotting strain.

CHANNELS FOR GROWTH

The overall additional 3.5% total lending growth could certainly come through digital channels, as our third annual Consumer Attitudes to Digital Finance report reveals (available via our website).

Smartphone use is now ubiquitous, while 66% of those surveyed have access to tablets and 53% use more mobile banking apps than was the case in 2014, making digital finance almost second nature for many customers. Interestingly, the lack of strong responses when asked about their attitudes to technology, suggests we’re approaching an age of acceptance of technology in lending, rather than awareness, which might have been the case until recently.

The inevitability of digital as the preferred route for consumers is reinforced when you consider how little people seek loans through a branch, just 23%. This plays perfectly into the hands of digital lenders, who can compete in the best buy tables and can target customers intelligently through numerous online channels.

One area of business for lenders to consider carefully is transparency. In our survey of 2,000 people, the consumer now ranks transparency second only to low interest rates in their preferences when considering taking a loan. Lenders have always been legally obliged to be transparent with customers, but this can be seen as a differentiating factor now.

In conclusion, the future looks bright for digital lenders. There is market share still to be acquired from high street banks and if consumer affordability continues to be bright for the majority of 2016, if not all of it, retail point of sale finance operators could benefit from more spending on the high street.

The perfect platform for innovation in digital finance to bloom has been set, building on increasing confidence in digital transactions and demand for credit of all varieties.

Richard Carter Chief Executive, Nostrum Group

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