THE CONSUMER CREDIT MAGAZINE - CCTA
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
THE CONSUMER CREDIT MAGAZINE
FEATURES
YOUR CCTA
LEGAL NEWS
REGULATORY BRIEF
MEMBER NEWS & VIEWS
INDUSTRY DIRECTORY
APR:JUL:21 | V75 | NO.1
THE CONSUMER CREDIT MAGAZINE FROM CCTA APR:JUL 2021 V75 NO.1
MAGAZINE
SPONSOR
WELCOME TO
Themis Consultancy would like to take this opportunity
to thank the CCTA for welcoming us as new members.
We would also like to introduce ourselves to all existing
THIS EDITION
members and let you know a little more about us.
Industry experts, Karen Taylor, Nicola Crump & Julie Driver
established Themis Consultancy in November 2020 to
OF THE CCTA provide highly professional compliance advisory services
that are personal and tailored to suit the needs and budgets
of our clients. We have a wealth of experience in fast
MAGAZINE paced, highly regulated commercial settings and as such
we understand the need for practical, solutions focused,
regulatory advice.
0203 126 6818
info@themisconsultancy.co.uk
www.themisconsultancy.co.uk
It has been over a year since we published the last
Creating a new CCTA, building on strong foundations...
changing times
The future regulation of consumer credit...
new driver
magazine, so we are understandably excited to be up
A customer-centric approach to avoid regulatory issues...
pulling focus
and running again. For this edition we are trying a new
Vulnerability - how effective are digital customer journeys?
the right balance
digital format to see how it works for members. So far,
SM&CR - a job done?
first steps
the response has been excellent, and we have a good
Political engagement - the major players and CCTA plans...
points of view
deal to share.
2021 started with a bang. There have been some major
REGULARS:
developments. Shortly after the new year, the Woolard Regulatory News 16
Review released its findings. As we were working hard
to challenge the Financial Ombudsman Service’s budget Legal News 22
plans, the news came through about the departure of
the Chief Executive. Your CCTA 24
Here we look at some of the recent developments in Member News 25
more detail and what they may mean for members.
Members Only 26
Huntswood explore the issue of affordability looking
at how firms can take a customer-centric approach, to Stakeholders 34
avoid regulatory issues. PrinSIX share the experience of
working on the vulnerability team for the FCA 2020/21 The Directory 36
Digital Sandbox and Addleshaw Goddard round up
the trio with an article on preparation for the Senior
Managers & Certification Regime. CONTACTS
You will find features and news from a legal and Jason Wassell, Chief Executive
regulatory perspective, alongside contributions from jason.wassell@ccta.co.uk
members and stakeholders alike. Helen McCarthy, Head of Policy
helen.mccarthy@ccta.co.uk
Within CCTA, Jason Wassell, the new chief executive, Graham Haxton-Bernard, Head of Legal, Compliance and Regulatory Policy
shares more details on the future strategy and direction graham.haxton-bernard@ccta.co.uk
of the association. Helen McCarthy, head of policy looks Anne Threapleton, Head of Marketing and Communications
at potential changes in regulation and I have shared anne.threapleton@ccta.co.uk
some of the thinking behind our political engagement. Lucy Donovan, Head of Communications
lucy.donovan@ccta.co.uk
We hope that you enjoy the magazine. If you would like Debbi Gower, Head of Finance, Complaints and Conciliation
to be involved in the next edition or have any feedback debbi@ccta.co.uk
on this one, please get in touch. Phillip Harding, Head of Membership
phillip.harding@ccta.co.uk
Brian Corke, Membership
Lucy Donovan brian.corke@ccta.co.uk
Head of Communications, CCTA
Consumer Credit Trade Association
A company limited by guarantee and registered in England. Registered Number 00034278.
VAT Number 232 4655 76. Registered Office Address
Spring Mill, Main Street, Wilsden, BD15 0DX
4 6 8 10 12 14
T: +44 (0) 1274 714959 www.ccta.co.uk
NOTE: With diverse contributing authors, the views expressed
in this magazine are not necessarily the views of CCTA.
| FEATURE
Jason Wassell
CEO, CCTA
CREATING A NEW
CHANGING TIMES
CCTA, BUILDING
ON STRONG
FOUNDATIONS
I am pleased to add my welcome to changes to the association. Both Greg ADVOCACY annual conference again. I have attended Look out for several smaller discussions
this edition of our relaunched magazine. and I felt that the pandemic was another One thing that has not changed from the CCTA events for years. I have always that will genuinely be two-way. As I
I am delighted to write as the new Chief reason for action, but longer term trends time of our foundation is the need to work thought they were helpful and enjoyable. mentioned, you will hear more about
Executive of the Consumer Credit Trade were already in place before then. together. Strong advocacy has never been Following on, I want to develop some what we are doing on your behalf. There
Association (CCTA). There were regulatory pressures across more critical. We require sound allies and more opportunities for members to will be more campaign activity around
My first step is to thank my predecessor, the consumer credit sector, including good relationships to be truely effective. engage with us and with each other. FOS, affordability, and access to credit.
Greg Stevens, who retired at the close of increased regulation and uncertainty on The online Summit held in March was a But we cannot do this alone, we will seek
Sometimes our role as an association is to your help.
2020. As many of you know, he stepped critical issues like affordability. explain what our part is in terms of society. good example. We were delighted to have
in as chief executive back when the CCTA We both felt that there were concerns This is why you will hear us talking about nearly 140 people join us. I thought it was I started my article with thanks to my
was going through some testing times. about the lack of understanding of our our vision of a well regulated market, valuable to hear more about Breathing predecessor. I close by adding some
He brought the organisation back to good members’ customers. That a set of providing responsible credit access. Space from Gareth McNab of Christians more thanks.
health and its prominent position. He has regulators educated and trained in bank Speaking publicly, we will talk about the Against Poverty. We were particularly keen I want to say thanks to all the members
steered the ship, continuing to avoid the lending often found it hard to understand benefits of credit, the positives it brings, that you should hear from an organisation of the CCTA team that have welcomed
reefs and shallows through some difficult the nature of the financial need and the and ask what happens if we do not have that is often on the frontline. I know, me and helped me through these first few
times for consumer credit. benefits of the services provided. At the access to credit? like me, you will have appreciated the months. Behind the scenes, they have
Over the last few years, he has been same time, changes to the market were pragmatic approach that they have. been working on implementing the many
We will be your advocates.
working on moving to the next chapter placing pressure on all trade associations. Do look out for opportunities to be changes I have mentioned. This magazine,
for the CCTA. I know we will all wish him In our discussions, we could see the INSIGHT involved in smaller roundtable discussions our successful summit, the increased
well with his own personal story as he opportunity to develop a single voice throughout the year. communication, and our ongoing
steps back. Of course, CCTA has always been a campaigning work has only happened
for alternative consumer credit that can source of information. Members could It is also our hope that we will be able to
engage with key stakeholders, regulators, get back to face-to-face meetings soon. because of the support of the team.
CREATING A NEW CCTA access us as a sounding board and a
Government, and other influencers. place for advice. That will always be part Possibly even in the second half of this Lastly, I would like to thank the CCTA
It is now no secret that This was the chance to ensure that the of our mission. year. There will be weekly updates to keep Council members, including those who
during 2020 we entered model was fit for the purpose. Leaner you informed. You will continue to see left at the close of the year, and who
into discussions about and more agile. Over the last few years, we have had regulatory alerts and our magazine. asked me to take over.
how this might to adapt to the new Financial Conduct
Our aim was, and is, to develop a Authority (FCA) framework. The questions Of course, there will be changes, some I know that they are rightly proud of the
be the catalyst natural home for lenders and supporting heritage of this association. I promise
we get asked now are less about a fixed, small and some more significant. I
for a series of companies. Always allowing members that I value that history and will continue
unmoving interpretation of the regulation. think you will see more information
to decide their level of engagement. There is a greater focus on how the FCA about discussions that we will have with to focus on our founding mission of
Following positive talks, made more and Financial Ombudsman Service (FOS) the regulators, ombudsman and with representation, advice for our members
difficult because of Covid-19, the interpret the rules. Less and less of this government. You will also see these and building a network.
directors came to their decision. black and white. reflected in reports of meetings and Any trade association is only as strong
On 1 Janaury 2021, I took on the role of briefings to members. We aim to draft as its members. I look forward to
Sometimes there will be precise more hints and tips.
CCTA CEO. The first opportunity for me to regulation, written in a way that leaves working with you to create a
properly introduce myself to you came at little margin for interpretation. There Speaking of advice and education, I do not new CCTA and a strong voice
our Spring Summit just a few weeks ago. are occasionally decisions in the courts. think we will ever return to an extensive for our sector.
If you did hear that presentation, then However, it is more likely that a regulator classroom-type training programme. Much
much of what I say in this article will or an adjudicator will be involved in the of this can be done online. Yes, there will
be familiar. be the occasional physical workshop,
reinterpretation of a principle. Just as
A great deal has changed importantly, those interpretations shift but training has changed. I hope that we
over the years, but the over time. That means that there is no can provide more webinars and online
association’s mission single truth. The experience of others, the workshops.
remains close to what interpretations of regulators are essential. I think there will be no surprise to hear that
it has always been. we will also be working on political and
You will see us asking for more details
about your experience of the regulator. public affairs engagement. This is always
an essential part of any trade association.
ONE THING
It is about having our finger on the pulse,
and hearing what is being said on the A key element in our advocacy work. THAT HAS
frontline. We want to continue to be a
source of insight. How we do that will
Much of this is about identifying who
has an interest and what that interest
NOT CHANGED
need to alter as we operate under a new
regulatory framework.
might be. Often it is about showing
that our interests are aligned.
FROM THE TIME OF
NETWORKING
That is when we talk about the
problems of illegal lending or
OUR FOUNDATION
Last but not least, we recognise it is not when we explain how claims IS THE NEED TO WORK
management companies
always about us. We know that often
it is about creating an opportunity for abuse their customers. TOGETHER. STRONG
members to hear from other members,
and we want to create more of these MORE TO COME ADVOCACY HAS
opportunities in the future. So, look out for further information
about our activities throughout the year.
NEVER BEEN
What does the new CCTA look like?
What this looks like will be familiar in
Look out for more summits and our
annual conference later in 2021. Come
MORE CRITICAL.
many ways. back to us when we ask whether you
I mentioned that we would like to run the would be interested in attending.
4 5
| FEATURE
Helen McCarthy
Head of Policy, CCTA
CHANGE WILL BE STEERED BY:
NEW DRIVER
The regulation of consumer credit will be
changing. That is the only certain thing we
know. How, or when it will change, are
• there is a longstanding commitment to
review the remaining provisions of the
Consumer Credit Act (CCA).
Consumer credit regulation is split
currently between the CCA and the FCA
rulebook, resulting in an uneasy marriage
unknowns at this stage. Following the UK exit from the EU, of detailed rules, based on the way
• THE UK LEAVING THE EU We are certain that there will be changes relevant EU laws and regulation have been consumer credit worked many years
to the regulation of consumer because: ‘onshored’ as a short-term measure. In the ago, and principles-based regulation by
• THE FUTURE REGULATORY • the UK has left the European Union (EU), longer-term the Government intends to the FCA.
use the UK exit as an opportunity to review This creates a strong case for a
FRAMEWORK creating both a need and an opportunity
for change in areas of regulation that and update the regulatory framework for comprehensive review of consumer credit
were driven by EU rules financial services in the UK. regulation, a point we have made to the
• THE FINANCIAL CONDUCT • the Government is working to develop A recent consultation from the Treasury Government and to the Treasury Select
set out the Government’s proposed Committee, which is also looking at the
AUTHORITY TRANSFORMATION the future regulatory framework
approach to the regulatory framework. future of financial services in the UK.
• a new CEO is in place at the Financial
PROGRAMME Conduct Authority (FCA) and a major
The intention is for Parliament to set high
level policy objectives for financial services
The exclusion of the role of the FOS
from the work on the future regulatory
transformation programme for the regulators, with much of the detail of framework is both curious and
• THE WOOLARD REVIEW organisation is underway regulation moving from legislation to the disappointing. The impact of the FOS is
• the recent review of the regulation of regulators’ rule books. significant, across financial services and
RECOMMENDATIONS unsecured credit (the Woolard Review) the role of the FOS really needs to be
Moving regulation from law, both primary
made 26 recommendations for change legislation and regulations, into regulatory considered as part of any work reviewing
• THE CONSUMER CREDIT rulebooks will be a mammoth task and and updating the regulatory framework.
ACT REVIEW will keep Government, Parliament and
regulators busy for years to come. It could
In tandem with the Treasury work on
looking at the regulatory framework,
well be the financial services equivalent of Christopher Woolard (former interim
painting the Forth Road Bridge. CEO of the FCA) conducted a review of
But there were two glaring omissions the regulation of unsecured consumer
from the Treasury consultation, specific credit. The review resulted in 26
THE FUTURE regulation of consumer credit and the role
of the Financial Ombudsman Service (FOS)
recommendations for change, including
extending FCA regulation to cover
REGULATION in the regulatory framework.
Consumer credit touches the lives of the
unregulated buy-now pay-later (BNPL)
products.
OF CONSUMER majority of ordinary working people in the
UK. Given this, reviewing and updating
Historically, new products and services
developing outside the perimeter of
CREDIT regulation of consumer credit should be
more of a priority for the Government
regulation, as BNPL has done, has
been an issue. While the Woolard
and regulators. recommendations would deal with the
particular issue of BNPL, it will still take
time to implement. But it is also vital for
the FCA to be able to act quickly to bring
unregulated products into the scope of
regulation, particularly where customers
are at risk of harm.
6 7
| FEATURE
Richard Brown
Technical Advisor,
Huntswood
TAKE A
CUSTOMER-CENTRIC
APPROACH TO AVOID
REGULATORY
Through our proactive support of firms
and our work as a Skilled Person, we have
for a number of years now, there can
still be challenges in ensuring that they
PULLING FOCUS
however, is that the handbook leaves
many rules open to interpretation, and
susceptible to attention, so understanding
how rules and expectations must manifest
in a timely manner to prevent future
reoccurrence of issues.
seen a substantial volume of activity arising are sufficiently focused on the outcomes this is compounded, as the FCA have themselves as actions for firms is vital here.
ISSUES from the The Financial Conduct Authority’s they are providing, rather than looking at formulated their expectations over
The final point on complaints is related to
Using the complaints data, there are a few the FOS. An ideal scenario for firms would
(FCA) thematic focus within specific compliance from a ‘technical’ perspective. the years. obvious areas where attention is to be be to reduce the number of customer
sectors of financial services. One recent How do firms ensure they are looking at Our recommendation here is for firms to expected, be that from the FCA or media. complaints that arise in the first place,
area has been the payday sector, with their customers’ outcomes holistically to review the FCA published material such For example: and from that the number that proceed
the FCA focusing largely on responsible inform technical compliance, and not the as consultation/finalised guidance papers to the ombudsman stage. We recognise
lending and complaint handling. other way round? 1. Highest complaint volumes compared
(e.g. FCA PS18/19) and Dear CEO letters to peers. that for many of you this is a perfect
Firms in this sector, as in any other, wish (e.g. 15 October 2018), then benchmark world scenario and perhaps one where
to ensure good outcomes are provided MANAGING ATTENTION? their own approach to those of FCA 2. Firms that have a low uphold rate most complaints are not about matters
to customers, as per the mission and There is no such thing as no attention expectations, making changes where gaps (FCA) and high overturn rate (FOS). that occurred years ago. In other words,
values they lay down as their reason from the FCA, and neither would we are identified. But as alluded to above, 3. Firms that have low uphold rate (FCA) irresponsible lending complaints.
for doing business. If the desire to suggest we would want this as an there are unwritten expectations that must when comparing two or more similar Therefore, the importance of good
consistently improve customer outcomes industry. During the early stages of Covid, be known and considered, and this is firms to each other. complaint handling is further elevated,
is the premier consideration, there is we witnessed fantastic collaboration where the CCTA and its members come 4. Firms which have high overturn rates because whilst it will not prevent
certainly also a place on firms’ agendas between firms and the FCA at the start of into play, as they will be able to share their (FOS) when comparing two or more complaints being received, it can lead to
for operating a technically compliant an emerging problem. During this time, insight and experience and guide firms similar firms to each other. fewer referrals to the FOS which, in turn,
business, after all, this is essentially what is we saw firms proactively influencing with current FCA expectations. reduces overall operational costs and
meant by ‘operating to the letter and the the FCA’s decision making through the It is also worth highlighting that Claims
Management Companies (CMCs) have keeps customers happy. Firms which have
spirit of regulation’. recounting of their joint experiences, and VULNERABLE CUSTOMERS complaints escalated to the FOS should
it ultimately led to good, and consistent, in the past alluded to using this data
We have recently seen the FCA starting to The FCA published its vulnerable customer to assess whether it is worth sending reflect on and evaluate whether they are
focus on other sectors of financial services support for customers in a difficult time guidance towards the end of February. satisfied with their processes:
for many. cases to FOS. For firms that have a high
such as guarantor lenders, home collected It is a great read as it provides insight FOS overturn rate, the success rate • have complaints been dealt with fairly
credit and pawnbrokers, even some initial Proactivity comes into play quite nicely and many examples of good practice. and correctly by the customer service
appears that much higher and therefore
activity around the motor sector. The when looking at this issue, as being However, the message from the regulator team?
‘worthwhile pursuing’.
focus of attention is still very much on proactive is an effective means of avoiding is very clear, in that it expects firms to
responsible lending and complaint unnecessary issues crystallising within your read the guidance, assess this against their Again, be proactive and review your • could anything have been done
handling, but in addition we are customer base. Being able to demonstrate current approach, make changes where complaints function to ensure it is as differently to avoid escalation to the
starting to see relending and your proactive approach to looking at needed, and continually monitor and effective and efficient as it can be at FOS?
arrears and collections being customer outcomes can be an effective adapt based on learnings. getting the right customer outcome in the • were there any common sticking points
an increasing focus. means of preventing matters from first instance. Consider these four areas: that reduce the likelihood of resolving
You cannot help but recognise a
For firms in this escalating if an unanticipated issue does tougher tone compared to previous Communication – As we found in complaints?
sector, who have affect your customer base and attracts the papers from the FCA on vulnerable our Complaints Outlook 2021 report, Equally, firms can stand to benefit
operated under attention of the regulator. We look at three customers. To summarise, the guidance customers want it to be easy when from learning from the experiences of
the jurisdiction areas where firms can do this right now. says that if no action is taken following making a complaint and want to be kept competitors, while also looking at existing
of the FCA the paper, or if the FCA deem action informed throughout the process. This case studies available through the FOS to
RESPONSIBLE LENDING taken to be insufficient, expect this to can be achieved by acknowledging receipt inform and improve complaints handling
Responsible lending was already a major lead to supervisory action and potential of complaints promptly and clearly, and policies and processes.
area of concern and regularly landed enforcement. if delays are likely, providing an estimate
in the FCA’s risk outlook prior to the of when the customer may have a THE NEXT CHAPTER
Our recommendation is simple; review
coronavirus pandemic. As a result, the resolution. Also, you should send regular There will be some challenging times
the paper as an absolute priority,
FCA clarified and updated its affordability communications throughout the process ahead for the consumer finance sector,
undertake a gap analysis and implement
requirements in 2018. The regulator has to keep customers informed of progress. perennially motivated by the desire to
changes where required and keep
been unequivocal in its requirements monitoring and adapting. Always, keep Resource – Ensure the complaints team ensure a safe, fair and reputable market for
in regard to responsible lending thorough records to show progress, is adequately resourced and trained to consumers.
practices. ready for when this is requested, which handle complaints in line with existing However, there are exciting times ahead.
When investigating why poor it will be at some point in time. regulatory requirements. Where this is not The value this sector offers customers is
practice can occur, it is possible at a given point in time, focus the phenomenal, if sometimes misunderstood,
important to look at the COMPLAINT HANDLING resource on priority customers such as and customer demand for the services
guidance currently Another area of continual focus should those in vulnerable circumstances. offered have done nothing other than
available to lenders. be on complaint handling. This is a Outcomes – Fair customer outcomes increase. Those firms that operate
The challenge with fascinating area, as it is one of the few are of paramount importance. They keep responsibly, proactively engage
compliance, (if only) areas that is visible to everyone, customers and the regulator happy and and do the right thing by their
due to the regular reporting to both reduce the likelihood of extra costs and customers and the regulator,
FCA and Financial Ombudsman Service resources required when customers are those likely to thrive
(FOS) which, as we know, is published at choose to escalate to the Ombudsman. and prosper.
frequent intervals. Quality assurance pays dividends at this
We know from experience that FCA current time and is an important role in
decisions are made using this data. We evidencing outcomes and learning from
even use this data ourselves as it seems mistakes.
to be quite predictive of what we will Root cause analysis – learnings from
find, not just when supporting firms complaints should continue to be driven
with complaints but in other areas of a by root cause analysis that is fed into the
business’s operation. It is fair to say that firm’s senior management and appropriate
negative outliers within this data are actions should be taken by the business
8 9
| FEATURE
Julian Graham-Rack
CEO, PrinSIX
THE RIGHT BALANCE
THE DIGITAL SANDBOX PILOT (API) market place where digital service CCTA MEMBER PRINSIX WAS SELECTED that customers’ financial circumstances of collaboration across stakeholders
providers list and provide access to AS PART OF THE VULNERABILTY TEAM may flag broader vulnerability risks within and an inability to run agile test and
In May 2020 a Digital Sandbox Pilot services via APIs the FCA’s other three definitions. These learn strategies within real lending
was launched by the Financial Conduct Their CEO, Julian Graham-Rack, writes
• integrated development environment in here about the experience. are far more complex circumstances, environments quickly, safely and cost
Authority (FCA) and the City of London which digital journeys cannot fully serve. effectively.
which applicants can develop and test
THE DIGITAL Corporation. The pilot ran from
November 2020 through to February their solution
The relentless drive towards digital
engagement is fuelling an active Digital journeys and analytics can be
SO, MY OVERALL CONCLUSION?
SANDBOX PILOT 2021. Twenty eight teams took part, to • a collaboration platform – to facilitate debate within consumer credit about helpful in identifying elevated vulnerability
risk in specific areas but identifying a high There needs to be a coming together of
test and develop innovative products an ecosystem of key organisations the adequacy of digital only customer
FCA BACKGROUND and services in response to challenges that will provide support and input to journeys. risk customer inevitably means an advisor
must intervene. Advisor interventions
all stakeholders within consumer credit,
working to develop proven, effective,
presented by the Covid-19 pandemic. digital sandbox participants, such as They meet customers’ demand for
incumbents, academia, government provide their own challenges. practical, and measurable vulnerability
convenience and lenders need for strategies. This requires a fundamental
FROM THE FCA WEBSITE: bodies, venture capital, and charities efficiency, but real concerns exist within SIMPLY MOVING ONLINE QUESTIONS change in how journeys are defined,
Our experiences and engagement with • an observation deck – to enable the regulator and support charities that OFF-LINE IS INEFFECTIVE, AND executed, tested and improved.
the industry indicate that developing a regulators and other interested parties digital journeys fail to adequately detect THE JOURNEY MOVES TO A MORE
permanent digital testing environment to observe in-flight testing at a technical and mitigate vulnerability risk. Done well, it can create a step change
CONSULTATIVE ENVIRONMENT in understanding how to deliver effective
would provide significant value to financial level, to inform policy thinking in a Are these concerns driven by a limited
services. The Digital Sandbox pilot was safeguarded environment. An environment that asks open questions, vulnerability strategies in this increasingly
understanding of the digital world, or and delegates outcome decisions to digital world.
aimed at trialling this environment, We provided support to innovative firms poor digital execution?
by providing support to products and advisors. In this future vision of ‘doing better
and organisations looking to tackle
services which are at an early stage of challenges relating to, or exacerbated by, WHAT ARE THE LIMITS OF DIGITAL It’s important to recognise the challenges things,’ PrinSIX is keen to play its part.
development. coronavirus. The pilot focussed on three JOURNEYS, AND WHEN DO HUMANS lenders face when implementing effective
Data has become increasingly pivotal pressing areas: NEED TO GET INVOLVED? advisor led journeys that reliably deliver
to the way firms operate and engage good, consistent customer outcomes.
• frauds and scams This was the focus of PrinSIX’s
with each other and the consumers involvement in the FCA’s Digital Sandbox Embarking on advisor led journeys evokes
they serve. This means that longstanding • vulnerability a whole new set of questions around
pilot: To consider how digital journeys
challenges like data access and • SME lending. can best deliver the outcomes articulated training and competence frameworks,
standardisation are increasingly a barrier Between 8-10th February, the teams in the FCA’s FG21/1 Guidance for firms QA, management oversight and controls.
for market participants and innovators. presented their progress throughout on the fair treatment of vulnerable The risk of ‘white noise’ is significant,
We also receive requests for support the pilot. customers, and the four categories where the really vulnerable get lost in the VULNERABILITY,
from firms which don’t match the processing machine due to the volume of
eligibility criteria of the regulatory THE FCA ARE CURRENTLY IN THE
of vulnerability (Financial Resilience,
Competence, Life Events and Health). unnecessary referrals. HOW EFFECTIVE
sandbox, but whose proposals may PROCESS OF DETERMINING THEIR The sandbox allowed us to speak To be effective, human intervention must ARE DIGITAL
nonetheless deliver desirable innovations
in UK financial services.
NEXT STEPS to academics, charities, compliance be targeted, and focused on those at
significant risk.
CUSTOMER
An independent evaluation process specialists, regulators, and technologists
We piloted the following features as the currently being undertaken by Grant to get a broad perspective of opinions. A combination of pure digital and JOURNEYS?
foundations of a digital sandbox: Thornton will help guide these discussions, hybrid journeys, if properly defined and
• access to synthetic data assets with the pilot being assessed against five THE VIEWS IN THIS ARTICLE ARE MINE executed, has the potential to deliver
to enable testing, training success criteria: AND SHOULD NOT BE CONSIDERED AS good outcomes for customers. It ensures
and validation of prototype 1. Innovation – role played in REPRESENTING THE OPINION OF ANY that everyone’s objective of protecting
technology solutions, for encouraging innovation in financial OTHER INDIVIDUAL OR ORGANISATION the vulnerable is achieved.
example transactional services to the Covid-19-related They are nevertheless formed after some
banking data sets, SME challenges detailed in the use cases. insightful conversations with experts. SO, HOW IN PRACTICAL TERMS
lending data and SHOULD DIGITAL AND HYBRID
2. Speed – role played in enabling My conclusion is that neither view is right. JOURNEYS WORK?
customer accounts quicker testing and development of Different customers require different
• an Application proof of concepts. onboarding channels depending on their When potential vulnerability is
Programming needs and circumstances. identified, what are effective
3. Collaboration – role played in mitigation strategies? How
Interface fostering collaboration, facilitating Financial Resilience is best assessed do we give lenders more
diversity of thinking and creating an through digital journeys. Digital tools than the obvious
ecosystem of key organisations. assessments are data driven, objective one – decline? Does
4. Pilot features – the effectiveness and evidence based. ‘decline’ always
of the key features of the pilot (see The challenge for lenders is whether deliver the best
below) in stimulating and accelerating these assessments are collecting customer
innovation. and using the right data to assess an outcome?
5. Sustainable future – role played in individual’s circumstances, adequately The lack of
informing and assisting the design assessing very specific circumstances answers within
and future operating model of a in a customer’s financial profile. This consumer credit to
permanent digital sandbox. may be the point that digital journey any of these questions
limitations lead lenders to trigger human is striking. While
intervention. anecdotal examples exist,
there is little best practice
DO THESE INTERVENTIONS DELIVER and there are only a handful of
GOOD CUSTOMER OUTCOMES? deployable, replicable strategies
While financial resilience may be best within a digital environment.
served digitally, it must be acknowledged The root causes of this are a lack
10 11
| FEATURE
Clare Hughes
SM&CR: Partner, Addleshaw Goddard LLP
clare.hughes@addleshawgoddard.com
A JOB DONE?
Following the introduction of the Senior
Management and Certification Regime
(SM&CR), to date the focus within
SM&CR has not had the same headlines
over the past year. This is, however,
likely to be due to everyone’s attention
31 March therefore, marks the start of
a journey for all solo regulated firms
which will impact how they are governed
FIRST STEPS
Some examples of FCA’s revised
supervisory approach are:
• the expectation that a firm is able to
SM&CR continues to remain one of your
top priorities.
WHAT ARE AREAS THAT YOU SHOULD
In addition, there is lack of consideration
of what ongoing training needs to
provided and how it should be delivered
Financial Conduct Authority (FCA) solo and energy being spent on managing and how they operate. The Prudential articulate and show, which SMF has effectively
regulated firms has been concentrated on the impact of Covid-19. In addition, Regulation Authority’s (PRA) ‘Evaluation of overall accountability for key areas FOCUS ON? • compliance monitoring methodologies
implementing and embedding processes there hasn’t been any visible high profile Senior Manager and Certification Regime’ of the regulatory agenda/concerns In our view there two main areas in terms have not been amended to take into
within their business as ‘BAU’ (Business enforcement action taken against which surveyed banks and insurers (which that are applicable to the firm. These of SM&CR that firms should focus on. account how SM&CR impacts should
as Usual) processes. The 31 March 2021 individuals under SM&CR, which has led have been subject to SM&CR for some expectations are often communicated These are: be included
was a milestone date as this marked some commentators to suggest that time) provides an indication of the level through speeches and other non-policy
the day by which all firms must have SM&CR lacks teeth. However, based on and type of changes that regulators, • consider the effectiveness of your • business and operational changes
publications, and the SM&CR rules and SM&CR implementation do not consider the relevant overall
completed their implementation of our experience of helping clients engage including the FCA, will expect to see guidance contain a list of expectations
SM&CR. Does, therefore, passing with regulators, it would be mistake for within consumer credit firms. The PRA’s • how can you embed the regulatory accountability of SMFs or whether
that are allocated to SMFs. An example these changes could have SM&CR
this milestone date mean that you firms and SMFs to regard SM&CR as evaluation found: of this is the management of Covid-19s expectations of the changes that
and Senior Manager Function job done. SM&CR is meant to drive into BAU implications
• over 90% of SMFs said that SM&CR had impact on a firm’s operations and the
holders (SMFs) can relax and In this article, we consider: brought about meaningful change in service levels to customers. The overall processes? • lack of succession planning.
focus on other things, behaviours accountability to the FCA for these The areas should be the focus of your
especially as the flood • why SM&CR should still be one of your NEXT STEPS
key priorities? • 97% of firms had integrated (to responses should be the responsibility SM&CR activities because the FCA is
of headlines related of SMFs likely, within the next 12 months, to To decide what still needs be done within
to SM&CR in 2019 • what the areas you should focus on are some degree) SM&CR into their BAU
practices in a way that went beyond • increased engagement by the FCA undertake a thematic review to see your business to embed SM&CR as a
and January • how to progress those SM&CR focus how effectively firms have implemented BAU process, we suggest you undertake
2020 has now simple regulatory compliance directly with the SMF who has overall
areas. accountability for areas they are SM&CR. It is therefore possible that your following two exercises:
died down? • 94% of SMFs said that SM&CR has firm may be selected to be part of any
brought about ‘positive meaningful interested in, rather than through the 1. Carry out a review which tests that you
WHY SM&CR SHOULD STILL BE ONE compliance function. This engagement review. Any thematic review is unlikely to have appropriate policies and processes
OF YOUR KEY PRIORITIES? change to behaviour in industry’ consider only the mechanistic aspects
through ‘clearer articulation of model is not exclusive to when things in place for your ongoing activities
The implementation of the SM&CR have gone wrong, but will also be part SM&CR implementation, but will also to ensure that you meet with various
authority and had improved focus likely consider whether the way in which
regime to all FCA regulated firms is not on accountability and responsibility’. of routine engagement SM&CR obligations. An example would
seen by the regulator as the end point SM&CR has been implemented achieves be obtaining and giving regulatory
Examples of changes that have been • increased scrutiny of approved person the following regulatory objectives:
of journey. Rather, implementation is driven by SM&CR are: references.
applications that are submitted for new
viewed as being only the beginning • clear allocation of overall 2. Review your governance arrangements
• enhanced decision making SMFs, especially with regards to the
of the journey to ensure that firms accountabilities to senior decision through the lens of a key or important
by increasing the focus on competence and experience of the
are delivering both commercial makers which aligns with how the business initiative or issue. For example,
responsibilities individual candidate but also the how
and regulatory objectives. The business operates in practice how the impacts of Covid-19 have
the individual’s ‘skill set’ fits in with the
FCA is expecting SM&CR to • improved culture • senior decision makers being able to been managed? The review should
firm’s management team
be the catalyst for driving • enhanced compliance and ethics demonstrate that they understand focus whether the governance and
change in how firms • introduction of SM&CR has also seen
training, whistle blowing procedures, the regulatory requirements and decision making processes within
operate and the a marked increase in whistleblower
misconduct reporting, induction expectations relating to their areas of your business are aligned to your
outcomes they reports being made by individuals
programmes, succession planning. overall accountability through their SM&CR arrangements. It is essential
deliver. directly to the regulator. These reports
SM&CR provides the FCA with a powerful actions and decisions. this review takes a holistic view of
are not just related to financial services
supervisory and enforcement toolkit Below are examples of common how governance and decision making
activity but include factors which
through which it can drive forward its weaknesses that we have seen with actually operates within your business.
could highlight the culture within a
regulatory agenda. The SM&CR toolkit has firm, such as harassment, bullying and SMCR implementation: These reviews will enable you to identify
already seen a change in how the FCA discrimination. Between April 2020 • limited engagement by SMFs in what is working well and highlight
supervises and engages with firms, and and September 2020 the FCA received understanding the impacts of SM&CR in areas that need to be enhanced,
we expect the changes approach to pick the equivalent of nearly two reports thereby enabling you to create
terms of how they undertake their roles
up speed after the 31 March. per week, mainly in relation lack of an action plan of what still
safe working environment. The FCA • limited or no consideration of needs to be done.
has recently revamped it process for whether the governance structure
If you would like to
handling whistleblowing complaints and reporting lines as they operate
discuss any in this
and launched a campaign to within the business are aligned to
article or understand
encourage individuals to make reports. how SM&CR has been implemented.
how we can help
This has resulted in potentially the
Questions for you to consider in terms of you, please get
wrong individuals being designated
SM&CR implementation include: in touch.
as SMFs, some accountabilities not
1. How confident are you and your SMFs being allocated to an SMF, and a
that your SMCR implementation has lack of clarity as to what each SMF is
positioned you to deal effectively with accountable for
the revised supervisory approach by • SMFs have not considered what
the FCA? reasonable steps look like for them
2. Are you able to show how your SM&CR personally or how they evidence what
implementation is now part of your reasonable steps are
BAU and is driving positive changes to • training that has been provided is
how you do business? too generic and too focused on
If you answer ‘no’ to either of the above what SM&CR is, rather than
questions, then you need to ensure that being role specific.
12 13
| FEATURE
Lucy Donovan
Head of Communications, CCTA
Political engagement is about our
relationships with external stakeholders
POINTS OF VIEW
The Economic Secretary is the Minster
responsible for consumer credit and
by Conservative MP Mel Stride.
The committee can also start inquiries
What do we talk to them about?
Aside from the association’s priority
that fall within the political sphere. These financial services regulation. This includes of its choosing. These often involve an issues, our campaign around access to
stakeholders play a role in structure of the oversight for the Financial Conduct invitation for written submissions, along responsible credit forms a major part of
sector and financial services regulation Authority (FCA) and covers issues such as with oral evidence sessions with various the work we do with these stakeholders.
or they have an interest in alternative access to affordable credit and financial organisations. In the past they have This has been a central focus for CCTA
credit. Some play a role in representing inclusion. The current Economic Secretary looked at personal finances and access in recent years and will continue.
the interests of the sector too. Ultimately, is John Glen MP. It would be fair to say to financial services. We regularly try to
they can have an impact on the future of that the Minister is not a big supporter The campaign is about explaining the
engage with members of the committee role alternative lenders play in helping
the market. of the sector, favouring to explore other and met (virtually) with a few of them last people access better credit and the
Therefore, it is important to make sure that options such as Credit Unions. We have year to brief them on the sector. contribution that our sector makes to
these different organisations have a good met the Minster previously and continue
POLITICAL understanding of our members and their
customers. We want to ensure that these
to liaise with his office to explain the role
we play in the market and the contribution
What have they been working on?
the UK economy (which has come into
sharper focus as we start to think about
the economic recovery needed following
ENGAGEMENT firms and the consumers they serve, are
considered in any future decisions that
member firms make to the economy.
Alongside the Minister, there are a number
The Treasury Select Committee currently
has an open inquiry into the work of
the FOS. This has included committee
the impact of the Covid-19 pandemic).
would affect how they operate. The other part of this campaign is about
of policy officials within the Treasury.
THE MAJOR Engagement with these stakeholders also
allows us to inform our work. When we
We meet with the Consumer Credit
Unit on a quarterly basis, with another
hearings and correspondence between
the outgoing Chief Executive and
explaining the consequences of not having
access to credit. Recently we have been
PLAYERS AND meet, it is interesting to hear what their
plans are in terms of future activity or
meeting due in the coming weeks. These
officials are often more connected to the
committee Chair. The committee was
due to hear from the FOS management
talking about the growth of informal and
illegal lending. Particularly, the fact that
CCTA PLANS intervention in the sector. You will know
that there are priority issues we have
detailed policy rather than the headline
announcements from the ministerial team.
once the organisation has published this
year’s budget, but it is unclear if this will
go ahead, at the time of writing, due to
illegal lending continues to move online,
allowing these sites to look more and
more sophisticated.
chosen to focus on, which have been Caroline Wayman’s departure.
driven by our political engagement and What are they working on? You may have seen the BBC piece that we
The committee has been one of the were quoted in recently, which formed
interaction with regulatory bodies and In the budget held at the start of March, strongest critics of the FOS in recent part of the campaign. The story pointed
consumer groups. Here we explore the funding was announced for a pilot of a months so we will continue to engage out the risks of illegal lenders, backed
main organisations and groups involved in no-interest loan scheme for those that with them on the management of the FOS up by figures showing a massive drop in
the political environment. We look at why cannot afford to pay interest on credit and the role of the new Chief Executive. investigations and prosecutions for illegal
they are important, the role they play and agreements. These loans have sometimes
current activities. lending during 2020. The purpose of the
been positioned as an alternative to high ALL-PARTY PARLIAMENTARY GROUPS story was to highlight that illegal lending
cost credit, but are really for consumers remains a serious problem, which has
HM TREASURY All-Party Parliamentary groups (APPGs)
that firms are unable to lend to. We are been further compounded by the impact
The Treasury is the government are cross party groups formed around a
working to explain this to those involved of the Covid-19 pandemic. We are working
department responsible for the specific topic or interest. Though APPGs
in the pilot. on developing future stories like these that
economy and financial matters. have no formal powers, they bring
Right now, Treasury officials are working issues onto the parliamentary agenda form part of our campaign.
Led by the Chancellor of the on the Future Regulatory Framework (FRF)
Exchequer, the Treasury also has and can be a good way to educate and It is vital that we continue our engagement
review. The FRF is considering how the build relationships. Representatives of with these groups as they impact upon our
oversight of the entire area regulatory framework for financial services
of financial services policy. the House of Commons and Lords sit members’ ability to operate successfully.
needs to adapt to be fit for purpose in the on the various groups. There are APPGs Many of you will know that there is little
Within this department future. CCTA submitted a response to a
there are both Minsters on alternative lending, credit unions and sympathy for alternative credit in wider
consultation on the review that recently financial education for young people. society, which makes engagement harder
and policy officials
closed. Given member struggles with the Unsurprisingly, the group on alternative as we work to challenge perceptions.
working across
interpretation of rules between the FCA lending is the one we are most aligned to. But we must keep explaining our current
different areas.
and the Financial Ombudsman Service Recently the group produced a report on position to the people and organisations
(FOS), we thought it odd that the FOS was lending and borrowing, post-covid. that matter, along with the threats we
not included in the review. We called for The Report covered a wide range of issues continue to face.
this to be reconsidered in our submission. including the future viability of credit files We need to ensure that we are part of the
We continue to raise our concerns and the likely increase in illegal lending debate. Our messages must be tailored
about the FOS and Claims Management because of the pandemic. to the interests of these different groups,
Companies with the Treasury and officials so we are aligned with their aims, while
in our regular meetings. PARLIAMENTARIANS making sure member views are
Outside of the various committees and represented. This is a central part
TREASURY SELECT COMMITTEE groups in Parliament, from time-to-time of the work we do to advocate
Arguably one of the most influential select other parliamentarians will become on behalf of members, along
committees in the House of Commons, interested in our sector. This could with our wider external
the Treasury Select Committee (TSC), have been as the result of a campaign stakeholder engagement.
is tasked with holding the government’s or a constituency issue. If there is an
Treasury department to account. It opportunity to brief an interested MP or
also examines the administration and member of the House of Lords, then we
expenditure of public bodies like the take advantage of this. Cabinet reshuffles
FCA and the FOS. Membership of and new parliamentary sessions always
select committees reflects the see changes to ministerial positions and
current makeup of the House of committee membership. You never know
Commons. The TSC is chaired where an interested MP might end up.
14 15
REGULATORY NEWS | ICO REGULATORY NEWS | GENERAL
cautious record
calling complaints
£480,000 FINES ISSUED
TO COMPANIES MAKING ICO RECORD 10,000
NUISANCE CALLS COMPLAINTS FOR SPAM a level field?
practical steps The Information
TEXT MESSAGES
CMA PUBLISHES TEMPLATE global
ICO PUBLISHES NEW
Commissioner’s Office (ICO)
the right tools Two separate companies that
SUMMARY OF BORROWING helping hand
DATA SHARING CODE
OF PRACTICE
has issued fines totalling
£480,000 to four separate paytime ICO LAUNCHES DATA
sent nuisance text messages
during the Covid-19 pandemic FOR PAYDAY LOAN FIRMS leadership MONEY ADVICE TRUST
companies for making unlawful ANALYTICS TOOLKIT have been fined a total of The Competition and Markets PAPER PUBLISHED:
In 2011 the Information
Commissioner’s Office (ICO)
calls to numbers registered
with the Telephone Preference
payback The Information
£330,000 by the Information
Commissioner’s Office (ICO).
Authority has published
a Summary of Borrowing
REPORT PUBLISHED:
INDEPENDENT REVIEW OF VULNERABILITY - MEETING
FINTECH EXPECTATIONS AND
published its first Data Sharing Service (TPS). ICO ISSUES FINES TOTALLING Commissioner’s Office (ICO) template to be used in
Leads Works Ltd was fined ACHIEVING OUTCOMES
Code. In the intervening period £270,000 TO FIRMS MAKING is urging all organisations communications from An independent review
Chameleon Marketing (H.I) Ltd NUISANCE CALLS considering using data £250,000 for sending more of FinTech in the UK has The Financial Conduct
the type and amount of data than 2.6 million nuisance payday loans firms to their
from Leeds; Rancom Security analytics on personal data to published a report setting out Authority recently published
collected by organisations has The Information text messages to customers customers to comply with their
Limited based in Sutton look at its new toolkit. a plan for the UK to retain its its final guidance for firms on
changed enormously, as has Commissioner’s Office (ICO) without their valid consent. obligations under the Payday
Coldfield; Repair & Assure global leadership in fintech. helping vulnerable customers.
the technology used to store has issued fines totalling It is vital that data protection The messages, sent between Lending Market Investigation
Limited from Redhill and Solar The Money Advice Trust has
and share it, and even the £270,000 to two separate is built in from the start when 16 May and 26 June 2020, Order 2015. The report highlights the
Style Solutions Limited in published a paper to help firms
purposes for which it is used. companies for making unlawful using data analytics to process resulted in over 10,000 opportunity to create highly
Stockton on Tees were found The template is designed turn their attention to planning
In January, the ICO published marketing calls to numbers personal data. This is not only complaints. skilled jobs across the UK,
to have made 2.4million illegal to help achieve consistency the practical steps they need to
a new code. registered with the Telephone the law but it’s a crucial step boost trade and extend
calls between them, resulting Valca Vehicle Ltd was fined across both the information continue taking based on the
The ICO have written this in over 250 complaints to the Preference Service (TPS). to gaining public trust and and format of information that a competitive edge over
confidence in the technology £80,000 for sending nuisance finalised guidance.
Data Sharing Code to give ICO and the TPS. payday-lending customers other leading fintech hubs.
It is against the law to make marketing messages during
individuals, businesses and and how your organisation is receive, to make it easier Recommendations include: The paper Vulnerability:
It is against the law to make marketing calls to numbers the pandemic.
organisations the confidence using people’s data. for them to understand the meeting expectations and
marketing calls to numbers that have been registered with • introducing a new ‘fintech
to share data in a fair, safe and The ICO’s new toolkit takes Following complaints from products they use. achieving outcomes, is
that have been registered with the TPS for more than 28 days, scale up’ visa route for
transparent way in a changing organisations through some of the public to the ICO, the designed to be a helpful
the TPS for more than 28 days, unless people have provided CMA: 11 February 2021 specialists from around the
landscape. This code will the key data protection points company was found to have starting point.
unless people have provided consent. world
guide practitioners through they need to think about from sent more than 95,000 text The paper goes through each
consent. Call Centre Ops of Nottingham messages from June to July • implementing a ‘scale box’
the steps they need to take the outset of any project they key expectation on vulnerability
to share data while protecting Andy Curry, head of and House Guard of 2020 without the recipients’ to provide regulatory support
are planning to undertake and outlines what this means
people’s privacy. investigations at the ICO, said: Bournemouth, were found to permission. This is against for growing firms
involving data analytics and for firms, what action firms can
have made almost 860,000 the law. The messages • improving UK listings rules
Proportionate, targeted data “Business owners operating personal data, and can be take to meet the regulator’s
illegal calls between them, referenced the pandemic and with free float reduction and
sharing delivered at pace in this field have a duty to found on their website: expectations and ultimately
resulting in complaints to both were designed to appeal to dual class shares
between organisations in both familiarise themselves ico.org.uk/data-analytics-toolkit achieve positive outcomes
the ICO and the TPS. individuals whose finances
the public, private and with and comply with the ICO: 17 February 2021 • creating a £1 billion-pound for vulnerable customers and
ICO: 12 February 2021 have been adversely affected. businesses.
voluntary sectors has been law. The law is simple and This, in the Commissioner’s fintech ‘growth fund’ to help
crucial to supporting and clear, businesses must not call view, was a clear attempt to firms grow independently Money Advice Trust:
protecting the most vulnerable numbers that are registered capitalise on, and profiteer March 2021
during the response to with the TPS unless they • establishing a private sector
from, the health crisis. led Centre for Finance,
the Covid-19 pandemic. have valid consent to do so.”
Be it through the shielding ICO: 5 March 2021 Innovation and Technology
To comply with the law, to support national
programme for vulnerable companies carrying out
people, or sharing of health coordination and growth in
electronic marketing should fintech across the UK.
data in the test and trace subscribe to the TPS to receive
system. the register of subscribers HM Treasury:
This code, and the products to screen against their own 26 February 2021
and toolkits published call lists.
alongside it, provides a ICO: 27 January 2021
gateway to good data sharing
practice and the benefits we
can expect from the results.
ICO: 6 January 2021
16 17
You can also read
