The Central Bank published its annual Consumer Protection - Outlook Report on 2 February 2016, setting out its consumer protection objectives for the year ahead, and key ongoing risks.

PRIORITY THEMES FOR 2016:

  • European agenda: it will continue its work on implementing both the Mortgage Credit Directive and Payment Accounts Directive (due for implementation by 31 March 2016 and 18 September 2016 respectively), and promoting a “coherent cross sectoral consumer protection framework” at EU level.
  • New SME Regulations: it will publish a guide to the new SME Regulations (which will replace the current Code of Conduct on Business Lending to Small and Medium Enterprises) in advance of 1 July 2016.
  • Mortgages and arrears:
    • Variable Rate Mortgages: once its Consultation on Increased Protections for Variable Rate Mortgage Holders concludes in mid-February, it will consider whether resulting changes are required to the Consumer Protection Code.
    • Tracker Mortgages: it will focus on making continuing progress in its examination of tracker mortgage issues.
    • Mortgage Arrears: it will be following up with lenders on the results of its 2015 CCMA themed inspection. Issues identified during that inspection relate to delays in MARP assessments, the quality of communications with borrowers (in particular in relation to decisions of Arrears Support Units), adherence to time-frames, telephoning borrowers and the ability to provide supporting documentation.
  • Authorisation and supervision:
    • Credit Servicing: following the introduction, in 2015, of a new authorisation regime for credit servicing firms (see our previous client briefings here and here), those firms will need to be able to demonstrate compliance with the Central Bank’s new Authorisation Requirements and Standards for Credit Servicing Firms.
    • New authorisation models: it has already introduced new authorisation process models for payment institutions and electronic money institutions; these will be rolled out to other institutions (such as bureaux de change, retail intermediaries, debt management firms, retail credit firms and moneylenders) during 2016.
    • Supervision: it will focus on on-site supervision, checking regulated firms’ progress in putting “fit-for-purpose consumer risk frameworks” in place.
  • Culture: it will work with the boards and senior management of regulated firms to assess what outcomes are being delivered to consumers.
  • Monitoring internal frameworks: it will assess the risk frameworks put in place by regulated firms to protect consumers, with a view to establishing gaps and best practices.
  • Remuneration: it will continue to check how regulated firms are dealing with its 2014 Guidelines on Variable Remuneration Arrangements for Sales Staff and will examine the payment of commission to intermediaries (publication of a discussion paper is expected to be the first step in its examination of commission  payments).
  • Failures and errors: it will continue to monitor whether regulated firms are dealing with the impact of failures and errors on consumers in a “timely and appropriate way.”
  • Retail intermediaries: retail intermediaries can also expect to be the subject of more focused firm- specific inspections in 2016.
    • Other: work will also be carried out on reviewing sales of structured products, private health insurance and claim settlement offers (particularly in the area of motor insurance). Regulated firms that do not meet minimum compliance standards will also be subject to more focused supervision.

RISKS:

  • Absence  of a consumer-focused culture: the Central Bank has emphasised the importance of senior management in regulated firms taking ownership of their firms’ culture and behaviour.
  • Poor product governance: product proliferation and lengthy and confusing documentation were highlighted as risks. Regulated firms will be expected to test their products and product documents to ensure that they are easily understandable and suitable for their target market.
  • Indebtedness and arrears: ongoing arrears (both in relation to mortgages and other debts) were also highlighted as an ongoing risk. The Central Bank emphasised the importance of lenders evaluating their processes to avoid irresponsible lending, and flagged future interest rate increases as an area of potential challenge for over- indebted consumers.
  • Cyber-risk: continuing one of its 2015 themes, the Central Bank highlighted the threat posed by cyber-risk to regulated firms, and encouraged those firms to improve their understanding in this area to enable them to identify and mitigate the resulting risks to consumers.
  • Low interest rates: the Central Bank is concerned that the continuing low interest rates available to depositors could push those depositors into investing in riskier products to achieve potentially higher returns without fully understanding the risks involved. It emphasised that regulated firms responsible for riskier products have responsibilities regarding the suitability of advice and the provision of information on the risks of those products to consumers.
  • Service delivery: with a particular focus on vulnerable consumers, the Central Bank emphasised that any move towards using new technologies to deliver services should be the subject of a full impact assessment, with full information and assistance being given to consumers (including those who want to switch providers as a result). 
  • Claims handling and settlement: the Central Bank stressed the importance of insurers treating their consumers fairly and reasonably, emphasising that cost-cutting measures should not be at the expense of customer service.