FCA fines Lloyds £117 million for PPI complaints handling failures: FCA has fined three members of Lloyds Banking Group a record retail fine of £117 million for failing to treat customers fairly in their handling of complaints about payment protection insurance (PPI). The failings started in March 2012 and lasted one year. Over that period, the companies rejected 37% of the 2.3 million claims they received. FCA found:

  • Lloyds had told complaints handlers to assume its PPI sales processes were compliant and robust unless told otherwise;
  • Lloyds did not tell complaints handlers when it found problems in the sales process; and
  • some complaints handlers believed what Lloyds had told them to assume over what customers told them, and sometimes did not contact customers to allow them to explain.

These led to several consequences, including Lloyds telling customers they had fully investigated complaints when this was not the case, as well as many customers not having the opportunity to provide evidence, and Lloyds failing to consider customer evidence in a balanced way. The then Financial Services Authority had intervened when it noticed a sharp decline in the amount of complaints upheld, following which Lloyds removed the assumption of compliance from its policies. FCA noted the steps Lloyds has taken to put in place a remediation programme which has included a review or upholding of 1.2 million complaints and setting aside significant funds to pay redress. Lloyds has also frozen shares under deferred bonus schemes for senior staff as a result of the investigation. Lloyds settled at an early stage and benefited from a 30% discount on the proposed fine. (Source: FCA Fines Lloyds £117 Million for Complaints Handling Failures)

FCA appoints new directors: FCA has appointed Mark Steward as the new director of enforcement and market oversight and Barbara Frohn as the director of risk and compliance oversight. (Source: FCA Appoints New Directors)

FCA issues final CBTL rules: FCA has issued a policy statement on reflecting the Mortgage Credit Directive (MCD) Order 2015 within its rules. The statement contains feedback from an earlier FCA consultation paper on FCA's proposals for a legislative framework for consumer buy-to-let (CBTL) mortgages and final rules. The consultation focused on four main areas:

  • registration: respondents welcomed FCA's intention to replicate the registration processes set out in the legislation. Following requests from firms, FCA has also issued a specimen application form for authorised firms;
  • aggregated data reporting: respondents considered the proposals to be a proportionate way of monitoring CBTL lending volumes and informing FCA's supervisory approach. However, FCA will be clarifying aspects of its guidance following feedback and adjusting the timing of reporting;
  • complaints handling rules: the proposal to apply most of FCA's complaints handling rules (set out in the Dispute Resolution section in the FCA Handbook – DISP) to firms’ CBTL activity was broadly supported. Some firms suggested that all of the DISP rules should apply to CBTL activity, including complaints publication rules. FCA rules would not prevent firms from publishing their own CBTL complaints data, but FCA decided it would not be proportionate to change its proposals to mandate this; and
  • modifications to other FCA Handbook modules to incorporate CBTL: FCA received limited feedback to proposed changes effecting the implementation and oversight of the CBTL regime. FCA has made some minor technical amendments in these areas.

The earlier consultation set out an indicative fee structure and registration fees for CBTL firms. Respondents raised concerns which FCA will take account of in a consultation on periodic fees planned for March 2016. FCA reminds firms that if they wish to lend, administer, intermediate, arrange or provide advisory services in relation to CBTL from 21 March 2016 they will have to be registered. FCA intends to start accepting applications in the summer. (Source: Buy-to-let Mortgages – Implementing the Mortgage Credit Directive Order 2015: Feedback on CP15/3 and Final Rules)

FCA issues pension transfer rules: FCA published a policy statement containing proposed changes to its pension transfer rules and feedback from its consultation on those changes. The new rules were necessary following changes to the Regulated Activities Order which made the conversion or transfer of safeguarded pension benefits into flexible benefits a regulated activity. FCA has also made changes to ensure that the Conduct of Business Sourcebook (COBS) pension transfer requirements will apply to all pension transfers, regardless of when the transferred benefits are being crystallised. The new rules described in this policy statement will come into force on 8 June. (Source: Proposed Changes to Pension Transfer Rules and Consultation Feedback)

FCA issues "insistent client" advice: FCA has published a factsheet for advisers on the handling of "insistent clients" who wish to take a course of action contrary to that suggested by their adviser. FCA encourages advisers to adopt the following three-step approach:

  • ensure that advice is suitable for the individual client and is clear to the client; 
  • make clear to the client that the client's actions are against the advice provided; and
  • make clear to the client the risks of the alternative course of action.

The factsheet goes on to outline issues firms have experienced with advice given to "insistent clients" and what firms should include in the standard suitability report. (Source: Pension Reforms and Insistent Clients)

FCA consults on rule changes: FCA's latest current consultation proposes changes to:

  • transpose the UK Corporate Governance Code and related miscellaneous changes to the Listing Rules, Disclosure and Transparency Rules, Senior Management Systems and Controls Sourcebook, and Statements of Principle for Approved Persons. The changes will affect listed issuers, those who advise them, investors, primary information providers and also affects firms subject to the code in their high level compliance;
  • rules for operators of self-invested personal pensions (SIPPs). FCA received feedback on the practicalities of implementing some of the rules it finalised in 2014 which are due to take effect on 1 September 2016. As a result, it has made minor changes relating to frequency of valuation, the standard asset list and to allow a six-month period for firms to apply any new constant that results from an increase of assets under administration;
  • the Mortgage and Home Finance Conduct of Business Sourcebook (MCOB) and the Training and Competence Sourcebook (TC). These minor changes correct errors in rules implementing the MCD on calculation methods, clarify how firms should consider when MCOB may apply to contracts entered into before MCD implementation and restrict certain transitional provisions in TC that delayed application of certain rules;
  • reflect the CRA. FCA will need to make changes to several parts of the Handbook, but most significantly will make a regulatory process manual and amend the Enforcement Guide and the Unfair Contract Terms Regulatory Guide (UNFCOG). FCA clarifies that the Unfair Terms in Consumer Contracts Regulations (UTCCR) will continue to apply to contracts entered into before 1 October 2015, but FCA needs to make changes to its rules and guidance from 1 October in respect of the CRA's provisions on unfair terms and notices, enforcement of the law on these terms and notices and investigatory powers. The changes will introduce a new definition of consumer and clarify the application of the UTCCR and the CRA. They will necessitate changes to all the conduct of business modules of the Handbook, the Consumer Credit Sourcebook, Supervision Manual and Credit Unions Sourcebook. FCA will rename UNFCOG and will in principle replace all references to the UTCCR with references to the CRA, and explain and clarify its powers under the CRA. FCA will wait for the Competition and Markets Authority's guidance on unfair terms before it decides whether to issue its own; and
  • be consistent with Treasury's measures on small and medium-sized enterprise (SME) finance. FCA thinks it needs to make only limited changes to its rules to reflect the proposed Treasury Regulations that will, among other things, require certain banks to share SME credit information with credit reference agencies and provide information about rejected loan applications to finance platforms. In each case, the information can then reach finance providers.

Consultation closes on 5 August for the first two parts of the consultation and 5 July for the rest. (Source:FCA Consults on Rule Changes)

FCA makes GAP competition rules: FCA has published its policy statement and final rules to address some of its concerns over competition in the guaranteed asset protection (GAP) insurance market. From 1 September, firms distributing add-on GAP insurance in the motor markets:

  • must give customers prescribed information to help them shop around and be more engaged when deciding on their purchase; and
  • will not be able to introduce and sell GAP insurance on the same day.

FCA hopes these measures will both level the field between different distribution channels and see greater levels of customer engagement. It is still consulting on further potential remedies (an opt-out ban and improved information requirements for add-on selling). It also says it is considering value measure options to apply to the wider general insurance market, on which it plans a discussion paper. (Source:FCA Makes GAP Competition Rules)