Guidance for firms on the fair treatment of vulnerable customers
The FCA are currently consulting on Guidance to give firms involved in the supply of retail products or services clarity on how they should treat vulnerable customers fairly.
The FCA’s Financial Lives survey found that 50% of adults show characteristics of potential vulnerability and thus may be more susceptible to experiencing harm. This is a significant concern and protecting vulnerable consumers is a key priority for the FCA. They want to see firms embedding the fair treatment of vulnerable customers into their culture.
The FCA’s research and engagement has shown that firms are making good progress. Despite this, there is room for improvement. The FCA have also found that some firms are failing to think about vulnerability or to provide a fair service to vulnerable consumers. The FCA want to see all firms focused on ensuring vulnerable consumers have good outcomes, and greater consistency across sectors.
Rather than prescribing a checklist of required actions, the draft Guidance sets out ways in which firms can comply with the Principles for Businesses. Precisely what the Guidance means for individual firms will depend on the specific context of the firm, including, among other things, the firm’s size and its customers’ characteristics.
The FCA are consulting on the Guidance in two stages and are asking for comments on this first stage of the consultation by 4 October 2019.
Update on the FCA’s work on pensions
On 30 July, the FCA published a package of pensions publications designed to help consumers get better value from their pension.
The FCA are proposing a ban on contingent charging for pension transfer advice. This will help protect customers from the conflicts of interest when a financial adviser only gets paid if a transfer goes ahead. The FCA are also looking to address the conflicts of interest when a financial adviser advising on a pension transfer stands to receive ongoing fees. The FCA have proposed that advisers will be required to demonstrate why any scheme they recommend is more suitable than the consumer’s workplace pension scheme. The FCA’s consultation will run until 30 October 2019.
The FCA also published an update on their work on non-workplace pensions. They found that many consumers are not engaged in pension decisions or aware of charges they are paying. Products and charges are often too complicated to compare – leading to a lack of price competition. The FCA have outlined a package of potential measures to protect consumers, and want feedback on these by 8 October 2019 with the aim of consulting on new rules in early 2020.
The FCA have also published the FCA’s final rules and guidance on the final tranche of remedies from the Retirement Outcomes Review, including the introduction of investment pathways.
Alternatives to High-Cost Credit
As part of the FCA’s wider high cost credit review, in July they published a report setting out actions and recommendations to improve the availability and awareness of alternatives to high-cost credit.
Senior Managers and Certification Regime
On 26 July the FCA published final rules on the extension of the Senior Managers and Certification Regime (SM&CR) to FCA solo-regulated firms, including claims management companies.
The SM&CR is being extended to FCA solo-regulated firms on 9 December 2019 to help set a new standard of personal conduct for people working in financial services.
In January 2019, in CP 19/4 the FCA consulted on changes to optimise the SM&CR. The Policy Statement summarises the feedback received to Consultation Paper 19/4, the response to the feedback and sets out the final rules. The rules are relevant to all SM&CR firms, including CMCs. The FCA implemented the proposed changes to the SM&CR as consulted on, which included:
For more information on how SMCR affects solo-regulated firms, please visit the FCA’s website.
FCA agrees plan for a phased implementation of Strong Customer Authentication
From 14 September 2019, new European Union (EU) rules will start to apply that impact the way in which banks or payment services providers verify their customers identity and validate specific payment instructions. The new rules, called Strong Customer Authentication (SCA), are intended to enhance the security of payments and limit fraud during this authentication process.
The FCA has agreed an 18-month plan to implement SCA with the e-commerce industry of card issuers, payments firm and online retailers. The plan reflects the recent opinion of the European Banking Authority (EBA) which set out that more time was needed to implement SCA given the complexity of the requirements, a lack of preparedness and the potential for a significant impact on consumers.