Tag: Financial Conduct Authority

Government consults on plan to protect future of cash

People will be able to get cashback from shops without needing to buy anything under new proposals to protect the UK’s cash system announced today (15 October 2020).

  • government sets out plans to protect the UK’s future cash system and ensure people have easy access to cash
  • proposals would see cashback offered at shops without consumers having to make a purchase
  • the Financial Conduct Authority would also be given overall responsibility for the UK’s retail cash system to protect consumers and SMEs

Under the government proposals, cashback without a purchase could be widely available from retailers of all sizes in local communities across the UK.

Although cash use is declining, with people increasingly choose cards, mobile and e-wallets to make payments, it remains crucial for groups across the UK – including the elderly and vulnerable. Many find that cash is more accessible than digital payments methods or that it helps them to budget and manage their finances.

These proposals, which also include making the Financial Conduct Authority (FCA) responsible for ensuring the cash system benefits consumers and SMEs, are the latest step in the Government’s effort to support the millions of people and business who rely on cash day to day.

John Glen, Economic Secretary to the Treasury, said: “We know that cash is still really important for consumers and businesses – that’s why we promised to legislate to protect access for everyone who needs it.

“We want to harness the same creative thinking that has driven innovation in digital payments to maintain the UK’s cash system and make sure people can easily access cash in their local area.”

To ensure no one is left behind by the transition to digital payments, the government announced at the March 2020 Budget that it would legislate to protect access to cash and ensure that the UK’s cash infrastructure is sustainable in the long-term.

Today it is seeking views on its approach to this legislation from consumer organisations, businesses, financial institutions, providers of ATM and payment services and others through a call for evidence.

One proposal under consideration is cashback without a purchase, which could help to keep cash widely available by reducing cash infrastructure costs.

When local shops accept and dispense cash, it is recycled through local communities and there is less need to transport and distribute notes and coins via cash centres, which reduces the associated costs.

Last year, consumers received £3.8 billion of cashback when paying for items at a till – making it the second most used method for withdrawing cash in the UK behind ATMs.

Current EU law makes it difficult for businesses to offer cashback when people are not paying for goods and this has been a barrier to widespread adoption. The Government is now considering scrapping these rules once the transition period ends on 31 December 2020.

The government is also considering giving the FCA overall responsibility for maintaining a well-functioning retail cash system given its existing regulatory role and consumer protection objective.

At present, The Bank of England, Financial Conduct Authority, Payment Systems Regulator, and HM Treasury each have specific roles and responsibilities for oversight of the cash system. Close coordination between these authorities has been highly effective, particularly in managing risks to cash through Covid-19, but there may be significant benefits to giving a single authority overall responsibility for setting requirements to meet the cash needs of consumers and SMEs.

The call for evidence opens today (15 October 2020) and will run for six weeks. It will seek views on how to ensure industry continues to offer ways to withdraw and deposit cash, how to improve cashback, what affects cash acceptance, and where regulatory responsibility should sit.

More detail on the government’s proposals is available in the Access to Cash Call for Evidence document.

The Call for evidence will close on 25 November 2020.

New debt letters rules will support people in problem debt

New rules for debt letters will help people to better understand and manage their debts, reducing distress and supporting mental health

The letters borrowers receive from their lenders when they are seriously behind on repayments will be easier to understand and less intimidating as a result of new rules proposed by the Treasury today.

Default Notices are designed to give people who are falling behind on their debts fair warning before lenders take further action, but much of the formatting and content has not been updated in nearly 40 years.

Research from the Money and Mental Health Policy Institute and debt charities has shown that large amounts of capitalised text and legal terms can make the information contained in the letter hard to understand, which has the unintended consequence of confusing and distressing people. This has a negative impact on people’s mental health as well as their ability to effectively manage their debt.

As part of the government’s effort to support people in problem debt, it will legislate to change the language and presentation of information in debt letters. T

The new rules will make debt letters less threatening by restricting the amount of information that must be made prominent and requiring lenders to use bold or underlined text rather than capital letters. Lenders will also now be able to replace legal terms with more widely understood words and letters will clearly signpost people to the best sources of free debt advice.

John Glen, Economic Secretary to the Treasury, said: Being behind on your credit repayments can be a really distressing experience which is made worse by a confusing and intimidating letter from your lender.

“As part of our effort to help to people struggling with their finances, it’s right that we look again at the legislation around these letters. These new rules will help to take the fear out of finance by ensuring that letters are easier to understand, less threatening, and empower people to take control of their finances.

“Some vital work has been done by charities, the industry and the Money and Mental Health Policy Institute and I am grateful for their support in tackling this important issue.”

Martin Lewis, Founder and Chair of the Money and Mental Health Policy Institute charity, said: It’s no exaggeration to say that this change could save lives. Over 100,000 people in England alone attempt to take their lives each year due to debts, and four times that consider it.

“So we’re delighted the government has agreed to back this element of our campaign and change the default demand rules. The last thing people struggling with debt need is a bunch of thuggish letters dropping through the letterbox, in language they can’t understand, written in shouty capitals alongside threats of court action.

“And the timing is crucial, with millions of people facing debt and distress due to the pandemic, the sooner we end these out-of-date laws which force lenders to send intimidating letters the better. Today’s changes will make the most distressing debt letters much less intimidating, and crucially will also easily and calmly point people in serious debt to get the free, non-profit, debt advice they need.”

Eric Leenders, Managing Director, Personal Finance at UK Finance said: “The banking and finance industry understands the impact that debt can have on a customer’s wellbeing and has been working closely with government to help support customers, especially those in vulnerable circumstances.

“Lenders have to send Default Notices and these important changes announced today will ensure that customers receive more appropriate and supportive communications.”

These new rules are the latest in a wide package of support put in place to help people struggling with their finances, especially through coronavirus.

This includes £38 million of extra funding to debt advice providers this year and working with lenders and financial regulators to give people access to payment holidays on their mortgages and a range of consumer credit including credit cards, personal loans, motor finance and payday loans.

The government has also given the Financial Conduct Authority strong powers to protect consumers who borrow money, including cracking down on payday lenders, capping the cost of rent-to-own, and taking action on overdraft fees.

The new rules will be delivered through secondary legislation and are expected to come into force in December 2020. All lenders will then be required to make the changes within six months.

If you are experiencing debt problems, don’t ignore it and hope it will go away – it won’t; it will get worse. Seek help NOW.

Granton Information Centre can help. Telephone 0131 551 2459 or 552 0458 or email info@gic.org.uk

Support for customers who are struggling to pay their mortgage due to coronavirus

The Financial Conduct Authority (FCA) has today announced proposals which will continue support for customers who are struggling to pay their mortgage due to coronavirus (Covid-19).

The proposal outlines the options firms will be required to provide customers coming to an end of a payment holiday, as well as those who are yet to request one.

For customers yet to request a payment holiday, the time to apply for one would be extended until 31 October 2020.

For those who are still experiencing temporary payment difficulties due to coronavirus, firms should continue to offer support, which could include extending a payment holiday by a further three months.

Christopher Woolard, Interim Chief Executive at the FCA, said: “Our expectations are clear – anyone who continues to need help should get help from their lender.

“We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a payment holiday, will continue to be able to apply until 31 October.’

If the proposals are confirmed, the FCA would expect:

  • Customers who can afford to return to full repayment should do so in their best interests – at the end of a payment holiday, firms should contact their customers to find out if they can resume payments and if so, agree a plan on how the missed payments will be repaid.
  • Anyone who continues to need help gets help – lenders should continue to support customers who have already had a payment holiday where they need further help. Firms are expected to engage with their customers and find out what they can re-pay and, for those who remain in temporary financial difficulty, offer further support. As part of this firms should consider a further three-month payment holiday.
  • Extending the time the scheme is available to people who may be impacted at a later date – customers that have not yet had a payment holiday and experiencing financial difficulty will be able to request one until 31 October 2020.
  • Keeping a roof over people’s head during a public health crisis – the current ban on repossessions of homes will be continued to 31 October 2020. This will ensure people are able to comply with the government’s policy to self-isolate if they need to.
  • Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.

This guidance would not prevent firms from providing more favourable forms of assistance to the customer, such as reducing or waiving interest.

Firms should consider signposting customers towards sources of debt advice. Debt advice may be helpful for customers coming to the end of payment holidays and may be particularly useful for consumers with pre-existing payment shortfalls or who are likely to be in longer-term financial difficulty.

When implementing this guidance, firms should be particularly aware of the needs of their vulnerable customers and consider how they engage with them. For customers who aren’t able to use online services (such as digital channels), firms should make it easy for customers to access alternatives.

The FCA welcomes comments on these proposals until 5pm on Tuesday 26 May and expects to finalise the guidance shortly afterwards.

This guidance only applies to mortgages. It does not apply to consumer credit products which are covered by separate guidance which will be updated in due course.

Gareth Shaw, Head of Money at Which?, said: “The extension of these measures will bring relief to people who would otherwise struggle financially during the challenging months ahead.

“Mortgage lenders should make the process as straightforward as possible, ensuring people can easily access the support they need.

“Consumers should also consider their options carefully as a mortgage payment holiday will likely lead to increased payments in the future – so it is likely to be in their interest to continue making payments as normal if that is feasible.”

FCA confirms temporary financial relief for customers impacted by coronavirus

The Financial Conduct Authority (FCA) has today confirmed a package of targeted temporary measures to help people with some of the most commonly used consumer credit products. 

Following a short consultation the FCA will be going ahead with the proposals outlined last week, which will give firms the flexibility under our rules to provide temporary financial relief to those facing payment difficulties during the coronavirus (Covid-19) pandemic.

Christopher Woolard, interim Chief Executive at the FCA, said: ‘We know many people are suffering financial pressures brought on as a result of the coronavirus pandemic.

“The measures we’ve announced are designed to provide people affected with short-term financial support through what could be a very difficult time. The changes will provide support for consumers with credit cards, loans and overdrafts, facing temporary financial difficulties because of the pandemic.

‘Customers should think carefully before making use of these measures and only do so if they need immediate help. Where they can still afford to make payments, they should continue to do so.

‘We know there is still more work to be done, and we will be announcing further measures to support consumers in other parts of the credit market in the future, including in the motor finance sector next week.’

The measures include firms being expected to:

  • offer a temporary payment freeze on loans and credit cards for up to three months, for consumers negatively impacted by coronavirus
  • allow customers who are negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account, up to £500 charged at zero interest for three months
  • make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft pricing changes came into force
  • ensure consumers using any of these temporary payment freeze measures will not have their credit file affected

The rule changes will be in force from today and the full range of measures will apply by Tuesday 14 April 2020.

This is to allow firms time to ensure they have the appropriate level of resources available to handle customer requests. All firms will be ready to receive customer requests by 14 April, although some firms including the major banks and building societies, will be adopting the changes today.

Consumers should check firm websites or social media posts for more information, and where possible use online services to request assistance.

This will reduce the pressure on firm call centres who are experiencing a high demand in calls due to the current pandemic situation. If consumers need to get in touch by telephone please be patient and, if you can, wait until after the Easter weekend, even if your lender is offering help sooner than the 14 April 2020.

In response to the consultation, the guidance now includes clarification on which products are in scope. In particular, the FCA are confirming that the following products are covered: guarantor loans, logbook loans, home collected credit, a loan issued by Community Development Finance Institution and some loans issued by credit unions, but only where these are regulated. The guidance also applies to firms which have acquired such loans.

These measures won’t replace normal forbearance rules where these would be more suitable for a consumer in serious and immediate financial difficulty. Consumers in financial difficulty should contact the Money Advice Service (MAS) for further guidance.

The FCA will keep this guidance under review.

Which? urges clarity on financial help for bank customers

Which? is calling on the financial regulator to urgently provide greater clarity on temporary measures to help people struggling financially because of coronavirus, as new research reveals the huge toll the outbreak is expected to take on people’s finances.

A survey by the consumer champion carried out between 20-22 March, just before the government asked people to stay at home to stop the spread of coronavirus, highlights that significant numbers of people are expecting to struggle with their finances over the next year.

With the Financial Conduct Authority (FCA) set to introduce temporary measures tomorrow designed to help consumers falling into financial difficulty as a result of the crisis, Which? can reveal people of all levels of working status are now expecting their household finances to worsen over the next 12 months, with those who work part time reporting the highest level of concern.

Taking the proportion of people expecting their financial situation to get better and subtracting the proportion who expects it to get worse, confidence among part-time workers was at -56 percentage points. The figure stands at -36 for those in full time work.

Of those that are retired, confidence in the future of their household finances stood at -49 for those on a state pension only and -45 for those with a private pension.

The research also shows that consumer confidence in the economy has plummeted. When asked whether the economy would be better or worse in 12 months’ time, confidence fell from -17 in February to -78 in March.

Worryingly, the financial impact of coronavirus follows a period in which large numbers of people were already reporting having cut back on spending, with 39 per cent of consumers in 2019 reporting that they reduced spending on essential items or took money from savings to cover their spending.

This indicates that a significant number of people may have already been close to the point of relying on credit to help manage their personal finances, and the impact of coronavirus could have pushed them to the point where they now need to depend on existing credit cards, loans or overdrafts.

Measures proposed by the FCA last week, due to come into force on Thursday, are designed to provide a temporary solution for consumers who until now have been financially stable. These include a temporary payment freeze on loans and credit cards as well as zero interest on existing overdrafts up to £500, with both put in place for three months.

However, while Which? is generally supportive of the plans, reassurance is needed that the measures can be consistently applied for customers across all banks, and that customers who take up these options will be fully aware of any longer term implications of using them.

This requires the FCA to be as explicit as possible about precisely when the payment holiday period starts – whether it is from the proposed launch date of 9 April, or from the moment the consumer requests support at any point during those three months.

There also needs to be a clear, industry-wide exit strategy for the temporary measures, which must ensure that customers do not end up in unnecessary financial hardship.

There is particular concern about how consumers will be moved off of their £500 interest free overdrafts after three months.

The consumer champion says it is vital that banks do not immediately place consumers back to their original arranged overdraft and rates at the end of any holiday period, and the FCA should consider  “easing off” interest-free overdraft arrangements in a way that does not affect credit scores.

The consumer champion believes that greater transparency will make it easier for people to access services online and make it clear that only those in the most urgent need should seek to directly contact their financial institutions. This should reduce the burden on call centres, providing a greater chance of consumers getting the help they need in good time.

Gareth Shaw, Head of Money at Which?, said: “The impact of the coronavirus outbreak is going to cause a sharp shock to huge numbers of people across the country, and many who were previously in good financial health will now require help from their banks to see them through the coming months.

“While the FCA has taken positive steps to provide assistance, there needs to be urgent clarity so that banks can apply this support consistently for everybody who is eligible, and customers can decide whether these measures represent the best option available to them.”

Credit Card firms told to review their approach to persistent debt customers

The Financial Conduct Authority (FCA) has written to credit card firms telling them to review their approach to borrowers who are stuck in persistent debt, where they are paying more in interest, fees and charges than they are paying of their balance.

The FCA require firms to help people who have been caught in a cycle of persistent debt for three years, by proposing and agreeing plans with customers to resolve the situation.

Ahead of firms issuing letters setting out proposals to customers who have been in persistent debt for three years, and to make sure the firms’ approaches to the rules are working in the best interest of consumers, the FCA is outlining a number of areas firms need to review and ensure their approach is in line with expectations.

This includes:

  • a concern that customers may not respond to letters from their credit card provider, advising that they have been in persistent debt for three years. Firms must encourage customers to speak with them to discuss potential repayment arrangements. If customers can’t afford the options proposed by the firm, they must be treated with forbearance and due consideration, for example, by reducing, waiving or cancelling any interest or charges.
  • a concern that firms may cancel or suspend credit cards for everyone in persistent debt, including those willing to engage and come to an agreement. In these circumstances, firms are not allowed to suspend a credit card without having an objectively justifiable reason.

Jonathan Davidson, Executive Director of Supervision for Retail and Authorisations at the FCA, said: ‘Under our rules, firms must help customers to reduce the level of debt they have on their credit card more quickly.

“If a customer cannot afford the firm’s proposals for how to do this, the firm must offer forbearance, potentially including reducing, waiving or cancelling any interest, fees or charges.

‘My advice to consumers is don’t bury your head in the sand. If you can’t afford to meet the repayment schedule that the credit card firm is suggesting, don’t be afraid to tell them. If we find firms are not offering their customers the appropriate level of help, we will not hesitate to take action.

‘If the firms do this right, we estimate that this could save customers up to £1.3bn a year in lower interest charges.’

Gareth Shaw, Head of Money, Which?, said: “Millions of people across the UK are trapped in persistent debt, so it’s right that the regulator is taking steps to encourage banks to help their customers break this cycle.

“It’s crucial that the industry properly engages with all those identified as needing help and offers manageable plans that include reductions, waivers and even the cancellation of charges and interest.

“The effects of living in persistent debt can be devastating, so it’s important that those who are likely to be impacted by the new rules take notice of how these new measures could affect their finances.”

Consumers concerned about persistent credit card debt and/or multiple credit cards they are dealing with, can get free debt advice from a range of support organisations including Granton Information Centre and Money Advice Service.

Insurance: customers paying the price for loyalty … or laziness?

Savings to be made by shopping around

The Financial Conduct Authority (FCA) has published the interim report of its market study into the pricing of home and motor insurance. The FCA found that competition is not working well for all consumers in these markets. It sets out concerns about how pricing in these markets leads to consumers who do not switch or negotiate with their provider paying high prices for their insurance.

Continue reading Insurance: customers paying the price for loyalty … or laziness?

PPI deadline is looming: don’t be ‘too busy’ to claim, says FCA

“I’m busy is the new I’m fine” – consumers in Edinburgh given help to prioritise, with two months to go to the PPI deadline

  • 70% people in Edinburgh are likely to reference how busy they are when asked ‘How are you?’ 
  • FCA teams up with productivity expert, Clare Evans to help people take a step back and tackle their task lists – such as claiming for PPI
  • FCA releases latest figures on PPI

With two months to go to the PPI deadline (29th August 2019), the Financial Conduct Authority (FCA) is releasing new research and tips to help urge consumers to make a decision and prioritise action, so they can meet deadlines and free themselves from being ‘too busy’.  Continue reading PPI deadline is looming: don’t be ‘too busy’ to claim, says FCA