Compliance Roundup - 27 November 2024
27 November 2024
In this issue:All-party parliamentary groups releases damning report on the FCA A recent report by a group of MPs and peers has heavily criticised the UK's Financial Conduct Authority (FCA), labelling it as "incompetent" and calling for significant reforms. The report, based on testimony from 175 respondents over two and a half years, highlights the FCA's failure to prevent wrongdoing in financial services, despite numerous scandals involving mistreatment of consumers and small businesses. The FCA has been accused of acting too slowly or not at all in response to these issues, with its leaders described as "opaque and unaccountable." The report, produced by the All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services, includes testimonies from whistleblowers, scam victims, and current and former FCA employees. The APPG reports that these testimonies paint a picture of a regulator with a "defective culture" where errors and inaction are common. It also states that employees who raised serious concerns were reportedly bullied, sidelined, or even managed out, indicating a toxic work environment, while the FCA's transformation program is also deemed ineffective. In response, the FCA has rejected the report's characterisation, asserting that it has learned from past issues and transformed to better serve consumers and the market. However, the report calls for several reforms, including a no-tolerance policy for lack of integrity, the establishment of a supervisory council to review the FCA's effectiveness, changes to its funding, and an overhaul of its senior leadership appointment process. APPG - Call for Evidence Report Financial Ombudsman confirms new fee structure for professional representatives in letter to FCA ChairThe Financial Ombudsman Service (FOS) has confirmed its decision to introduce a fee for Claims Management Companies (CMCs) bringing complaints to the FOS. This decision follows a consultation, which saw significant engagement from CMCs, consumer groups, and respondent firms. The majority supported the proposal to introduce a charge to make the FOS's fee arrangement fairer by sharing costs across respondent firms and CMCs. However, there was disagreement on the fee level, with respondent firms advocating for the full £650 case fee and CMCs preferring no charge or a minimal fee The FOS Board has carefully considered the feedback and legal advice, deciding to proceed with the fee introduction. The proposed charging mechanism ensures that if the FOS does not rule in favour of the complainant, the current £650 case fee payable by the respondent firm will be offset. This aims to prevent the FOS from having a vested financial interest in the complaint outcome. The FOS also emphasised the need to support vulnerable consumers and ensure there is no disincentive to bring cases directly to the service. The FOS has noted that it now awaits legislation which will enable this change to move forward. Financial Ombudsman Chair writes to FCA Chair to confirm board decision on charging professional representatives – Financial Ombudsman service. FCA urges firms to enhance bereavement handling efficiencyThe Financial Conduct Authority (FCA) has urged firms to enhance their bereavement handling processes, emphasising the need for quicker claim settlements and better measurement of customer experiences. A multi-firm review of life insurers revealed that while some life insurers provide good support to bereaved customers, many still fall short in terms of timely service. For CSA members who may operate a claims process, this highlights the critical need for efficient and compassionate handling of bereavement cases. Ensuring robust customer support can significantly impact customer satisfaction and compliance with regulatory expectations. The FCA's focus on the Consumer Duty, underscores the importance of placing consumers at the heart of business practices and delivering positive outcomes during challenging times. FCA calls for firms to improve bereavement handling times and shares best practice | FCA FCA proposes extended deadlines for motor finance complaintsThe Financial Conduct Authority (FCA) has proposed extending the time firms have to handle complaints related to motor finance commission. This extension aims to give firms more time to respond to complaints involving non-discretionary commission arrangements. The FCA's proposal follows a Court of Appeal judgment that highlighted the need for consumers to be fully informed about commission payments. The proposed extension would allow firms until either 31 May 2025 (reflecting how long it may take to hear whether the Supreme Court has granted permission to appeal) or 4 December 2025 (to align with the current rules for motor finance firms dealing with discretionary commission complaints) to provide final responses to complaints. The FCA is also consulting on giving consumers more time to refer motor finance commission complaints not involving a DCA to the Financial Ombudsman Service. FCA proposes to extend the time firms have to handle complaints relating to motor finance commission | FCA CP24/22: Further temporary changes to handling rules for motor finance complaints | FCA Financial Services Compensation Scheme Chief Executives releases outlook statement
Martyn Beauchamp, Interim CEO of FSCS, reports progress in the latest edition of Outlook, highlighting a strategic shift to in-house claims management to improve customer experience and productivity. With PwC appointed as the new claims partner, FSCS has seen an 18% increase in claims decisions and maintained high customer satisfaction. The complexity of claims has doubled, necessitating more specialised resources and deeper investigations. For 2024/25, FSCS has set the levy at £265 million, with expected compensation payments of £372 million. Substantial recoveries from failed firms have helped stabilise the levy. The initial levy forecast for 2025/26 is £394 million, reflecting reduced surplus balances. Despite these changes, compensation costs remain steady, underscoring FSCS's commitment to efficient claims assessment and maximising recoveries. Interim Chief Executive’s statement | FSCS Civil Justice Council (CJC) publishes phase two report on pre-action protocols The Civil Justice Council (CJC) has published its Phase Two Report on Pre-Action Protocols, which is the second part of a comprehensive review aimed at improving the civil justice system in the UK. The report provides detailed recommendations for specific subject-area protocols, including a chapter focusing on the pre-action protocol for debt claims. The CJC emphasises the importance of pre-action protocols in facilitating fair and proportionate dispute resolution, aiming to reduce the number of cases that require judicial adjudication. Recommendations relating to the pre-action protocol for debt claims include introducing more prescription in terms of creditor obligations, such as more disclosure around debt origination, and changing the language from ‘creditor’ and ‘debtor’ to ‘claimant’ and ‘defendant’. Civil Justice Council (CJC) publishes Phase Two Report on Pre-Action Protocols – Civil Court Users Association ConsultationsThe following are consultation papers that are currently open for responses and may be of relevance to some or all CSA members. Also listed are papers that have recently closed to which the CSA has responded. If an industry response is warranted and you want to contribute, please contact CSA head of policy, Daniel Spenceley (daniel.spenceley@csa-uk.com). Regulation of Buy-Now, Pay-Later: consultation on draft legislation (October 2024) - GOV.UK
Closing date: 29th November2024 Call for Input Modernising the Redress System
Closing date 30th January 2025
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