Worldwide: FIG Bulletin, 21 June 2019

Last Updated: June 27 2019
Article by Hogan Lovells


FCA PS19/17: final rules on buy now pay later products

On 12 June 2019, the Financial Conduct Authority (FCA) published a policy statement on buy now pay later (BNPL) offers (PS19/17). The paper is relevant to firms involved in offering BNPL deals, including retailers and lenders. 

BNPL offers are credit offers with a product feature that gives the consumer a promotional period during which they are not generally required to make repayments. If the consumer does not repay the entire amount within the promotional period, interest will usually be charged on the original credit amount or the unpaid part of that amount from the date of purchase.

In December 2018, the FCA consulted in CP18/43 on a package of remedies relating to BNPL offers, including: 

  • three proposed disclosure remedies, designed to improve the information consumers receive about these offers; and
  • a proposal to prevent firms charging backdated interest on money that the consumer has repaid during the BNPL offer period.

The FCA is going ahead with its proposals, subject to some small technical changes to the definition of BNPL credit. It is also extending the implementation period for the backdating interest remedy, so that firms have enough time to implement this significant change properly. 

Affected firms need to comply with:

  • the disclosure rules and guidance by 12 September 2019; and
  • the rule preventing backdated interest from being charged on repaid amounts by 12 November 2019. Defined benefit pension transfers: FCA announces further action

The FCA has published the results of the data it has received from firms carrying out defined benefit (DB) pension transfers and set out the next steps in its supervisory work related to such transfers. The FCA is concerned that firms are recommending that large numbers of consumers transfer out of their defined benefit pension schemes. The FCA stresses that it has repeatedly warned firms in the past that such transfers are likely to be unsuitable for most clients. Despite this, the FCA states that too much advice it has seen to date is still not of an acceptable standard. In its review the FCA surveyed 3,015 firms and found that between April 2015 and September 2018:

  • 2,426 firms provided advice on transferring their DB pension;
  • 234,951 scheme members received advice on transferring; and
  • of those, 162,047 members had been recommended to transfer out and 72,904 had been recommended not to transfer.

The FCA has already started visiting some firms, starting with those most active in the market. These visits will allow the FCA to complete a full assessment of the firms' approach to DB advice, focusing on key aspects of firms' business models and processes which could give rise to harm. The FCA will also write to all firms where the potential for harm has been identified in the data the firm has supplied. This will set out the FCA's expectations and the actions firms should take.

RBS GRG: final report into treatment of SMEs

The FCA has published the final report on its investigation in to Royal Bank of Scotland's (RBS) treatment of small and medium-sized enterprise (SME) customers transferred to its Global Restructuring Group (GRG). This follows the FCA's update provided in July 2018 on the investigation. In that update, the FCA said that given the serious concerns that were identified in the independent review it should launch a comprehensive and forensic investigation to see if there was any action that could be taken against senior management or RBS. Also, that it was important to recognise that the business of GRG was largely unregulated and the FCA's powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, are very limited. 

The FCA concluded that its powers to discipline for misconduct do not apply and that an action in relation to senior management for lack of fitness and propriety would not have reasonable prospects of success. The FCA also found no evidence that RBS artificially distressed and transferred otherwise viable SME businesses to GRG to profit from their restructuring or insolvency. In its newly published final report, the FCA sets out in detail why it came to the decision it did. This report concludes the FCA's work on GRG. However, the FCA states that it will continue to closely monitor the sector and the complaints process overseen by Sir William Blackburne to ensure that things are put right.

FCA CP19/20: Assessing Adequate Financial Resources 

The FCA has published a consultation, CP19/20, which explains the purpose of, and its approach to, the assessment of adequate financial resources for all FCA solo-regulated firms subject to threshold conditions and/or the Principles for Businesses (PRIN). It also provides further guidance on the meaning of 'adequate financial resources' under these parts of the Handbook. The FCA aims to provide more clarity to the industry on:

  • the role of adequate financial resources in minimising harm;
  • the practices firms can adopt when assessing adequate financial resources; and
  • how the FCA assesses the adequacy of a firm's financial resources.

The deadline for comments on the proposals is 13 September 2019.

Regulatory co-operation between the UK and US: now and in the future

Nausicaa Delfas, FCA Executive Director of International, spoke in a panel appearance at the British American Business Transatlantic Finance Forum in New York. Her focus was on regulatory co-operation between the UK and the US. The FCA has published her speech. Ms Delfas concludes by emphasising that, whatever the outcome of Brexit, ‟you can expect the FCA to continue to champion high standards, international coherence and open markets, and that we will continue to build on our strong relationships with both US and EU regulatorsˮ.

FCA and MAS announce collaboration on cyber security

The Monetary Authority of Singapore (MAS), the BoA and the FCA have announced that they will be working together to strengthen cyber security in their financial sectors. The MAS and the UK financial authorities will commence work towards a Memorandum of Understanding to signify this enhanced collaboration.

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