Consumer Credit & Insurance Compliance Newsletter February 2025
Welcome to the latest edition of our compliance newsletter for Consumer Credit & Insurance. Since the turn of the year, there has been a lot of news coverage of Labour’s urge to allow growth in the economy, and they clearly have sights set on the FCA as part of achieving this. Deregulation will sound, on the face of it, like music to the ears of most firms, but lets be clear, this will not stop changes to regulation or the FCA expectations that firms must deliver good outcomes to customers and be able to demonstrate this. 2025 will be a year full of progress and regulatory initiatives as the FCA increase the data reporting requirements in the consumer credit sector.
What’s the latest?
In the motor finance sector, we await with bated breath the supreme court case relating to commission disclosure which rocked the industry in October 2024 following the court of appeal ruling. There are mixed reports on the likely outcome of this; however what is clear in my view is that commission disclosure is here to stay. That said, a mass redress scheme could significantly misalign with the government’s desire to grow the economy and I would not be surprised to see a significant reduction in the levels of any payouts as a result of the ruling.
In the Insurance sector, the FCA continue to conduct fair value work in the premium finance sector as there is an underlying concern that this type of finance is attracting higher costs to consumers than what the risk levels of the product suggest. Under the Consumer Duty lens, I am sure there will be concerns raised around the influence intermediaries can have over the pricing of the credit, which would suggest these products are co-manufactured and subject to the same commission rule which has set alight the motor finance debacle.
As always, if you have any questions about the content in this newsletter, then please contact us here and we will be happy to help with your enquiry.
sign up to our consumer credit and insurance updates
Portfolio Letter - Claims Management Companies
On 30th January 2025, the FCA issued a Portfolio letter to the CEOs of all Claims Management Companies (CMCs) outlining the new strategy for supervising firm.
As a reminder, the transfer of regulation of CMCs from the Ministry of Justice (MoJ) to the FCA occurred in April 2019 and, since that date, the FCA have observed a steady decrease in the number of CMCs. And interestingly, ‘lead generators’ now account for more than half of the industry.
The FCA’s view is that CMCs are trusted providers of high-quality, good-value services that help people pursue legitimate claims for redress and well-run CMCs benefit the public interest.
Over the past 2 years, the FCA have carried out some detailed work which has informed its future supervisory work programme. The work has shown that standards are improving, but there are areas where firms are not meeting expectations.
The purpose of the Portfolio letter is to set out the priority areas of focus for the next 2 years.
To read the full article, click here.
Portfolio Letter - Mortgage Intermediaries
On 30th January 2025, the FCA issued a Portfolio letter to the CEOs of Mortgage Intermediaries outlining the new strategy for supervising firms.
Mortgage intermediaries play an important role in matching consumers with home loans. The FCA want to see a thriving and innovative mortgage market where customers receive tailored advice, are paired with suitable products, and high standards are maintained in line with the Consumer Duty.
Firms are expected to discuss this letter with their respective leadership teams and ensure that the areas of focus are being addressed under existing Consumer Duty work programmes, or if not, how these risks may need to be addressed going forwards.
We highlight the main priorities in our article here.
The dust is far from settling on the motor finance fiasco
Shockwaves flew through the car finance industry last month when the Court of Appeal ruling on secret commissions being received by credit brokers, expanded the scope of the commission disclosure issues. It now moves beyond discretionary commission into a wider assertion that all credit brokers hold a fiduciary and disinterested duty toward their customers.
Without getting into the finer details of the impact of this, the ruling which has been granted an appeal by the supreme court has called into question whether the fact that commission arrangements had not been or had only partially been disclosed, makes the acceptance of such commission illegal under legislation where the borrower may not be sophisticated enough to understand that brokers may have a commercial arrangement with the lenders for the introduction of customers to their lending product.
Click here to read the full article.
MS24/2.1 Premium Finance Market Study
In October 2024, the FCA published a proposed Terms of Reference (ToR) for a new market study into the provision of premium finance for motor and home insurance policies. The scope of this market study is premium finance products sold to UK consumers, in relation to motor and home insurance policies. The ToR sets out why the FCA are conducting the market study, its scope, the key issues that will be explored, the potential outcomes that could arise from the study and the next steps.
Click here to read the full article.
The FCA cracks down on illegal finfluencers…again!
At the end of October 2024, the FCA interviewed twenty finfluencers under caution. So why is the FCA interviewing them under caution? Since the action taken in May 2024, where charges were brought against nine individuals in relation to an unauthorised foreign exchange trading scheme promoted on their social media accounts, the FCA are launching targeted action against specific finfluencers who they believe may be touting financial services products illegally on their social media accounts.
Click here to read the full article.
Finally
As regulatory consultants, Cosegic takes a lot of firms through the FCA authorisation process. Having successfully negotiated over this hurdle, a very common question from the client is “so what do we need to do now?”
You can download our free guide which provides some of the basics that firms must do in order to maintain a healthy relationship with the FCA.
Yours,
Ben
