The FCA recently published its business plan for 2017/18 focusing on a number of cross sector priorities to help it meet its main statutory objectives. There are seven financial market sectors which the FCA considers, including, among others, retail banking and lending, retail investments and pensions and retirement income.
The FCA is intent on embracing innovation, including FinTech and automated financial advice services. It recognises that innovation can improve value and accessibility for consumers and could help vulnerable customers. However, it is conscious of the risks that financial innovation brings and will continually monitor these through Project Innovate as this market sector grows apace; the key, it says, is that regulation keeps up with innovation.
The FCA is also conscious of scams, especially pension scams and those targeting vulnerable customers, and the ways in which innovation can increase the risk of such scams. The FCA hopes to reduce harm to consumers by increasing awareness and by ensuring firms improve procedures to minimise risks to consumers. Keeping up with innovation will be just as important for firms as it is for the FCA.
High Cost Short Term Credit
The high-cost credit market continues to be monitored closely as this tends to affect vulnerable customers more than other market sectors. A full sector analysis is due to take place and the high-cost credit price cap will be reviewed and potentially extended to other high cost forms of credit. Greater protection and accessibility for vulnerable customers is an FCA priority going forward.
The FCA has said that it will carry out an “exploratory” piece of work into the motor finance industry. The FCA refers to possible concerns regarding irresponsible lending and conflicts of interest; however, it is not clear as yet whether the FCA will intervene with the industry. The exploratory work is expected to last for up to two years so for now the industry will simply have to watch this space.
Other key consumer initiatives
Also under the retail lending umbrella, the FCA will look at the following:
- debt management;
- credit cards (especially those with persistent debt); and
- mortgages (especially interest only mortgages and those in long-term arrears).
This is with a view to ensuring consumers are treated fairly, have access to financial advice and information to make informed decisions and to give them more control over their finances. The FCA has also noted a trend that firms tend to pay existing customers less attention than potential new customers and it is seeking to address this.
Similarly in retail banking, the FCA is encouraging a culture change amongst firms in order to improve treatment of customers, embrace innovation, whilst maintaining integrity and ensuring all consumers have appropriate access and effective choice to improve and maintain confidence in the market.
Of course, underlying the entirety of the business plan are the FCA’s ongoing objectives to protect consumers, protect integrity and promote competition.
The FCA has also published its “Sector Views” paper which will be produced once a year and contains collective intelligence gathered over the year to show how each sector is performing.
In many areas, the FCA is continuing with previous initiatives (such as Project Innovate) or is beginning new sector-specific projects or assessments in order to understand what, if any, action needs to be taken to achieve its objectives. Firms should be aware of what action is being taken in their specific sector as this could help shape their own business plan and approach for the year ahead.
For further information please contact Geoffrey May