YOUR COMPLIANCE MATTERS – FCA expectations during the cost of living crisis

YOUR COMPLIANCE MATTERS – FCA expectations during the cost of living crisis

Relevance:           All firms.

 

Action required: Ensure you and your staff are aware of FCA expectations and the options for dealing with clients in financial difficulty

 

 

The FCA issued yet another, “Dear CEO letter,” on 29 September 2022, relating to the issues arising from the cost of living crisis.

 

We would suggest that you distribute a copy of the letter to your own staff and ask them to confirm that they have read and understood the letter and have recorded the activity in their CPD log.

 

A link to the letter can be found here Dear CEO letter: Our expectations on cost of living and insurance (fca.org.uk)

 

Following previous guidance published during the Covid pandemic, the regulator is reinforcing the need to ensure that you take all necessary steps to address issues arising from financial vulnerability amongst your clients (both consumer and commercial).

 

Expected Actions

 

Customers with Vulnerable Characteristics and Customers in Financial Difficulty

 

In respect of vulnerable customers, the FCA has issued guidance on this issue and we would recommend that you guide staff towards the vulnerability guidance found here: FG21/1: Guidance for firms on the fair treatment of vulnerable customers (fca.org.uk)

 

For customers in financial difficulty, there are a number of issues that were previously raised in the Covid context which may now be equally applicable. These include:

 

-      Re-assessing the risk profile of customers.

 

-      Identifying more suitable products for customers.

 

-      Working with customers to avoid cancelling necessary covers.

 

-      Waiving cancellation and MTA fees, when applicable.

 

-      For premium finance, discussing repayment problems with the finance provider in order to identify the most effective solution for the customer (amending the way the loan is repaid, reducing payments, waiving interest, allowing payment holidays, etc).

 

Please be aware that premium finance lenders have received similar guidance from the FCA with regard to forbearance for customers in financial difficulty.

 

 

Under Insurance and Uninsured

 

There is great concern to make sure that customers do not buy the cheapest possible cover, which may not be suitable for them. As professional advisors, we are sure that you would not allow this to happen, but the FCA is expecting you to provide customers with guidance to ensure that they get covers that meet their needs.

 

Premium Finance

 

As you already have an obligation under the Product Governance Rules to ensure that premium finance provides fair value, this is just a reminder to ensure that finance is the best option for any given customer, given the cost of the finance versus the freedom to pay over a period of time.

 

Service levels

 

The FCA seems to be under the impression that firms may be looking to cut staff in order to reduce overheads. Be reminded that it is your obligation to ensure that all customers receive an appropriate level of service (and this is one of the focus points of the new consumer duty).

 

Claims

 

Get them paid without undue delay.

 

Multi-Occupancy Buildings Insurance

 

We have already provided a separate Newsletter on this topic but suffice it to say that the FCA is concerned about leaseholders and their financial position as it is about your own policyholders.

 

Additional Actions for You

 

As recommended above, we do believe that all staff should be provided with a copy of the letter from the FCA. At the same time, you need to provide them with guidance as to the actions that they should take in any given set of circumstances (any freedom they may have to waive cancellation or mid-term charges for vulnerable customers, referral processes to you, as necessary, etc).

 

Conclusion

 

Nothing really new here apart from encouragement from the regulator to look after your customers as well as you can.