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FCA announces reviews of business models, motor finance and mortgage arrears

The Financial Conduct Authority (FCA) has revealed a set of new reviews which include looking at customers with long-term mortgage arrears, “transparency” in the car finance industry and retail banks’ business models.

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The FCA’s business plan, published this week, also shows it will explore interest-only mortgages and monitor the debt management sector to ensure that it’s “fit for purpose”.


As cyber attacks remain a major threat to financial services firms, the regulator will roll out a further ScamSmart campaign, which warns of investment fraud. The regulator will also establish cyber co-ordination groups across five sectors to share experiences and foster innovation.


On retail banking and lending, the FCA will work with the Prudential Regulation Authority, the Bank of England, the Treasury and larger banks to support the implementation of ring-fencing investment and retail banking. This will coincide with a strategic review of retail banking business models and a communication campaign to raise awareness and understanding of the PPI complaints deadline.


It will also undertake an “exploratory piece of work” on the motor finance industry.


The FCA said it wants to ensure remuneration policies and practices promote the link between risk and individual reward, discourage excessive risk taking and short-termism, and encourage sound and effective risk management. It said this will support positive behaviours and a strong and appropriate culture within firms.


As part of its new ‘mission’, the FCA said it will focus on vulnerable customers, but added that it needs more information about who might be vulnerable within markets to apply ’vulnerability mapping’.


The regulator said it will try to identify how important competing FCA priorities are to vulnerable consumers whose susceptible harm is often under-represented.


As a first step to develop this information, it said it will publish a ‘Consumer Approach’ document in the summer which will consider this in more detail.


Following the vulnerability theme, the FCA will continue to monitor the debt management sector to ensure that it is fit for purpose and that firms are treating their customers fairly. A thematic review of this sector will be completed by the end of March 2019.


The fair treatment of homeowners with interest-only mortgages will be an area of concentration across the next 12 months, with a focus on how firms treat borrowers whose interest only mortgages are approaching maturity.


This will include those interest-only mortgages that are due to be repaid by 2020 – where borrowers have the least amount of time to find a solution. This thematic review will be completed by the end of March 2018.


A rise in the numbers of mortgages with long-term (more than five months) arrears, from 2008 at 49,000 to more than 61,500 in June 2016. The FCA will assess how firms are using forbearance and how well they are delivering fair customer outcomes, and take further action if needed.


This summer the regulator will publish an interim report of analysis and preliminary conclusions, including any potential remedies, of the mortgage market.



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