Category Archives: FCA

FCA UPDATE on Fintech

FCA UPDATE on Fintech

The FCA regulates over 56,000 firms which employ over 2 million people in the UK. The financial services industry is obviously an important industry in UK’s economy given this statistic. This highlights the need for Fintech initiatives going forward (technology initiatives supporting or enabling the financial industry). One such initiative is Project Innovate. The initiative was developed back in 2014 to promote competition and growth in UK’s financial services industry. The initiative has been supporting small and large businesses which make new products and services that benefit customers genuinely. In the first year of operation, Project Innovate helped over 175 businesses. Currently, the project has helped over 358 businesses.

The latest FCA update on Fintech as of April 2017 focuses on a few main points. First and foremost, the FCA continues to tackle regulatory barriers to allow firms to continue innovating for the benefit of their clients. The FCA is doing so given the fact that the demand for its support is increasing. Project Innovate is also entering a new phase. As a forward-looking regulator, the FCA sees the need to continue evolving its approach. The FCA has seen an emergence of Fintech hubs in the UK and has reaffirmed its commitment to support these hubs by offering more/better local assistance.

The FCA’s approach to innovation

In an effort to highlight the importance of innovation in the financial services industry, the FCA continues to educate the public on why innovation is important. According to Christopher Woolard, the FCA’s Executive Director of Strategy and Competition, the FCA has an obligation to make UK’s financial services work well. To do this, the FCA continues to assess the integrity of financial markets and consumer protection issues. The FCA also has the duty to continue promoting the interest of consumers.

According to Woolard, the FCA is increasingly focused on using innovation to promote competition going forward. The FCA has completed its second round of testing innovative products/services, business models and well as delivery mechanisms in practice through its Regulatory Sandbox program. The FCA is also continuing to support technologies that will facilitate the delivery of regulatory requirements better than existing capabilities. The regulator has already held successful initiatives aimed at bringing market participants together to solve crucial problems in the financial services industry.

Priority areas going forward

The FCA is increasingly focused on expanding the scope of its Advice Unit which has been making automated advice models in the investment, pension and protection space. The FCA’s Advice Unit has a broader scope now. The unit is currently engaging the general insurance, mortgage, and debt sectors as well as many other firms that are keen on providing guidance, instead of advice. According to Woolard, the FCA will do more to spearhead the conversation about emerging innovations and trends. The regulator has already started a conversation about the risks and advantages of Distributed Ledger Technology.

The FCA also intends to take an international approach to innovation i.e. restarting its commitment to supporting innovation globally by signing cooperation agreements. The FCA has already signed such agreements with China, Hong Kong, Japan and Canada and is also working with other global regulators to foster a common understanding on good innovation. The regulator is working towards this via international bodies such as the IOSCO and the G20.

In early April 2017, the FCA hosted the first ever International Innovate Seminar featuring over 90 regulators from 56 countries globally.
According to Woolard, this will foster stronger international cooperation as well as help to secure the future of the industry in the long-term. Woolard, however, insists that the FCA is still focused more on supporting emerging Fintech hubs in the UK.

In his latest remarks, London has experienced the most Fintech emergence regionally. This emergence is however expected to spread beyond London. The FCA sees numerous exciting Fintech developments across the UK from Liverpool to Bristol which is why the regulator has promised to work with numerous organisations across the UK. The FCA is focusing on areas with a technological presence as well as strong financial centers. The FCA is also looking at areas where it has established strong relationships with local learning institutions like universities.

The regulator has mapped out the Leeds-Manchester and Edinburgh-Glasgow areas as promising emerging Fintech hubs and is focused on offering such areas the same access to regulatory support as key areas like London. The FCA is committed to ensuring good Fintech ideas in the financial services industry come to fruition regardless of where they are conceived.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.
An Overview of FCA Payday Loan Regulations Today

An Overview of FCA Payday Loan Regulations Today 

Background

The Financial Conduct Authority (FCA) is the body charged with regulating the payday loan industry in the UK. The FCA began regulating payday loans among other forms of high-cost short-term credit on 1st April 2014. Initially, the regulator focused on tackling poor conduct present in the industry.

The FCA began by introducing new rules on affordability, rollovers, advertising as well as the use of recurring payments (continuous payment authorities). The regulator then took a supervisory role focusing on payday loan lenders breaching the new regulations/requirements.
The UK parliament gave the FCA the duty to cap prices of short-term loans/credit products like payday loans to protect borrowers from unfair lending practices in December 2013. The rules, however, came into effect two years later (on 2nd January 2015). The regulator was involved in the entire process. The main aim of the regulatory changes was to see the price of high-cost short term loans/credit like payday loans come down and make sure borrowers never pay back more than double the amount borrowed.

According to the then FCA chief executive officer, Martin Wheatley, the new rules were meant to put an end to increasing payday debts and offer borrowers effective protections without affecting the viability of the market.

FCA stance on payday loans today: Price structure/levels

The FCA published new payday loan price caps in July 2014. The price cap structure/levels remain unchanged to date after taking effect on 2nd January 2015. They include;

• Lower costs for most borrowers. The FCA set the initial cost cap to 0.8% per day. All high cost short term loans, fees and interest should not exceed 0.8% (per day) of the amount borrowed. The initial cost cap remains unchanged to date and applies to the outstanding principal, all interest, and fees charged per day during the loan term as well as when refinancing. Payday loan lenders are however free to structure charges as they wish provided they don’t exceed the 0.8% cap.

• New protection from borrowers struggling to pay: The FCA also set default fees at £15. If a borrower has a hard time repaying their payday loan, default fees (default charges as well as interest on unpaid balances) can’t exceed £15. Interest can increase but can’t exceed the initial cost cap.

• Cost cap on escalating debts: The FCA also set a 100% cost cap ensuring that borrowers never pay back more in interest and fees than the initial amount borrowed. The cap covers debt administration, debt collection, and other ancillary charges as well as credit broking charges.
From 2nd January 2015, no UK payday loan borrower has been charged twice what they borrowed, more than £15 in default fees or more than 0.8% in interest and fees per day of the amount borrowed. The price cap structure/levels will be reviewed in 2017.
FCA payday loan regulation today on: Repeat borrowing, data sharing, supervision, and E-commerce directive

Repeat borrowing

FCA regulations remain the same for repeat borrowing. All price cap structure/levels remain the same as for the 1st loan. The FCA is however in the process of assessing the impact of repeat borrowing.

Data sharing

The FCA requires all lenders in the UK payday loan industry to participate in real-time data sharing to ensure majority of the payday loans are reported real-time. Although this regulation hasn’t been fully implemented, the current progress is in line with the regulator’s expectations.

Supervision

The FCA is currently following its standard model supervisory approach
E-Commerce Directive (ECD)
The FCA currently prohibits UK-based debt collectors from collecting debts that arise under high-cost short term credit agreements entered into by incoming e-commerce directive lenders who charge more than the set price caps. Also, UK-based debt administrators are prohibited from enforcing or exercising rights on behalf of lenders under such high-cost short term credit agreements.

The FCA is in the process of gaining powers to take action against incoming lenders who avoid rules by abusing freedom of movement rules.

Other FCA regulation stances today

Insider dealing: The FCA has powers to investigate as well as prosecute insider dealing in the UK payday loan industry as stipulated in the 1993 Criminal Justice Act.
Supervision: The FCA also has the right to supervise all regulated payday loan lenders as well as all other regulated financial firms.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.