Building blocks
Covid-19 economic recovery and CCJ data

Published 21 July 2021

Registry Trust maintains the Register of Judgments, Orders, and Fines for the UK and Ireland. We hold historical and ‘live’ data on monetary County Court Judgments (CCJs), which provides a picture of indebtedness and creditworthiness at a national and regional level and can be used to inform responsible lending and borrowing, policy making, and business decisions. Since the onset of the pandemic, we have been analysing and sharing this data in different ways to try and help shape the economic recovery strategy. In October 2020, we hosted a roundtable discussion with key stakeholders including the Financial Conduct Authority (FCA), Fair by Design, Equifax, Experian, Financial Inclusion Commission, Lending Standards Board, Finance and Leasing Association, UK Finance, Cabinet Office, Money and Pensions Service, University of Lancaster, the Consumer Council of Northern Ireland, and others, to discuss how we could build back an inclusive economy from both a macro and micro economic, and household perspective. This looked at the impact of increasing inequality as a result of Covid-19 and the vital role of access to affordable credit as a key driver in inclusive growth. We know from our role maintaining the Register of Judgments, Orders, and Fines, how an unsatisfied CCJ or other blip on a credit record can lead to increased financial vulnerability as a result of inability to access credit and we strongly believe that educating and supporting people to not let the situation escalate is vital. We have also been campaigning for changes to the CCJ process that will make it fairer for consumers and businesses by holding claimants to account and ensuring that having a CCJ ‘satisfied’ is not overlooked. This is all part of building consumer and business financial resilience which will not only help to boost economic recovery, but also ensure that they are not as vulnerable to future crises. Through our regular data analysis blogs, we’ve been able to identify trends and ‘hotspots’ by mapping judgment levels and value against other data and policy changes, from availability of debt advice and child health deprivation, to Universal Credit and Brexit. Most recently, we’ve been looking at the likely impact of the implementation of the Debt Respite (Breathing Space) Scheme and at the rise of ‘buy now, pay later’ product use. All of this is helping to bring CCJ data to life by demonstrating how it can be an indicator of emerging issues. When it comes to Covid-19, we can also use our data to learn from past mistakes. This recession is likely to be like no other we have previously experienced, but there are trends that we are already seeing which mimic what has gone before, and these can be used as a warning sign for what not to do when it comes to lending, borrowing, and economic policy. We also have a new opportunity to educate a new demographic of people who have never been in debt before to seek help and resolve issues as early as possible. Our public facing website TrustOnline allows anyone …

Bounce back?
Household financial crunch continues

Published 21 July 2021

Evidence continues to emerge demonstrating the scale of the crunch on household finances and its likely consequences. The March Budget brought welcome news of extended supports and measures, now lasting until September 2021, which will assist household’s finances as the UK moves onwards from a deeply challenging year. However, the picture of the sheer depth of issues which are forthcoming remains a concerning one. Since March 2020, 11.1 million households have accumulated £25 billion in debt and arrears due to the pandemic, an average of £2,300 per affected household. 460,000 private sector renters were behind on their rent in January 2021, while 2.3 million people have fallen behind on their broadband bills, with internet connectivity having progressed from its previous perceived status as a luxury to an essential utility. As in previous months, these numbers showing hardship, stand alongside those indicators which show financial improvement for the households where members have stayed employed and saved money during the pandemic. The average household savings rate was 16.5% in Q3 2020. Meanwhile outstanding credit card balances fell by 22.4% in the year to January 2021 and the average first-time buyer house price rose by 6.8% in the same period. Michelle Highman, Chief Executive of The Money Charity says: “While the extended support measures announced in the Budget are very welcome, increased debt levels and evidence of financial hardship suggest that new forms of creative support will be sorely needed in the year ahead. “The numbers of those in difficulty are alarmingly large, in the hundreds of thousands if not millions, meaning that maintaining ‘business as usual’ support just won’t be sufficient. For the UK to continue developing its Financial Wellbeing, it is imperative that we avoid a household insolvency and eviction crisis, by ensuring that people are supported to keep their homes and incomes until the economy has had time to fully recover.” Other striking numbers from the March Money Statistics: Net lending to individuals and housing associations in the UK grew by £76.8 million a day in January 2021 •  in Q4 2020 lenders wrote off £960 million (of which £292 million was credit card debt, amounting to a daily write-off of £3.2 million) •  at the end of January 2021, outstanding consumer credit lending was £199.4 billion, falling by £2.8 billion on the revised total for the previous month •  £2,300 average increase in debt and arrears since March 2020 among those who have fallen behind on bills or borrowed for essentials • £3,763 total unsecured debt per UK adult in January 2021 •  -22.4% change in outstanding credit card balances in year to January 2021 •  360,000 increase in unemployment in the year to January 2021 •  citizens advice bureaux in England and wales dealt with 1,616 debt issues every day in the year to February 2021 •  Borrowers paid £122 million a day in interest in January 2021 •  Government debt increased by £789 million a day in the year to February 2021. Get the full picture and …

Guiding light
Mortgage prisoners – what steps can the industry take to help?

Published 21 July 2021

In the UK, borrowers trapped in their current, more expensive mortgage who can’t re-finance for a cheaper loan have been dubbed ‘mortgage prisoners’ in recent years. The pandemic shone a spotlight on their situation. A recent report by the London School of Economics (LSE) found that those in this situation were up to 40% more likely to default on their mortgage payments. The UK’s Financial Conduct Authority (FCA) has made efforts to address the issue of mortgage prisoners over the last few years, but progress appears to have been offset by the impact of the coronavirus pandemic and resulting economic downturn. WHAT CAN LENDERS DO? The LSE report suggests that the UK’s Treasury offer interest-free government equity loans and ‘mortgage rescue’ to help homeowners, but what about the financial services organisations to whom these mortgage prisoners are in debt? One thing lenders can do is improve communications with customers who find themselves locked into unaffordable mortgages. They can provide better information about who owns their mortgages, the regulatory status of those owners and advise which protections are available to the customer. All this is dependent on identifying mortgage prisoners from the outset. Some customers may be unaware that they’re actually in the situation of being locked-in to an unaffordable mortgage product. Lenders need to first identify who these mortgage prisoners are before they can respond accordingly, similarly to other vulnerable customers who don’t or won’t identify as vulnerable. There’s the issue of new vulnerability, too, with increasing numbers of customers finding their personal circumstances changed considerably due to the pandemic. This puts the onus on responsible lenders to get a comprehensive picture of each and every customer before deciding how best to communicate and address their particular needs. At the crux of the matter is customer data and how financial services institutions ensure they gather the right information while optimising how it’s used. It’s crucial to have the right systems in place to log all customer interactions. This helps businesses to pinpoint patterns in behaviour or communications that would suggest a change in circumstances. The ability of the systems predefined workflows to steer the customer service agent in the right direction for follow-up actions, is also paramount. This includes suggesting which communications should be sent out to customers next or which products could be made available. Crucially, when it comes to mortgage prisoners, the system would trigger a send of the factual information needed while steering the customer in the direction of support relevant to his or her specific circumstance. What’s right for one struggling borrower may not be right for another but, with the right systems and processes in place, lenders can facilitate nuanced communications, treating every customer as an individual, in line with their specific needs. It’s vital for lenders to understand and support the needs of mortgage prisoners if they are to play their role in ending the dire situation in which increasing numbers of customers find themselves. Lenders can kick-start a chain of measures to proactively …

Tread gently
Safeguard and protect – Is this what the FCA really mean?

Published 21 July 2021

The very clear message from the Financial Conduct Authority (FCA) in their Guidance for firms on the fair treatment of Vulnerable Customers (FG21/1) is that organisations must have good clear strategies for identifying and dealing with vulnerable customers. Customers experiencing financial vulnerability has not just been caused by the pandemic, this isn’t new, however what is new is the unprecedented circumstances we have all had to endure throughout the last year, and it’s not over yet. The economic impact of the pandemic (still not fully known) has brought vulnerability to the forefront of the FCA’s agenda, hence the expedited publication of the new guidance. For many years now organisations have erred on the side of caution and ‘ring fenced’ customers showing signs of vulnerability. They are moved out of collections strategies and ‘safeguarded’ with protection in mind, but of course these customers are unlikely to follow this path unless they engage with the business to notify a change in circumstances. Unfortunately, not all customers will do that, and our experience shows that a common characteristic of vulnerable customers is that their circumstances can often limit their ability to make decisions and choices which represent their own best interests. This of course inevitably often results in customers becoming caught in a ‘safeguard and protect’ limbo journey, which is a poor customer outcome overall. WHAT IMPACT COULD THIS HAVE FOR THE CUSTOMER? •  no one is regularly making contact with them to check how they’re doing and if they need any further help, or indeed to see if their circumstances have improved or worsened •  they’re not receiving a fair treatment like their ‘non-vulnerable’ peers’ •  it’s likely the customer will have outstanding debt and a negative credit rating for longer than necessary •  the ability to get a reasonable opportunity to fix their credit rating is impacted •  the customer is, to some extent, in the dark with no knowledge or visibility of their account status. None of these points are fair outcomes and none of them compare to the experiences available to customers who have never expressed vulnerability. With over 24 million consumers showing signs of vulnerability and 30% of those being over-indebted with signs of low financial resilience, it’s important that all sectors and organisations take notice of how vulnerable customers are being identified and managed. From inception and throughout the life cycle, the customer’s journey is paramount. Whilst the initial identification of the customer’s circumstances is key, ultimately having the ability to do the right thing and ensure the long-term journey of the customer is both fair and in their best interests, should be at the forefront of organisational outcomes. The FCA: “want all consumers to experience outcomes as good as those for other consumers and receive consistently fair treatment across the firms and sectors they regulate.” This doesn’t mean doing the same thing for all customers, vulnerable or otherwise, as we know one size doesn’t fit all when it comes to customer treatment. We all have an …

Space to breathe
Adapting systems for breathing space

Published 21 July 2021

Coming into force on the 4th of May 2021, The Debt Respite Scheme, otherwise known as breathing space, will impact how consumer credit lenders and debt collection agencies interact with individuals struggling to manage their debt. Here, Paul O’Sullivan, Aryza Lending Division CEO, explores what this means for lenders and how new technologies can help minimise disruption and provide greater support for consumers. Breathing space will be available to anyone with problem debt, giving them legal protections from creditor action for up to 60 days. These protections include pausing most enforcement action and contact from creditors, as well as freezing most interest and charges on their debts. DATABASE CHANGES Ensuring your software has the capability to adequately manage breathing space cases is vital, as a lender you will need to be able to track information around the type of debt agreement, transaction types, fees and charges, details of the debt adviser and consumer, while also applying configurable rules on managing the process on a case-by-case basis. BREATHING SPACE RECORD As a lender, if you’re told that a debt owed to you is in a breathing space, you must stop all action related to that debt and apply the protections. These protections must stay in place until the breathing space ends. Look for software with the functionality to ensure you are always working off the most accurate and relevant information. The ability to create a breathing space record, listing the full details of the case, its start and end date, and the debt advisor acting on behalf of the customer will help you offer a more personalised service. The functionality to search for cases will also streamline the administrative burden, allowing you to easily identify other applicable debts linked to that customer and helping guide them towards a healthier financial future. AGREEMENT FEES AND INTEREST PROCESSING Debts included in a breathing space must be qualifying debts, such as credit or store cards, personal or payday loans, overdrafts, utility bills, mortgage or rent arrears. Whilst in a breathing space agreement, it’s important to remember that the debtor does not have to pay certain interest, fees, penalties or charges. Specialist software can apply specific rules, helping calculate interest, fees or charges and automatically applying certain logic. CONTACT DURING BREATHING SPACE Individuals and debt advisers may contact each other during the breathing space to discuss the debt itself, a debt solution for the debtor, advising them about an additional debt, asking for a review or if one party is not meeting their obligations. Communication regarding arrears recovery is not allowed during a breathing space, although regulatory notices can still be sent. When processing an SMS, letter or email, our software can flag whether or not the agreement is in an active breathing space and the type of SMS, email or letter template permitted. As with any regulatory changes, the industry will need to adapt processes to ensure they are familiar with the new rules and processes being enforced. The right software provider can assist …

Road to recovery
The FCA’s covid roadmap

Published 21 July 2021

As we all patiently navigate the four steps of the roadmap out of lockdown, users (and providers) of personal loans, credit cards, store cards, catalogue credit, rent to own, buy now pay later, pawnbroking, motor finance and high-cost short-term credit (HCSTC), will also be on their own, often personal, journeys on the road to recovery. THE FCA’S COVID ROADMAP The Financial Conduct Authority’s (FCA) Finalised Guidance on consumer credit products which came into force on 25 November 2020, pre-empted the government’s roadmap, setting out a consumer finance roadmap, which at a high-level can be summarised as follows: Step 1 – Consumers had until 31 March 2021 to apply for an initial or further payment deferral. Eligible customers were able, where it was in their interests, to defer up to six monthly payments, provided that the last deferral relates to payments falling due no later than July 2021. Under the HCSTC guidance, customers who had not yet benefitted from support under that guidance could be granted a one-month payment deferral before the end of 31 March 2021. The HCSTC guidance expired on 31 March 2021, albeit certain provisions remain in force beyond that guidance for customers who have a payment deferral but who have not been dealt with under the relevant parts of the guidance by that date. Step 2 – After 31 March 2021, consumers are able to extend existing deferrals to 31 July 2021, provided those extensions cover consecutive payments (subject to the maximum six months allowed). Firms should take reasonable steps to contact their customers in good time before the end of a payment deferral period with information about resuming payments and on how to access further support. Step 3 – On 31 July 2021 the Payment Deferral Guidance (PDG), as it applies to all firms (other than the HCSTC – see Step 1 above), expires but certain provisions of it, including the interest waiver remain in force beyond that date to enable firms to deal with customers at the end of payment deferrals that end shortly before that date. Step 4 – After 31 July 2021 firms will rely more heavily on the Tailored Support Guidance where customers are facing payment difficulties due to circumstances arising out of coronavirus (but are not eligible for payment deferrals under the then expired PDG). Despite the expiration of the PDG on 31 July 2021, firms can continue to support consumers by offering payments deferrals, however payment deferrals provided in these circumstances should be reported to credit files in accordance with usual reporting processes and the FCA expects firms to ensure that balances do not escalate where further payment deferrals are provided outside of the PDG. ACHIEVING THE RIGHT CUSTOMER OUTCOMES The above summary does not cover every detail contained within the reems of guidance produced, so how can firms satisfy themselves (and the regulator) that they have done the right thing by their consumers? Well, I am pleased to say that amongst all of the detail, the FCA has set …

Lees V Lloyds
Court dismisses repetitive data subject access requests

Published 21 July 2021

In the case, Lees v. Lloyds, the data subject, Mr Lees (the claimant) issued a claim against Lloyds Bank Plc (Lloyds) for failing to provide an adequate response to various Data Subject Access Requests (DSARs) in breach of the Data Protection Act 2018 (DPA 1998) and General Data Protection Regulation (GDPR). THE DECISION The Court decides whether to make an order in circumstances where there is a failure to provide a proper response to a Data Subject Access Request (DSAR). In this case, the Court’s view was that the bank’s responses to the claimant’s DSARs were adequate and the claimant’s claim was dismissed. THE BACKGROUND The claimant entered into buy-to-let mortgages for three properties with Lloyds, which subsequently became subject to orders for possession. In addition to the litigation in respect of the mortgages, the claimant submitted several DSARs to Lloyds between 2017 and 2019. Lloyds responded to each DSAR received. In summary, the claimant alleged that Lloyds had failed to provide a copy of his personal data contrary to GDPR and the Data Protection Act 2018 (DPA 2018). In fact, the three DSARs were made when the DPA 1998 was in force. The DPA 2018 only came into effect for most purposes on 25 May 2018 and otherwise from 23 July 2018. GDPR provides data subjects with rights of access to personal data like those under the DPA 1998. COURT’S REASONS FOR THE DECISION In reaching its decision, the Court considered the Court of Appeal case of Ittihadieh v 5–11 Cheyne Gardens RTM Co Ltd and others [2017] and specifically the factors which must be taken into account when striking the balance between the right of the data subject to have access to his personal data on the one hand, and the interests of the data controller on the other. The Court considered that even if the bank had not responded adequately, there would have been good reasons for declining to exercise its discretion to make an order that the bank should respond to the DSARs. These reasons included: 1. numerous and repetitive DSARs which were abusive; 2. the real purpose of the DSARs was to obtain documents rather than personal data; 3. there was a collateral purpose behind the requests, to obtain assistance in preventing the bank from bringing claims for possession; and 4. the data sought was of no benefit to the claimant. IS THE HIGH COURT DECISION WELCOMED? Whilst GDPR makes allowances for data controllers to refuse to respond to DSARs that are “manifestly unfounded or excessive”, the current ICO guidance suggests that the bar to demonstrate this is high. To decide if a request is manifestly unfounded or excessive, a data controller must consider each request on a case-by-case basis and shouldn’t have a blanket policy in place. A data controller must demonstrate why it considers the request is manifestly unfounded or excessive and, if asked, be able to explain its reasons to the Information Commissioner. Furthermore, it should be noted that GDPR and the …

Responding to data breach claims
A common sense approach

Published 21 July 2021

In the run-up to GDPR, the focus was on the fines that data protection regulators can impose for infringements. Another issue that has become increasingly significant is that of data breach claims, compensation and costly group litigation. Under GDPR and the Data Protection Act 2018, individuals can claim through the courts for compensation for “material” (i.e. financial) and/or “non-material” damage, including distress and loss of control over their personal data. No hard and fast rules have developed regarding the level of compensation. The judge will take into account all the circumstances, including how serious the infringement was and its impact on the claimant. While the amounts to date (under the old Data Protection Act) have tended to be modest, in group litigation with high claimant numbers the total could be considerable. It is also not yet clear whether compensation may be higher now. The Court of Appeal’s decision in Lloyd v Google, currently subject to a Supreme Court appeal, marked a turning point concerning how group claims are brought. A representative was allowed to claim on behalf of himself and an estimated class of 4.4 million people who do not have to opt in to the litigation. If the Supreme Court agrees, we are likely to see an increase in mass data breach claims. We are seeing an uptick in the volume of these types of claims often brought by claims management firms. Often they are spurious and/or not fully documented but the amount claimed is usually small (up to £2500) and firms may be tempted to make a settlement payment as it is not cost-effective to litigate. However, such strategies can open the floodgates to more claims if you are characterised as a soft target. We had a case recently where an employee was claiming compensation for a data breach because his payslip had been sent in error to a colleague; on investigation the colleague had returned the slip unopened to the employer – so in fact there had been no data breach at all! It is therefore important that firms take a common sense approach where each case is investigated and considered on its merits. In Lloyd v Google, the court referred to a threshold of seriousness which it said would undoubtedly exclude a damages claim for an accidental one-off data breach that was quickly remedied. If the court decided that the infringement was trivial it would be entitled to refuse to make an award for loss of control damages. Firms should consider these factors carefully in light of the facts of each case, and the sensitivity of the personal data involved, when deciding whether an offer of compensation is justified. Jeanette Burgess Head of the Regulatory & Compliance Walker Morris LLP

Forebearance
Too much of a good thing?

Published 21 July 2021

The Financial Conduct Authority (FCA) warned consumers in its Mortgages and Coronavirus: Information for Consumers Guidance of 27 January 2021 that: “If a repossession on your home is stopped and you don’t keep up with payments, the total amount you owe will increase. This is because interest will continue to be charged (plus any fees and charges you may owe according to your lender’s tariff of charges). This means you are likely to get less back later if your property is repossessed and then sold by your lender. If property prices fall in the time between now and when your property is sold, you might get less back, or even nothing, if your property is sold for less than you owe.” These risks to the consumer are recognised by the FCA in relation to its recent consultation on draft mortgages tailored support guidance, published on 5 March 2021, which provides that in certain circumstances ‘delaying repossession can lead to poor customer outcomes as a result of increased balances and equity erosion.’ The risks of increased charges and ‘equity’ erosion are also, arguably, inherent in hire purchase agreements for motor vehicles, where forbearance is exercised, unless they are sympathetically addressed by the lender. Where there is no prospect of rehabilitation of the hirer’s arrears, continuing to allow the hirer to use the vehicle, which is a depreciating asset, may involve the hirer in increased charges, and reduce the sale proceeds which would be credited to the hirer’s account on the hire purchase agreement eventually being terminated and the vehicle being sold. The FCA in the Final Notice it issued to Yorkshire Building Society (YBS) on 28 October 2014, in relation to YBS’s handing of mortgage arrears, stated:- “Call handlers also failed to consider all payment options. In cases of long-term unaffordability, this may have included a voluntary sale by the customer or, in appropriate cases, repossession by YBS. YBS failed to recognise the detrimental effect to customers of delays in agreeing solutions and they failed to focus on minimising and preventing delays. While repossession was properly viewed as a last resort for customers in payment difficulties, management did not take account of the fact that where repossession is appropriate, if it is delayed this causes further significant detriment to customers and leaves them in a worse financial position.” Firms must of course comply with CONC and the Guidances issued by the FCA in relation to consumers effected by coronavirus but, on lenders considering forbearance, in certain situations, repossession and sale of a vehicle subject to a hire purchase agreement, may be in the hirer’s interest. Frank Johnstone Consultant Brodies LLP

Points of view
Political engagement – the major players and CCTA plans

Published 21 July 2021

Right now, Treasury officials are working on the Future Regulatory Framework (FRF) review. The FRF is considering how the regulatory framework for financial services needs to adapt to be fit for purpose in the future. CCTA submitted a response to a consultation on the review that recently closed. Given member struggles with the interpretation of rules between the FCA and the FOS, we thought it odd that the Financial Ombudsman Service (FOS) was not included in the review. We called for this to be reconsidered in our submission. We continue to raise our concerns about the FOS and Claims Management Companies with the Treasury and officials in our regular meetings. TREASURY SELECT COMMITTEE Arguably one of the most influential select committees in the House of Commons, the Treasury Select Committee (TSC), is tasked with holding the government’s Treasury department to account. It also examines the administration and expenditure of public bodies like the FCA and the FOS. Membership of select committees reflects the current makeup of the House of Commons. The TSC is chaired by Conservative MP Mel Stride. The committee can also start inquiries of its choosing. These often involve an invitation for written submissions, along with oral evidence sessions with various organisations. In the past they have looked at personal finances and access to financial services. We regularly try to engage with members of the committee and met (virtually) with a few of them last year to brief them on the sector. WHAT HAVE THEY BEEN WORKING ON? The Treasury Select Committee currently has an open inquiry into the work of the FOS. This has included committee hearings and correspondence between the outgoing Chief Executive and committee Chair. The committee was due to hear from the FOS management once the organisation has published this year’s budget, but it is unclear if this will go ahead, at the time of writing, due to Caroline Wayman’s departure. The committee has been one of the strongest critics of the FOS in recent months so we will continue to engage with them on the management of the FOS and the role of the new Chief Executive. ALL-PARTY PARLIAMENTARY GROUPS All-Party Parliamentary groups (APPGs) are cross party groups formed around a specific topic or interest. Though APPGs have no formal powers, they bring issues onto the parliamentary agenda and can be a good way to educate and build relationships. Representatives of the House of Commons and Lords sit on the various groups. There are APPGs on alternative lending, credit unions and financial education for young people. Unsurprisingly, the group on alternative lending is the one we are most aligned to. Recently the group produced a report on Lending and borrowing post-covid. The Report covered a wide range of issues including the future viability of credit files and the likely increase in illegal lending because of the pandemic. PARLIAMENTARIANS Outside of the various committees and groups in Parliament, from time-to-time other parliamentarians will become interested in our sector. This could have been as the …

First steps
SM&CR: A job done?

Published 21 July 2021

SM&CR: A JOB DONE? Following the introduction of the Senior Management and Certification Regime (SM&CR), to date the focus within Financial Conduct Authority (FCA) solo regulated firms has been concentrated on implementing and embedding processes within their business as BAU (Business as Usual) processes. The 31 March 2021 was a milestone date as this marked the day by which all firms must have completed their implementation of SM&CR. Does, therefore, passing this milestone date mean that you and Senior Manager Function holders (SMFs) can relax and focus on other things, especially as the flood of headlines related to SM&CR in 2019 and January 2020 has now died down? SM&CR has not had the same headlines over the past year. This is, however, likely to be due to everyone’s attention and energy being spent on managing the impact of COVID-19. In addition, there hasn’t been any visible high profile enforcement action taken against individuals under SM&CR, which has led some commentators to suggest that SM&CR lacks teeth. However, based on our experience of helping clients engage with regulators, it would be mistake for firms and SMFs to regard SM&CR as job done. In this article, we consider: •  why SM&CR should still be one of your key priorities? •  what the areas you should focus on are •  how to progress those SM&CR focus areas. WHY SM&CR SHOULD STILL BE ONE OF YOUR KEY PRIORITIES The implementation of the SM&CR regime to all FCA regulated firms is not seen by the regulator as the end point of journey. Rather, implementation is viewed as being only the beginning of the journey to ensure that firms are delivering both commercial and regulatory objectives. The FCA is expecting SM&CR to be the catalyst for driving change in how firms operate and the outcomes they deliver. 31 March therefore, marks the start of a journey for all solo regulated firms which will impact how they are governed and how they operate. The Prudential Regulation Authority’s (PRA) ‘Evaluation of senior manager and certification regime’ which surveyed banks and insurers (which have been subject to SMCR for some time) provides an indication of the level and type of changes that regulators, including the FCA, will expect to see within consumer credit firms. The PRA’s evaluation found: • over 90% of SMFs said that SM&CR had brought about meaningful change in behaviours • 97% of firms had integrated (to some degree) SM&CR into their BAU practices in a way that went beyond simple regulatory compliance • 94% of SMFs said that SM&CR has brought about ‘positive meaningful change to behaviour in industry’ through ‘clearer articulation of authority and had improved focus on accountability and responsibility’. Examples of changes that have been driven by SM&CR are: •  enhanced decision making by increasing the focus on responsibilities •  Improved culture •  enhanced compliance and ethics training, whistle blowing procedures, misconduct reporting, induction programmes, succession planning. SM&CR provides the FCA with a powerful supervisory and enforcement toolkit through which it can …

The right balance
How effective are digital consumer journeys?

Published 21 July 2021

In May 2020 a Digital Sandbox Pilot was launched by the Financial Conduct Authority (FCA) and the City of London Corporation. The pilot ran from November 2020 through to February 2021. 28 teams took part, to test and develop innovative products and services in response to challenges presented by the Covid-19 pandemic. FCA BACKGROUND Our experiences and engagement with the industry indicate that developing a permanent digital testing environment would provide significant value to financial services. The Digital Sandbox pilot was aimed at trialling this environment, by providing support to products and services which are at an early stage of development. Data has become increasingly pivotal to the way firms operate and engage with each other and the consumers they serve. This means that longstanding challenges like data access and standardisation are increasingly a barrier for market participants and innovators. We also receive requests for support from firms which don’t match the eligibility criteria of the regulatory sandbox, but whose proposals may nonetheless deliver desirable innovations in UK financial services. We piloted the following features as the foundations of a digital sandbox: •  access to synthetic data assets to enable testing, training and validation of prototype technology solutions, for example transactional banking data sets, SME lending data and customer accounts •  an Application Programming Interface (API) market place where digital service providers list and provide access to services via APIs • integrated development environment in which applicants can develop and test their solution •  a collaboration platform – to facilitate an ecosystem of key organisations that will provide support and input to digital sandbox participants, such as incumbents, academia, government bodies, venture capital, and charities •  an observation deck – to enable regulators and other interested parties to observe in-flight testing at a technical level, to inform policy thinking in a safeguarded environment. We are provided support to innovative firms and organisations looking to tackle challenges relating to, or exacerbated by, coronavirus. The pilot focussed on three pressing areas: •  frauds and scams •  vulnerability •  SME lending. Between 8-10th February, the teams presented their progress throughout the pilot. The FCA are currently in the process of determining their next steps regarding future iterations of the digital testing environment. An independent evaluation process currently being undertaken by Grant Thornton will help guide these discussions, with the pilot being assessed against five success criteria: 1. Innovation – role played in encouraging innovation in financial services to the Covid-19-related challenges detailed in the use cases. 2. Speed – role played in enabling quicker testing and development of proof of concepts. 3. Collaboration – role played in fostering collaboration, facilitating diversity of thinking and creating an ecosystem of key organisations. 4. Pilot features – the effectiveness of the key features of the pilot (see below) in stimulating and accelerating innovation. 5. Sustainable future – role played in informing and assisting the design and future operating model of a permanent digital sandbox. CCTA member PrinSIX was selected as part of the Vulnerabilty Team, tasked …