The Financial Conduct Authority published a report on the outcomes of its thematic review of the suitability of retail investment portfolios provided by wealth management and private banking firms. The aim of the review was to assess whether the relevant firms had taken steps to address concerns that had been highlighted to them during previous thematic reviews. The FCA review concluded that: (i) some firms have taken steps to improve and demonstrate the suitability of customer investment portfolios; (ii) firms still need to make substantial improvements in gathering, recording and regularly updating customer information; (iii) firms need to take steps to ensure that the composition of the portfolios they manage reflect the investment needs and risk appetites of their customers, in particular those customers with a limited capacity for capital loss or that do not want to be exposed to such risks; and (iv) firms must ensure that their governance, monitoring and assessment frameworks meet the regulatory requirements on suitability. The FCA expects firms, in particular senior managers, to assess their own processes and practices and to take any necessary action.

View the report.

The European Banking Authority published a discussion paper on strong customer authentication and secure communication under the revised Payment Services Directive (known as PSD2), which is expected to enter into force in January 2016 and apply from January 2018. Under PSD2, the EBA must deliver Regulatory Technical Standards on strong customer authentication and secure communication by January 2017. The aims of these standards are to enhance consumer protection, promote innovation and improve the security of payment services across the EU. The draft RTS, once developed in conjunction with the European Central Bank, will set out: (i) the requirements for strong customer authentication; (ii) the exemptions from these requirements; (iii) measures that would protect security credentials of users; (iv) requirements for communications that are common and secure; and (v) security measures between the various types of providers in the payments sector. Comments are due by February 8, 2016.

View the consultation paper.

The UK Payment Systems Regulator issued a press release on the provisional determination of card schemes that are subject to domestic interchange fee caps in the UK under the EU Regulation on Interchange Fees for Card-Based Payment Transactions. The IFR introduces caps on interchange fees for debit and credit card transactions where the issuer and acquirer are both located in the EEA. The caps became applicable on December 9, 2015. The IFR  applies to the following payment card schemes: MasterCard, Visa Europe, American Express, Diners Club International, JCB International and Union Pay International. Following the responses to the PSR's information request published in November 2015 on the value of UK domestic debit and credit card transactions, and the possibility of American Express potentially qualifying for an exemption from the interchange fee caps on domestic transactions, the PSR's provisional conclusion is that the market share of American Express is above the 3% threshold and American Express and any payment service providers participating in the American Express Scheme must comply with the interchange fee caps for UK domestic transactions. The PSR will issue its final guidance as well as an announcement to specify the schemes that will be exempt from the domestic interchange fee caps for the period to 31 March 2016 at an unspecified later date.

View the press release.

The Financial Conduct Authority published proposals to amend its guidance on when an issuer can delay disclosure of inside information under the FCA's Disclosure and Transparency Rules. Under the UK market abuse regime, which includes the transposition of the EU Market Abuse Directive, an issuer can delay disclosing inside information to protect its legitimate interest subject to certain conditions being met. FCA guidance on when an issuer might have a legitimate interest states that there are unlikely to be other circumstances where a delay would be justified except in relation to impending developments, the provision of liquidity by a central bank to the issuer or a member of its group and the non-exhaustive list of examples included in the DTR, which are taken from MAD. The FCA is proposing to delete that guidance. As a result of recent case law, stakeholders have highlighted to the FCA that issuers are concerned that more information should be considered inside information than was previously thought to be the case. However, the ability of the issuer to delay disclosure of that information is constrained by the FCA's guidance which goes further than the EU requirements. Under the Market Abuse Regulation, which comes into effect in the UK on July 1, 2016, the European Securities and Markets Authority must issue guidelines on an issuer's legitimate interest, including a non-exhaustive indicative list of examples. The FCA therefore does not intend to define a list of legitimate interests at this time. Responses to the FCA's consultation are due by February 20, 2016.
 
View the consultation paper.

The US Consumer Financial Protection Bureau issued a final rule intended to streamline the process of reporting residential mortgage market information for financial institutions. Regulation C implements the Home Mortgage Disclosure Act and requires lenders to report certain information regarding home loans for which they receive applications or that they originate or purchase. The final rule amends current Regulation C requirements by calling for more specific information from lenders, such as property value, term of the loan, and the duration of any teaser or introductory interest rates. In addition, financial institutions will be obligated to deliver certain information about mortgage loan underwriting and pricing, such as an applicant’s debt-to-income ratio, the interest rate of the loan, and the discount points charged for the loan.

Aside from requiring lenders to report more detailed information, the final rule also attempts to simplify the reporting process by easing reporting requirements for some small banks and credit unions and aligning reporting requirements more closely with industry standards.   The rule also provides guidance on compliance with both new and existing requirements under Regulation C.

View the CFPB press release.

View the Final Rule.

The US Federal Financial Institutions Examination Council’s Task Force on Consumer Compliance revised interagency examination procedures for Regulation P, which governs the privacy of consumer financial information. Under Regulation P, financial institutions are prohibited from disclosing nonpublic personal information about consumers to unaffiliated third parties, with certain exceptions if the institution meets various opt-out and notice requirements. Regulation P also requires financial institutions to inform customers of their privacy policies and practices.Among other things, the revised examination procedures reflect a rulemaking by the US Consumer Financial Protection Bureau from October 2014 that creates an alternate delivery method financial institutions can use in their annual disclosure of privacy practices to customers. The examination procedures also reflect the recodification of Regulation P by the CFPB in December 2011. The revised examination procedures supersede previous Regulation P interagency examination procedures issued by the FFIEC via CA 11-4.

View the Federal Reserve Board press release.

View the revised interagency examination procedures.

The US Consumer Financial Protection Bureau sent a letter to mortgage industry trade groups specifying details regarding initial examinations for compliance with the Know Before You Owe mortgage disclosure rule (also known as the TILA-RESPA Integrated Disclosure regulation). The rule, which became effective October 3, 2015, requires institutions supervised by the CFPB to introduce more simplified mortgage disclosure forms. The CFPB intends to conduct initial examinations for compliance with the rule. Although the initial examinations will take into account the scale and scope of modifications necessary for each supervised institution, the CFPB letter re-stated the expectation that supervised institutions should make a good faith effort to comply with the rule. To that end, the letter detailed the various factors that CFPB examiners will take into consideration, which include: (i) the institution’s implementation plan, including actions taken to update policies, procedures and processes; (ii) its training of appropriate staff; and (iii) its handling of early technical problems.

View the press release.

The UK government announced the launch of the Financial Advice Market Review which will be led by HM Treasury and the Financial Conduct Authority and include a separate expert advisory panel made up of leading individuals from financial services providers, financial advisors and consumer representatives. The review will assess the current regulatory and legal framework for the provision of financial advice and guidance to consumers and its effectiveness in ensuring access to the information, advice and guidance for consumers. The review will gather a broad range of initial evidence and then conduct the assessment on narrower terms according to where the advice gap is most evident. The initial evidence gathering will request examples of problems in obtaining advice in investments, savings, pensions and retirement income products, mortgages, consumer credit and general insurance. A consultation is expected to begin around the start of Q3 2015 and proposals are expected to be produced before the Budget is announced in 2016.

View the terms of reference.

The Financial Conduct Authority has published final guidance for firms on risks to customers from performance management. The guidance applies to all firms with staff that deal directly with retail customers. The guidance is intended to assist firms in ensuring that the risk of misselling from performance management is managed and to monitor performance management, looking for indicators of undue pressure to identify poor practices. The FCA will reconsider the guidance once the Markets in Financial Instruments Regulation and Directive, known as MiFID II, come into effect on January 3, 2017.

View the guidance.

The Prudential Regulation Authority announced changes to depositor protection provided by the Financial Services Compensation Scheme. Currently, the deposit compensation limit is £85,000 for deposits made by private individuals and small businesses. The changes include: (i) amending the deposit protection limit to £75,000 from July 3, 2015 to match the new limit under the recast Deposit Guarantee Schemes Directive and because Member States converting the limit into their national currency must use the exchange rate prevailing on July 3, 2015 to recalculate the limit; (ii) transitional UK legislation under which most depositors remain protected up to £85,000 up to and including December 31, 2015; (iii) making certain deposits of large companies and small local authorities eligible for protection from July 3, 2015 onwards although the £75,000 deposit protection limit will apply which is a significant change from the past scope of the UK compensation scheme; (iv) amendments to the PRA rules to ensure that firms update disclosures and procedures to account for new limits and scope of the regime; and (v) requiring firms to communicate the changes to their customers by September 1, 2015 using the PRA’s prescribed language. The PRA is also consulting on proposals that would ensure that all depositors to which the decrease in FSCS protection applies have an opportunity to adjust to the new limit, without incurring any penalties, charges or loss of interest from August 1, 2015 until December 31, 2015. Responses to the consultation paper are due by July 24, 2015.

View the new rules.

View the consultation paper.

The US Consumer Financial Protection Bureau published a rule that for the first time permits CFPB oversight over larger non-bank auto finance companies. The agency’s Supervisory and Examination Manual has also been updated to guide examiners who are monitoring compliance by auto finance companies with federal consumer financial laws (e.g., the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibition on unfair, deceptive or abusive acts or practices).

The final rule extends the CFPB’s current oversight of auto financing at the largest banks and credit unions to any nonbank auto finance company that makes, acquires or refinances 10,000 or more loans or leases in a year. The final rule also defines additional automobile leasing activities for coverage by certain consumer protections of the Dodd-Frank Act. While the CFPB has finalized the rule largely as proposed in September 2014, the final rule broadens the category of transactions involving asset-backed securities that are not counted toward the 10,000 transaction threshold and slightly modifies the definition of refinancing for the purpose of the threshold. 

The CFPB rule will take effect 60 days after publication in the Federal Register.

View the CFPB press release.

View the Final Rule.

View the Examination Procedures for Auto Finance.

The US Consumer Financial Protection Bureau issued a final rule intended to improve the process for companies submitting consumer credit card agreements to the CFPB. The final rule suspends credit card issuers’ obligations to submit their credit card agreements to the CFPB for one year. The purpose of the suspension period is to give the CFPB time to create a more streamlined and automated electronic submission system. Under the rule, credit card issuers will not be required to submit agreements that would otherwise have been due to the CFPB by the first business day on or after April 30, 2015, July 31, 2015, October 31, 2015 and January 31, 2016. During the temporary suspension period, the CFPB will collect consumer credit card agreements from credit card issuers’ public websites and post the agreements to its online consumer credit card agreements database. Credit card issuers will be required to resume submitting credit card agreements on a quarterly basis starting on April 30, 2016.

View the final rule.

The US Consumer Financial Protection Bureau announced that it is considering proposing rules that would require lenders to ensure that consumers can repay their loans. The proposals under consideration would also restrict lenders from attempting to collect payment from consumers’ bank accounts in ways that pile up excessive fees. The consumer protections being considered would apply to payday loans, vehicle title loans, deposit advance products and certain high-cost installment loans and open-end loans. The CFPB published an outline of the proposals under consideration in preparation for convening a Small Business Review Panel to gather feedback from small lenders, which is the next step in the rulemaking process.

View a fact sheet summarizing the proposals under consideration.

View an outline of the proposals under consideration.

HM Treasury published a policy paper on competition and choice in banking, announcing a set of processes that aim to improve competition in the banking sector. The proposed plans include: (i) launching the “midata” initiative, which will allow bank customers to access their current account transaction data in a format that can be used to assess which account is best for them; (ii) applying legislation to prevent anti-money laundering relating to UK digital currency exchanges; and (iii) delivering an open standard for Application Programming Interfaces in UK banking, a framework making it easier for customers to determine if they can get a better deal with a different bank.

View the policy paper

HM Treasury published a report detailing the outcome to its call for information on digital currencies. The report states that UK Government intends to improve standards and clarity around digital payments, and the initiatives that it will undertake will include: (i) applying anti-money laundering regulations to digital currency exchanges; (ii) developing a set of standards to enhance consumer protection; and (iii) ensuring that law enforcement bodies are able to prosecute criminal activity and confiscate digital currency funds where transactions are carried out for criminal purposes.

View the report

The US Consumer Financial Protection Bureau announced a public inquiry on the status of the credit card market and the impact of credit card protections on consumers and issuers, including issues such as credit card terms, the use of consumer disclosures, credit card debt collection practices and rewards programs. This inquiry is being conducted pursuant to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which required that the CFPB conduct a review of the consumer credit market every two years. To assist with its inquiry, the CFPB is seeking public comment and information in connection with the credit card market and the impact that various credit card regulations have had on consumers. The CFPB will publish a public report of its findings with Congress on the state of the consumer credit card market. Results of the inquiry will also inform future CFPB regulations on the consumer credit card market.

View the CFPB Request for Information

The Financial Conduct Authority published its guidance consultation on risks to customers from performance management at firms. This report is aimed at trade associations as well as all financial firms that deal with retail customers directly. The report discusses performance management practices and acknowledges that poorly executed performance management can lead to mis-selling for various reasons, including pressure to meet individual targets and corporate objectives. The report recommends that firms manage these risks, and identifies poor practices that can create undue 3 pressure on staff. The guidance recommends that controls should be put in place to mitigate the increased risk of misselling adequately. Comments on the consultation may be submitted until May 15, 2015.

View the guidance consultation

The US Commodity Futures Trading Commission reopened comment periods for two position limit draft rulemakings for an additional 30 days, in order to accommodate questions and comments that may have arisen from the Energy and Environmental Markets Advisory Committee meeting, which took place on February 26, 2015. The original positional limits proposed rule was overturned in September 2012 based on the US district judge of Washington’s determination that the CFTC was not able to prove the rule was “necessary to diminish, eliminate, or prevent” excessive speculation. The comment period for the two rulemakings will now close on March 28, 2015.

View the notice in the Federal Register

The US Consumer Financial Protection Bureau issued a proposal to suspend for one year credit card issuers’ obligations to submit their credit card agreements to the CFPB. The suspension is intended to give the CFPB time to develop a simplified and automated electronic submission system. In designing the new system, the CFPB intends to introduce improved reporting formats and faster posting of information. Credit card agreement submissions that would otherwise be due to the CFPB by the first business day on or after April 30, July 31, and October 31 of 2015, and January 31, 2016 would be suspended. Credit card issuers would resume submitting credit card agreements on a quarterly basis starting on April 30, 2016. During the temporary suspension period, the CFPB will collect consumer credit card agreements from the largest card issuers’ public websites and post the agreements to its online consumer credit card agreements database.

View the proposed rule

The Financial Conduct Authority published a feedback report on its wholesale sector competition review, announcing that it will be launching a wholesale market study into investment and corporate banking to assess whether there is adequate competition within this sector. The FCA wholesale sector competition review found that a lack of transparency and clarity in price and quality of services is preventing clients from being able to tell whether they are getting good value for their money. The review also found that the cross-selling and bundling of services may be making it difficult for smaller firms to compete with larger more established firms. The FCA intends to launch the market study and publish the terms of reference in the second quarter of 2015.

View FCA feedback report.

The US Federal Deposit Insurance Corporation announced the release of the third technical assistance video developed to assist bank employees in meeting regulatory requirements. This is the final release in a series of three technical assistance videos which address compliance with certain mortgage rules issued by the US Consumer Financial Protection Bureau. The first video, released on November 19, 2014, covered the Ability to Repay and Qualified Mortgage Rule. The second video, released on January 27, 2015, covered the Loan Officer
Compensation Rule. The third video covers the Mortgage Servicing Rules.

View the third video.

View all FDICs technical assistance videos.

The CFPB proposed amendments to its mortgage rules to better accommodate responsible lending by small creditors, particularly in rural and underserved areas. If the rules are finalized as proposed, a greater number of financial institutions would be able to offer certain types of mortgages in rural and underserved areas. Among other things, the amendments would: (i) expand the definition of a small creditor; (ii) include mortgage affiliates in the calculation of smallcreditor status; (iii) expand the definition of “rural” areas; and (iv) provide grace periods for small creditor status. The proposed rules will be open for public comment until March 30, 2015.

View the proposal.

The FDIC announced the release of the second in a series of three technical assistance videos intended to help bank employees meet regulatory requirements. These videos address compliance with certain mortgage rules issued by the CFPB. The first video, released on November 19, 2014, covered the Ability to Repay and Qualified Mortgage Rule, and the second video covers the Loan Originator Compensation Rule. The third video, expected to be released in February, will cover mortgage servicing rules. The servicing rules address servicers’ obligations to consumers.

View the first video.

View the second video.

The US Consumer Financial Protection Bureau (“CFPB”) issued a compliance bulletin on the treatment of confidential supervisory information (“CSI”). The bulletin is intended to remind persons in possession of confidential information, including confidential supervisory information, that they may not, except for certain exceptions, disclose confidential information to third parties. The bulletin defines CSI, reviews certain disclosures of CSI and discusses in detail that private confidentiality and non-disclosure agreements do not alter the legal restrictions on the disclosure of CSI.

View the bulletin.

The Consumer Financial Protection Bureau finalized two minor modifications to the "Know Before You Owe" mortgage disclosure rules. The changes, which were originally proposed in October 2014, identify when consumers will receive updated disclosures after locking in an interest rate and address how consumers receive information regarding certain construction loans. Under the finalized rule, creditors are required to provide a revised loan estimate within three business days after a consumer locks in a floating interest rate, as opposed to the original rule which required a revised loan estimate on the date a rate was locked. The second change creates a space on the loan estimate form where creditors could include language informing consumers that they may receive a revised loan for a construction loan that is expected to take more than 60 days to settle. The rule will be effective on August 1, 2015.

View the final rule.