The Prudential Regulation Authority published a consultation paper on proposals to reset the deposit protection limit at £85,000. The purpose of the update is to provide depositors with PRA-authorized firms commensurate protection to that of depositors with firms authorized by regulators in other EU Member States. The Deposit Guarantee Schemes Directive requires non-Euro Member States to adjust their deposit protection limits every five years to ensure they are equivalent to the euro limit of EUR100,000. The DGSD also requires that such countries, including the UK, must adjust their deposit protection limit to take into account currency fluctuations. Following the Brexit referendum on June 23, 2016, the PRA considers that a structural shift in the exchange rates has occurred and to comply with the DGSD, the PRA is proposing that the depositors’ protection level be raised to £85,000 from January 30, 2017. This will require an increase of £10,000 pounds from the limit that was set in 2015. The PRA is also proposing a five month transitional period until June 30, 2017 for firms to implement changes to their disclosure materials, advertising materials and Single Customer View (SCV) and Continuity of Access (CoA) systems to accurately reflect the new deposit protection limit. Prior to June 30, 2017, firms will be required to notify the PRA if they are ready to implement the rule changes and will become subject to the new rules from the next business day following notification.  Separate notifications are available for: (i) SCV and CoA systems; and (ii) disclosure and advertising materials. The PRA notes that it will seek to maintain a stable deposit protection limit through uncertainty in foreign exchange markets resulting from the referendum, but will seek to avoid making further adjustments to the limit. Responses to the proposals are due by December 16, 2016.

View the Consultation Paper. 

The CFPB launched an inquiry into the challenges consumers face in accessing, using and securely sharing financial records. The CFPB is asking the public to report how much choice they are given about the use of their records, how secure it is to share them and to what extent they have control over them. The CFPB’s release noted that the Dodd-Frank Act gave consumers rights to electronically access their financial records, with the CFPB having rulemaking authority over the area.

The comment period will end on February 21, 2017.

View CFPB’s press release.

View Request for Information.

The US Federal Reserve Board, the Farm Credit Administration, the FDIC, the National Credit Union Administration and the OCC issued a joint notice of proposed rulemaking to implement provisions of the Biggert-Waters Flood Insurance Reform Act.

Federal flood insurance statutes generally require regulated lending institutions to impose a mandatory purchase requirement for flood insurance in connection with loans secured by improved real property located in areas having special flood hazards. Under the Biggert-Waters Act, regulated lenders must accept, in satisfaction of this requirement, policies issued by private insurers that satisfy the criteria specified in the Biggert-Waters Act, in addition to policies made available by the Federal Emergency Management Agency.

The proposed rule includes provisions to help lenders identify private flood insurance policies they would be required to accept and provides that lenders retain their discretion to accept private flood insurance policies that do not meet the criteria for mandatory acceptance, provided certain conditions are met. Furthermore, the proposed rule would establish criteria to apply in determining that coverage offered by a mutual aid society provides the type of policy or coverage that qualifies as “flood insurance” for purposes of the federal flood insurance laws.

The agencies previously issued a proposal addressing private flood insurance and have decided to issue this second proposal for additional public comment based on comments received in response to the first proposal. Comments are due on or before January 6, 2017.

View proposed rule.

The UK Government announced that it would not be taking forward its plans to create a secondary market for consumers to sell their annuity income.  The market was to extend the recently introduced pension freedoms and flexibilities to individuals, who retired prior to April 2015. In December 2015, the Government announced that tax changes would come into effect from April 2017, which would allow individuals to receive all of the proceeds following the sale of an annuity as a taxable lump sum, arrange for the buyer to pay all of the proceeds into a flexi-access drawdown fund or arrange for the proceeds to be used to buy a new ‘flexible’ annuity. In April this year, the UK Government and the Financial Conduct Authority consulted on the proposed regulatory framework for the secondary annuities market. The UK Government’s view is that a balance between creating conditions for a competitive market with multiple buyers and sellers of annuities combined with sufficient consumer protections could not be achieved. 

View the press release. 

View the HM Treasury consultation.

View the FCA consultation. 

The US Court of Appeals for the DC Circuit declared the structure of the US Consumer Financial Protection Bureau unconstitutional, stating that the “massive, unchecked power” exercised by its director, Richard Cordray, lacks necessary supervision and direction from the President of the United States. It also vacated a $109.2 million penalty against PHH Corp., a home mortgage loan provider, sending it back to the CFPB for further proceedings.

Read more.

The CFPB issued a final rule that applies federal consumer protections under Regulations E and Z for prepaid account users for the first time. Prepaid accounts may be loaded with funds by a consumer or by a third party, such as an employer. Consumers generally can use these accounts to make payments, store funds, withdraw cash at ATMs, receive direct deposits or send money to others.

Read more.

The Prudential Regulation Authority issued a Policy Statement relating to implementing risk-based levies for the Financial Services Compensation Scheme deposits. The Policy Statement contains final rules amending the Depositor Protection Part of the PRA Rulebook and a final Statement of Policy on the Financial Services Compensation Scheme and the calculation of firm contributions to the Scheme. The final rules and Statement of Policy are relevant to UK banks, building societies, credit unions, overseas firms with PRA deposit-taking permission, and the FSCS (the UK's administrator of its Deposit Guarantee Scheme). The rules applied from October 1, 2016.

Read more.

The US Consumer Financial Protection Bureau outlined proposals under consideration that would overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt. Pursuant to the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect. As they are collecting, debt collection companies would be required to limit communications, clearly disclose debt details and make it easier to dispute the debt. When responding to disputes, collectors would be prohibited from continuing to pursue debt without sufficient evidence. These requirements and restrictions would follow the debt if it were sold or transferred.

View outline of proposals under consideration.

The Financial Conduct Authority published its final report outlining findings from its credit card market study. The FCA credit card market study was launched in November 2014. The purpose of the study was to analyze the credit card market and determine whether it is working in the interest of consumers and to develop remedies to improve the situation if needed. Interim findings were published in November 2015 with potential remedies mooted for certain issues such as the frequent withdrawal of firms’ promotional offers and the fees associated with a single month’s missed payment. The final report summarizes feedback received on the interim report and outlines the FCA’s package of remedies.

The US Commodity Futures Trading Commission announced the signing of a Memorandum of Understanding with the European Securities and Markets Authority regarding cooperation with respect to recognized central counterparties. Pursuant to the MOU, derivatives clearing organizations established in the United States may apply to ESMA for recognition as central counterparties, known as “Recognized CCPs.”
 
View the text of the MOU.

The US Consumer Financial Protection Bureau issued a lengthy proposed rule to regulate so-called “pay day loans.” Specifically, the proposed rule would impose restrictions on “covered loans,” defined as (i) loans with a term of 45 days or less and (ii) loans with a term greater than 45 days that (a) have an all-in annual percentage rate greater than 36% and (b) are either repaid directly from the consumer’s account or income or are secured by the consumer’s vehicle. For these covered loans, the proposed rules would deem it an abusive and unfair practice for a lender to make such a loan without “reasonably determining that the consumer has the ability to repay the loan.” In addition, the proposal would restrict lenders of covered loans from making such loans when a consumer has, or recently has had, certain outstanding loans (in general, certain loans that the consumer has had difficulty repaying). 

The Treasury Committee of the UK Parliament announced that Andrew Tyrie MP, Chairman of the Treasury Committee, had written to Financial Conduct Authority and the Prudential Regulation Authority requesting further information about the risks and opportunities presented by crowdfunding (also known as peer-to-peer lending). The letter to the FCA focuses on conduct risk and consumer protection and the letter to the PRA requests information about the resilience of crowdfunding platforms to economic stress.

View the letter to the FCA.

View the letter to the PRA.

The Consumer Financial Protection Bureau issued a semiannual update of its rulemaking agenda which provides an overview of the agency’s major current initiatives. Among other initiatives, the CFPB notes that it expects to issue a final rule this summer to create a comprehensive set of consumer protections for prepaid financial products, such as general purpose reloadable cards and other similar products. The CFPB issued a proposed rule in November 2014 to bring prepaid products expressly within the realm of the Electronic Fund Transfer Act and its implementing Regulation E as prepaid accounts and to create new provisions specific to such accounts. The agency also proposed to amend Regulation E and Regulation Z (which implements the Truth in Lending Act) to regulate prepaid accounts with overdraft services or credit features. The CFPB had previously announced Spring 2016 for the release of the final prepaid account rule, but the current rulemaking agenda now lists July 2016.

View the CFPB's Spring rule making agenda.

View the proposed rule. 

The US Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the OCC and the Consumer Financial Protection Bureau issued interagency guidance regarding supervisory expectations on how financial institutions should handle consumer deposit discrepancies. In some instances, when a consumer makes a deposit, the sum the bank credits to the account may be different from the total amount deposited. These deposit discrepancies can occur if the amount written on a deposit slip does not match the cash transferred into the bank or as a result of encoding errors or a poor image capture by the bank when it scans or reads a deposit slip. The interagency guidance calls on banks to avoid or reconcile, or resolve deposit discrepancies and to adopt policies that treat consumers fairly when they make deposits and do not violate laws and regulations that apply to deposit discrepancy practices. If a financial institution fails to comply with applicable laws and regulations, including prohibitions against unfair, deceptive and abusive practices, it could open itself up to liability and possible action by an agency.

View the interagency guidance.

The Financial Conduct Authority published a consultation paper on its proposed rules and guidance for the secondary annuity market due to start in April 2017. The consultation is aimed at parties interested in pensions and retirement issues, including providers and distributors of annuities, retirement income and planning products, sponsors of occupational Defined Benefit and Defined Contribution Schemes and firms providing advice in this area. The consultation discusses how consumers will be able to sell their annuity incomes on the secondary market. The changes proposed will primarily affect consumers who hold or will hold annuities in their name and contingent beneficiaries with an interest in such annuities.  

A divided US Court of Appeals for the Ninth Circuit ruled that the Director of the US Consumer Financial Protection Bureau had the authority and standing to bring a civil enforcement claim against a California attorney and provider of home loan modification services. The decision addressed the issue of whether Director Cordray was authorized to act during the period following his recess appointment as director of the CFPB, but prior to the Senate’s confirmation of his appointment. In the majority opinion, the court stated that Director Cordray was empowered to bring actions in federal court to enforce certain consumer protection statutes and regulations notwithstanding any deficiency in Director Cordray’s appointment process, and further, that the subsequent ratification of Director Cordray’s appointment by the Senate cured any such deficiencies.

View the Ninth Circuit opinion.

US Consumer Financial Protection Bureau Director Richard Cordray presented the CFPB’s Semi‑Annual Report at a hearing before the Senate Committee on Banking, Housing and Urban Affairs. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is required to provide to Congress an update on the CFPB’s mission, activities, accomplishments and publications since the last Semi-Annual Report, as well as certain additional information required by the Dodd-Frank Act.

As part of the hearing, Cordray also responded to questions from the Committee, including what standards FinTech companies will be held to since they are not depository institutions. Cordray noted that “it would not be appropriate for new FinTech startups to be getting an advantage in the marketplace because they are arbitraging the regulatory system, they are not complying, they’re not taking seriously what the banks and regulated institutions have to do.” While many FinTech firms hold “a lot of promise,” Cordray added that innovation isn’t always a net positive, and cited subprime mortgages as an example of what was once thought of as an innovative product.

At the hearing, Cordray also fielded questions on payday loans, arbitration agreements, prepaid cards and small-business lending. The most contentious interactions involved indirect auto lending and regulation by enforcement.

View Cordray's written testimony. 

View additional coverage of the hearing. 

The European Banking Authority published a final Decision setting out the formula to be used by creditors when calculating the benchmark rate under the Mortgage Credit Directive. The MCD requires creditors to provide consumers with certain pre-contractual personalized information, including calculated illustrations of the annual percentage rate of charge and of the maximum instalment amount based on the highest value of any external reference rate used in calculating the borrowing rate, or, where the creditor does not use an external reference rate, the highest value of a benchmark rate as specified by a national regulator or the EBA. The EBA has therefore developed a formula for creditors to use to calculate such a rate which uses the underlying rate of the European Central Bank for Eurozone countries, or the Member State's central bank rate for non-Eurozone countries. The Decision will come into effect once it is published in the Official Journal of the European Union.

View the Decision.

The Prudential Regulation Authority published a consultation paper proposing amendments to the Depositor Protection Part of the PRA Rulebook and a new Statement of Policy in relation to the Financial Services Compensation Scheme and the calculation of firm contributions to the Scheme. The consultation is relevant to UK banks, building societies, credit unions, overseas firms with PRA deposit-taking permission, and the FSCS (UK's administrator of its Deposit Guarantee Scheme). Current PRA rules require the FSCS to calculate firm levies on the basis of covered deposits. The recast Deposit Guarantee Schemes Directive provides that contributions to a deposit guarantee scheme should also be adjusted relative to the risk incurred by each member of the scheme. The European Banking Authority issued Guidelines detailing methods for calculating contributions to schemes. In response to the EBA Guidelines the PRA has set out, in appendices to the consultation paper, the methodology for calculating risk-based levies and their application to the repayment of current and future compensations costs incurred by the FSCS. The methodology uses different calculations depending on the category of firm: Capital Requirements Regulated firm, Credit Unions and Non-European Economic Area branches. The consultation closes on June 3, 2016.
 
View the consultation paper.
 
View the EBA Guidelines.

The Financial Conduct Authority published proposed guidance on the FCA's updated view on enforcing security under the Consumer Credit Act and when a default notice is required to be issued. The guidance is aimed at firms that provide consumer credit services and products. The proposed guidance invites comment on "what is enforcement" in the context of when a firm could breach the CCA. The proposed guidance relates to the requirement under the CCA to serve a default notice, following the breach of a regulated agreement, before taking certain enforcement actions. In a previous feedback statement published in September 2015, the FCA stated that a default notice was not required when taking or demanding payment from guarantors following a default because this was deemed to be enforcement of a security. This guidance provides the updated view that this statement made in the feedback statement was incorrect. The guidance provides specific circumstances where a default notice would be required in the context of guarantor loans. One such circumstance is where a creditor wishes to request or take payment from a guarantor following non-payment by a debtor. The FCA has taken the view that a creditor cannot take payment from the guarantor where it has failed to serve a valid default notice. Comments on the consultation may be submitted until March 18, 2016.

View the Proposed Guidance.

The Financial Conduct Authority published the findings of its review into the research and due diligence processes that firms undertake on the products and services they recommend to retail clients. The FCA assessed 13 advisory firms and also visited seven external research and due diligence consultancy firms. Key findings that emerged from the thematic review were that most firms seek to achieve positive outcomes for their clients when undertaking research and due diligence and that there is some evidence of good practice. However, many firms do not demonstrate good practice consistently across all products and services. The FCA found that a corporate culture of challenge was a key driver of good research and due diligence. Those firms that did not have a corporate culture of challenge: (i) did not try to understand or challenge their own inappropriate bias towards products, services or providers; and (ii) inadequately managed conflicts of interest. The FCA has taken steps to address the issues found, instructing three firms to improve their research and due diligence process. The FCA has also asked one firm to complete a past business review. The FCA intends to provide firms with further communications that set out its expectations in this area in greater detail. In addition, the FCA's second consultation paper on implementing the Markets in Financial Instruments Directive, due to be published later this year, will cover requirements for research on products.

View the FCA's review report.

The US Consumer Financial Protection Bureau finalized a policy, first proposed in October 2014, establishing a process for companies to apply for a no-action letter from CFPB staff that would reduce regulatory uncertainty for a new product or service that offers the potential for significant consumer-friendly innovation. This letter would indicate that CFPB staff reviewed the company’s application and have no present intention to recommend enforcement or supervisory action with respect to the particular aspects of the company’s product under the specifically-identified provisions and applications of statutes or regulations that are the subject of the no-action letter.

The new policy was created as part of the CFPB’s Project Catalyst initiative, which was designed to encourage consumer-friendly developments in markets for consumer financial products and services. The CFPB views this initiative as an important aspect of fulfilling its mandate under the Dodd-Frank Act to provide all consumers access to fair, transparent, effective, and innovative markets. The policy also builds on a trial disclosure waiver policy issued by the CFPB in 2013, which allows financial services providers to take advantage of new technologies in designing and testing improved alternative federal consumer disclosures. 

View the CFPB press release.

View the policy. 

 

The Financial Conduct Authority issued a Call for Input on the retained provisions of the Consumer Credit Act. Responsibility for regulating consumer credit markets was transferred to the FCA in April 2014. The aim of the review is to simplify the regime and provide appropriate protection for consumers without burdening firms disproportionately. The FCA is seeking input on three key areas: (i) whether any specific retained provisions should be prioritized for review; (ii) the timeline of the review; and (iii) the manner in which the review should be undertaken. Responses to the Call for Input are due by May 18, 2016. The FCA is expected to establish a stakeholder's consultative group and to finalize the scope of the review in the next few months. The regulator will publish an update on progress in the fourth quarter of 2016. The FCA is required to report its recommendations to the Treasury by April 1, 2019. The report could outline legislative change and whether repealing any of the retained provisions in the CCA could have an adverse effect on the appropriate level of consumer protection. The report must also consider whether any of the retained provisions of the CCA could be replaced by FCA rules. In making the review the FCA must have regard to the principle that a burden imposed in relation to the carrying on of an activity should be proportionate to the benefits.

View the Call for Input.

The European Banking Authority published its final Guidelines relating to cooperation agreements between Deposit Guarantee Schemes in accordance with the EU Deposit Schemes Directive. The Guidelines provide the minimum content for cooperation agreements between DGSs. The EBA has also provided a multilateral framework cooperation agreement in an attempt to minimize the need for numerous detailed bilateral agreements to be executed between multiple DGSs. The framework offers scope for DGSs to enter multilateral and bilateral agreements with more detailed terms than those provided for in the Guidelines, if necessary. The Guidelines stipulate minimum specifications to be included in cooperation agreements, including the means for: (i) repayment of depositors by the host DGS at branches of banks established in other Member States; (ii) the transfer of contributions from one DGS to another where a bank ceases to be a member of a DGS and joins another DGS; and (iii) mutual lending between DGSs. The EBA has attempted to cater for depositors in EU branches of firms headquartered in other Member States, so that they are treated in a similar fashion to depositors in home Member States by providing direction on the sequence and timing of events when the host DGS pays out depositors on behalf of the home DGS. The Guidelines will come into effect six months after their publication in all official EU languages.

View the Guidelines.

The US Board of Governors of the Federal Reserve System announced that, as part of the transfer of certain consumer protection rulewriting authority to the US Consumer Financial Protection Bureau under the Dodd–Frank Act, the Federal Reserve Board was repealing Regulation AA (Unfair or Deceptive Acts or Practices). Among other things, Regulation AA contained the Federal Reserve Board’s “credit practices rule,” which prohibited banks from engaging in certain practices to enforce consumer credit obligations and from including these practices in consumer credit contracts. Separately, the Federal Reserve Board announced the proposal to repeal Regulation C (Home Mortgage Disclosure), which has been superseded by CFPB rules.

View the Federal Reserve Board press release.

View the text of the final rule repealing Regulation AA.

View the text of the proposed rule to repeal Regulation C.
 

The European Securities and Markets Authority issued a statement, addressed to investors and fund managers, on some European collective investment funds that may potentially be "closet index tracking funds". Closet indexing can occur when fund managers claim to manage portfolios actively, but in reality, the fund stays close to its benchmark index. Such practices can mislead investors as they may not receive the service or risk/return profile that they expect, whilst possibly paying higher fees than those usually charged for passive management. ESMA carried out research using a sample of around 2,600 funds between 2012 and 2014 and found that 5% to 15% of Undertakings for the Collective Investment of Transferable Securities equity funds could potentially be closet indexers. ESMA recommends that UCITS management companies re-evaluate whether they provide accurate information to investors on the performance objectives of relevant funds so that investors can make informed investment decisions. ESMA has stated that it will take an active role in coordinating further analysis at national level and will assess whether any further steps are necessary to ensure that market participants wholly comply with disclosure obligations.  
 
View ESMA's statement.

The European Supervisory Authorities published a letter, dated January 26, 2016,  from their Chairpersons to the European Commission on issues arising in the regulation and supervision of cross-selling financial products in the EU. The ESAs – the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority – are responsible for preparing guidelines on the supervision of cross-selling of financial products for each of the securities, banking and insurance sectors. However, due to discrepancies between EU primary legislation which governs such cross-selling practices across the different sectors, the ESAs are unable to provide harmonized guidelines. The primary legislation includes the Mortgage Credit Directive, the Payment Accounts Directive, the Insurance Mediation Directive and the revised Markets in Financial Instruments Directive.  Differences identified relate to the formal wording of the legislation, scope, level of granularity and date of application. The ESAs consider that a more harmonized approach across the sectors would be beneficial for consumers, financial institutions engaged in cross-selling and national regulators supervising the practice. The ESAs therefore urge the Commission to consider reviewing the underlying legislation, including within the Commission's current consultations on Retail Financial Services in the Banking and Insurance Sectors and/or its Call for Evidence on the regulatory framework in financial services.
 
View the ESA's letter.

The European Banking Authority published proposed Guidelines on compensation policies and procedures related to the sale and provision of retail banking products and services. The EBA is seeking to address the issues arising out of the recent cases on misconduct and mis-selling by staff in financial institutions where poor remuneration policies and practices have been identified as a root cause. The proposed Guidelines apply to the remuneration paid to staff employed by banks, credit intermediaries, payment institutions and electronic money institutions when selling mortgages, personal loans, deposits, payment accounts, payment services and/or electronic money. The proposed Guidelines set out the design of remuneration policies and practices, including prevention of conflicts of interest, using quantitative and qualitative criteria for determining variable remuneration and how the rights and interests of consumers should be taken into account. The EBA also proposes that remuneration policies and practices should be documented, and that such documentation should be retained for five years, be accessible to staff and made available to national regulators on request. Responsibility for complying with the Guidelines would rest with the management body of a firm. The consultation closes on March 22, 2016.
 
View the consultation paper.

The International Organization for Securities Commissions published a statement on addressing the regulation of crowdfunding and a report on its survey conducted on how crowdfunding is regulated in twenty-three IOSCO jurisdictions. The objectives of the statement and the report are to highlight emerging trends and issues in crowdfunding and to enhance IOSCO's understanding of how jurisdictions have adopted regulations on crowdfunding. Crowdfunding provides an alternative capital raising avenue, particularly for small enterprises and start-ups, which is beneficial in supporting economic growth but which may pose risks for investor protection. IOSCO's survey found that most jurisdictions had implemented regulations to address issues on conflicts of interest, data protection and fraud. IOSCO believes that more attention is required on the risk of default or failure of start-ups, potential failure of crowdfunding platforms, illiquidity, money laundering, fraud and terrorist financing as well as the suitability of any particular platform for an investor. IOSCO urges policy makers and regulators to consider the steps taken in some jurisdictions to address the risks of crowdfunding, including the imposition of registration requirements for funding portals, setting disclosure requirements for issuers and funding portals and requiring the appointment of a third party custodian to hold investor assets. In addition, the cross-border risks involved in crowdfunding should either be addressed by restricting cross-border fundraising or implementing a coordinated approach between relevant jurisdictions.

View the statement.

View the survey.

The European Commission announced that it had formally requested 10 EU countries to fully implement the EU Deposit Guarantee Schemes Directive which was due to be implemented into national law by July 3, 2015. The countries - Belgium, Cyprus, Estonia, Greece, Italy, Luxembourg, Poland, Romania, Slovenia and Sweden - must implement the DGSD within two months. If any of these countries fails to do so, the Commission may refer them to the Court of Justice of the EU. In October, the European Commission referred the Czech Republic, Luxembourg, the Netherlands, Poland, Romania and Sweden to the Court of Justice of the EU for failing to transpose the Bank Recovery and Resolution Directive into national legislation in time.

View the press release.

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.