APCC Regional Forum September 2014

Agenda – Registration, tea and coffee – Welcome and introduction Ray Cohen, APCC Director – FCA Effective Communication with smaller firms Matthew Thompson, FCA Associate, Thematic Investment and Communication Project – FCA Consumer Credit Authorisation Keith Cooper, FCA Manager - Debt, Credit & Regulatory Permissions/Credit Authorisations Division/Consumer Credit – Tea and Coffee Break – FOS – Update on the Ombudsmans’ work with Consumer Credit Firms Ian Woodman, FOS Outreach Manager – BIBA and the changing experience to consumer claims in changing regulation Andrew Gibbons, BIBA Board member & Chairman of the BIBA Claims Working Group – Close APCC update and open forum

FCA Restricted Effective Communications with Small Firms APCC Presentation Matthew Thompson 3

The importance of effective communications 4 RegulationCompliance

Effective Communications Should… 1.Reach the right audience 2.Explain how the information affects that audience 3.Encourage the right action to be taken 5

How are we communicating? – Direct sector specific information Website – Discussion Papers, Guidance Video – RDR, Risk Outlook Face to Face – Workshops, Speeches Trade Press – Consumer credit Social Media - Twitter 6

The role of compliance consultants 7 RegulationCompliance

Your views… 8

Unrestricted Consumer Credit FCA authorisation 9

Unrestricted Today… Overview of application process Experience to date Questions No detail on technical matters or specific applications/business models 10

Unrestricted Our approach 11 FCA approach Gateway is key High minimum standards Getting to know firms Flexible for different size firms

Unrestricted The firm journey 12 Interim Permission Full application New entrant VoP Full authorisation

Unrestricted When to apply? 13 Now If firms want to start offering consumer credit Your application period If firms have interim permission If firms miss this date, they will need to stop regulated credit activities Firms can still prepare now, so they are ready to apply

Unrestricted How much it costs to apply Note – income figures must be right –Brokers - amount paid for credit services –Amount from consumer credit activities – not turnover Firms will need to pay an application fee when they apply The fee will be a calculation based on how complex we think the application is and the consumer credit income We have put all firms into different complexity categories based on what they do: –Limited permission –Straightforward: eg credit broker –Moderately complex: eg, lender –Complex: eg debt management company 14

Application fee breakdown 15

Unrestricted Firm meetings Firm visits The application journey 16 Application received Systems Databases Convictions Decision Further information requests Case officer assessment Initial vetting Risk scoring Team allocation Hybrid cases

Unrestricted Help for firms 17 Webinars ‘Credit Ready’ Packs Website – FAQs & guidance Checklists Speaking events Help text in Connect Case officer support Contact Centre Keep the FCA updated on any firm changes – check and update CCI.

Unrestricted Timescales and progress How long – depends on complexity and quality. –Statutory Deadline – 6/12 months Have completed a number of more detailed assessments –Visits, firm meetings and conference calls AR progress & volumes –Too soon to say – Principal Application Period has only just closed and these are being assessed –1 st application period soon and this will dramatically change our current portfolio 18

Unrestricted Experience so far Permissions –Wrong ones –Limited permission –‘Just in case’ Criminal convictions – significant events Failing to disclose all controllers Lack of documents – secci, adverts, credit agreements etc Unclear business models Lack of competence Over reliance on 3 rd parties –Brokers –Advisors 19

Unrestricted Your role? What can you do to ensure rapid progression? Complete business models –Why permissions are required –How the business will work, what will the business do and why, and how it will make its money –Examples of key docs and advertising –How the firm is set up, who works there and their role, skills and experience –Who owns or influences the business (controllers) –Compliance strategy –Financial information –The firm’s history and full disclosure of any ‘significant events’ 20

Unrestricted Your role? Bespoke applications Remember we need to hear from the firm – especially during visits Honest and transparent with firms –Cold calling –Need for a consultant –Authorised/approved by FCA 21

Unrestricted Questions? 22

© May not be reproduced without permission of Financial Ombudsman Service Ltd 23 workingtogether Association of Professional Compliance Consultants September 2014

© May not be reproduced without permission of Financial Ombudsman Service Ltd 24 what does the ombudsman do?  set up by law … … as an alternative to the courts  to resolve disputes … … and help both parties move on  share our experience and insight  not a regulator!

© May not be reproduced without permission of Financial Ombudsman Service Ltd 25 and how do we do it? free informalimpartial independent

© May not be reproduced without permission of Financial Ombudsman Service Ltd 26 the tools we use inquisitorial powers ‘fair and reasonable’ outcomes inquisitorial powers

© May not be reproduced without permission of Financial Ombudsman Service Ltd 27 jurisdiction – which complaints do we cover? activity covered? business covered? eligible complain- ant? within UK? complaint ‘in time’?

© May not be reproduced without permission of Financial Ombudsman Service Ltd 28 when is a business covered?  a business is subject to our jurisdiction where:  it is FCA-authorised to carry on any FCA-regulated activity (= Compulsory Jurisdiction)  this can also include ‘inherited’ jurisdiction  it subscribes to our Voluntary Jurisdiction  Consumer Credit Jurisdiction now fallen away  post April 2014, former OFT licensees should be FCA (interim) authorised firms

© May not be reproduced without permission of Financial Ombudsman Service Ltd 29 process - how we deal with complaints enquiries and referrals investigation resolution by consent review final decision

© May not be reproduced without permission of Financial Ombudsman Service Ltd 30 redress - putting things right interest financial losses ‘trouble and upset’ costs (rarely) directions

© May not be reproduced without permission of Financial Ombudsman Service Ltd 31 our workload

© May not be reproduced without permission of Financial Ombudsman Service Ltd 32 consumer credit complaints over time

© May not be reproduced without permission of Financial Ombudsman Service Ltd 33 consumer credit numbers product type2013/142012/132011/122010/112009/10 point of sale loans1,4181,9392,2472,7651,735 hire purchase1,5111,6211,5451,3951,430 payday loans ?? catalogue shopping credit broking debt collection store cards other1,4431,2401, ,138 total7,6308,4707,4167,2506,329

© May not be reproduced without permission of Financial Ombudsman Service Ltd 34 help from us  online at:  technical advice desk helpline:

© May not be reproduced without permission of Financial Ombudsman Service Ltd 35 any questions?

ANDREW GIBBONS ACII MIoD Managing Director Mason Owen Financial Services Ltd Chair – Industry Claims Initiative

AGENDA 1.Background 2.Formation of the Group 3.Objectives of the Group & Progress 4.FCA Thematic Review of Personal Lines Claims 5.Future Developments in Claims 6.Q&A

BIBA RESEARCH Carried out January % of brokers believe that insurers are stricter on paying claims More strict due to the economic climate and fraud 66% of brokers were finding it harder to conclude claims

BIBA RESEARCH 75% of brokers have overturned a claim rejection by an insurer in the last year 70% of brokers had secured an increase in claims payment for a client 43% of brokers achieved an average percentage uplift on claims of between 11% and 20%

THE RESULT Public spat Missed opportunity for reasoned debate Confirmation of the Regulator’s interest in this area

MACTAVISH REPORT Insurers dispute half of “significant” business claims since 2008 Insurers take an average of 35 months to settle disputed claims Reasons include breaches of conditions or inadequate information disclosure

INSURANCE TIMES - 3 RD SEPT 14

INDUSTRY CLAIMS INITIATIVE Formed / Launched April 2013 Made up of industry stakeholders Opportunity to explore the issue of claims more thoroughly

MEMBERS

TERMS OF REFERENCE To support the FCA thematic reviews on claims To improve the customer experience of claims To promote positive stories surrounding the industry with particular reference to claims

PROGRESS Claims is Point 6 of the BIBA Manifesto The group is recognised by government The group is recognised by the FCA

POSITIVE STORIES Industry Pays £40m in claims every day Insurance Times – The Knowledge Covered extensively in the Broker Magazine Further work being undertaken by Insurance Times in relation to claims and transparency following FCA Conference

FCA CONFERENCE 2014 Underlined Customer Focus of FCA Customer Outcomes are essential to FCA Loss Ratio as a Measure of Value

EDUCATION OF THE CUSTOMER AXA Insurance – Transparency Project The group is accessible to government and the industry on issues such as flood & Storm Surges Industry responded to flood claims promptly

REVIEW OF INSURANCE CONTRACT LAW Consulted with the Law Commission in relation to their proposals Clarifying the position in relation to warranties Dealing with issues for remedies to contract Insurers can contract out

FCA THEMATIC REVIEW FCA attended the May 2014 meeting of the group John Parker and John King of FCA attended Group had opportunity to question FCA on their findings FCA Specifically Requested a Further Audience with the Group Ahead of the Commercial Review in July 2014

FCA THEMATIC REVIEW FINDINGS Household and travel insurers were investigated and it did not involve loss adjustors Significant scope for improvement was found No systematic avoidance of claims payment found Travel insurance – 30% of the claims either rejected or withdrawn 28% of home claims were rejected or withdrawn

FCA THEMATIC REVIEW FINDINGS No indication of how many claims were generated through the broker or direct market Main reason for claims failing was that the client was mislead or there was poor communication 78% - 83% of customers understood excesses 1,500 cases looked at specifically

FCA THEMATIC REVIEW FINDINGS 1 in 5 people felt like complaining but only two thirds of those did complain Many complaints arose from the supply chain (e.g loss adjustors/contractors not turning up) Recording of calls with a view to turning claims down was an issue Better ownership within insurers was highlighted by FCA as requiring improvement

FCA THEMATIC REVIEW FINDINGS The burden of proof of the insured to find receipts was too onerous Emergency response lines for travel insurance were found to be extremely good The length of policy documents was found to be too long and complicated Travel – Medical Declarations

SUMMARY Good in parts Not so good in others No systematic avoidance of claims

SUMMARY No brokers investigated Claims Issues may have arisen as a result of poor distribution Commercial claims review to follow

ANY OTHER BUSINESS The group discuss topical issues such as the supply chain Reservation of rights Basis clauses

IN SUMMARY We can Improve Claims as an Industry Just Ticking the Boxes of Compliance Does Not Always Produce the Feeling of a Good Customer Outcome Claims is the Shop Window and Should be Resourced and Managed Appropriately Concentrate on the Quality!!

QUESTIONS

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