Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
The New Consumer Credit Regime
Will it do what it says on the tin?
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
What’s new?
• As of 1 April 2014, the Financial Conduct Authority has taken over Consumer Credit regulation:
• Stronger powers
• More resources
• Faster and more flexible response to change
• “The government firmly believes that the FCA will be better equipped to tackle the consumer
detriment and malpractice that has taken place under the… (existing) regime. The transfer
will…mean a fundamentally new approach to regulating consumer credit, ensuring that
irresponsible firms and bad practice will have no place in the consumer credit marketplace.”
Government consultation, March 2013
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
FCA has a different approach
“We are committed to creating a regime that builds on
what the Office of Fair Trading had
in place, while bringing in the FCA’s approach to
regulation, most notably in how we supervise
firms.”
Martin Wheatley, FCA Consultation Paper, October
2013
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
What is the FCA’s approach?
Principle based regulation
1 Integrity
A firm must conduct its business with integrity.
2 Skill, care and diligence
A firm must conduct its business with due skill, care and diligence.
3 Management and control
A firm must take reasonable care to organise and control its affairs responsibly
and effectively, with adequate risk management systems.
4 Financial prudence
A firm must maintain adequate financial resources.
5 Market conduct
A firm must observe proper standards of market conduct.
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
The 11 principles to live by
6 Customers' interests
A firm must pay due regard to the interests of its customers and treat them fairly.
7 Communications with
clients
A firm must pay due regard to the information needs of its clients, and
communicate information to them in a way which is clear, fair and not
misleading.
8 Conflicts of interest
A firm must manage conflicts of interest fairly, both between itself and
its customers and between a customer and another client.
9 Customers: relationships of A firm must take reasonable care to ensure the suitability of its advice and
discretionary decisions for any customer who is entitled to rely upon its
trust
judgment.
10 Clients' assets
A firm must arrange adequate protection for clients' assets when it is responsible
for them.
11 Relations with regulators
A firm must deal with its regulators in an open and cooperative way, and must
disclose to the appropriate regulator appropriately anything relating to the firm of
which that regulator would reasonably expect notice. 1
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Authorisation – “The Gateway”
• To be able to do business, all firms and certain individuals will
need approval from the FCA.
• “only the right firms, run by the right people, and selling the
right products, to the right consumers, are approved to do
business”
• The FCA will approve individuals who perform certain specified
functions. In order to be approved, an individual must satisfy
the FCA that he/she can meet, and maintain, the criteria for
approval (known as the ‘fit and proper’ test), and then perform
their controlled function in accordance with a set of standards
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Gateway: Comparing then and now
OFT
FCA
Enhanced protection
To become licensed,
firms must:
To become authorised, firms must:
Greater scrutiny at the gateway to the
market, especially for higher risk firms, will
improve standards and root out rogue firms
before they enter the market
Pass basic ‘fitness’ test
as set out in CCA
Assessment of
competence of higher
risk firms at gateway
Meet threshold conditions which
are more demanding than the CCA
fitness test
Firms already in the market will need to
Report more information which will pass this new, more stringent gateway by
be subject to greater scrutiny by the 2016
FCA
Approved persons regime will lead to
Obtain pre-approval for those in key improved compliance by placing responsibility
roles in firms
for specific functions on individuals
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Supervision – Ensuring continued high-standards
• An approach that is pro-active, proportionate and focussed
on treating customers fairly (TCF)
• Three key elements:
- Pro-active work: Firm focussed supervision,
proportionate
- Reactive: Event-driven work, dealing with current and
emerging problems
- Thematic issues and products: intensive campaigns
looking at whole sectors or products
• ‘Guidance’ sometimes means something different
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Supervision: Comparing then and now
OFT
FCA
Enhanced protection
No ongoing supervision
Close supervision of higher risk
firms
More intensive monitoring (with greatest
focus on highest risk areas) will help the
FCA deal with problems earlier
Reliance on third party
information,
intelligence,
information and data
gathering
Less intensive regime for lower risk
firms
Firms will have regular reporting
requirements
Reviews of compliance
Thematic work in response to
systemic issues
FCA can take a market-wide approach by
requiring action from all firms in a sector
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Rule-making powers
• The FCA also has the power to make rules which are binding on
firms.
• Rule- making allows the regulator to respond more quickly to
changes in the market, to address practices causing consumer
detriment more speedily and to enforce breaches of the rules.
• Detailed rules are complementary to the Principles for
Businesses.
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Enforcement: Comparing then and now
OFT
FCA
Enhanced protection
Revoke licences
Powers to bring criminal, civil and
disciplinary proceedings, to withdraw
authorisation, ban from financial
services, suspend firm or individuals for
12 months, issue unlimited fines
Broad enforcement toolkit
and stronger sanctions
should act as strong
deterrent
Impose conduct requirements on
firms, if breached can fine up to
£50k per breach
More frequent and stronger
Bring criminal and civil proceedings Continued LATSS role in relation to CCA
enforcement action should
provisions carried forward to FCA regime incentivise greater
Complementary enforcement role
compliance
of local authority trading standards Enhanced policing of regulatory
services (LATSS) and Department of perimeter (i.e. enforcement against
Enterprise, Trade and Investment
firms without appropriate
(DETI) in Northern Ireland
authorisation/permissions) alongside
LATSS/DETI
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Redress & Complaints
Unlike OFT, FCA:
• Can require redress schemes
• Require firms to publish complaints data if a significant number of
complaints are received
• Has introduced prudential requirements for most debt management
firms
• Continued access to FOS and extended to include not-for-profit firms
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
What else will change?
• Well, that depends…
• Additional rules for payday loan (high-cost short-term credit) and debt
management firms
• Affordability checks for every agreement
• Clear, fair and not misleading financial promotions
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Payday lenders (HCSTC)
• Limit the number of times a loan can be ‘rolled over’ to two
• Limit the number of times they can seek payment using a continuous
payment authority to two and ban on part-payment
• Inform customers about sources of free debt advice before refinancing a
loan
• Risk warnings on loan adverts
• Price cap to be introduced
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Debt Management Firms
• New prudential standards and client money requirements
• Specific conduct rules (largely based on OFT Debt Management
Guidance)
• Requirement to have an approved person for compliance oversight
• New rules relating to
- Debt management firms dealing with lead generators
- Signposting consumers to the availability of ‘free’ debt advice
- Substantial proportion of client money going towards paying off
creditors from month one of a debt management plan
- New perimeter guidance setting out types of ‘regulated’ debt
advice.
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Timetable
Date
Rules coming into force
1 April 2014 Principles for business
Consumer Credit sourcebook (CONC) – albeit with six month transition period
FSMA enforcement powers
Payday – Risk warning (electronic promotions)
Debt management – signposting of free debt advice & ensuring fees for plans are
spread
1 July 2014 Payday – rules on rollovers, CPAs and risk warning on all promotions
1 October
End of CONC transition period
2014
Client money rules for certain not-for-profit advice bodies
1 April 2017 Debt management - end of transition period for prudential requirements that
permits firms not to deduct certain items from there prudential resources
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Will it do what it says on the tin?
• Broadly welcomed
• Expected to improve standards and reduce the number of rogue firms
• BUT can’t expect miracles – finite resources and balancing consumers
having continued access to the services they need
• Won’t solve some wider social issues – rising living costs vs flat
income levels, buy now pay later culture, lack of money management
skills
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
What do you think?
What impact do you think these rules are having / will have?
Do the new rules go far enough?
What won’t be solved (e.g. the wider social issues)?
What other areas need looking at?
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Additional reading
FCA final rules for Consumer Credit (February 2014)
FCA consultation document for new credit rules (October 2013)
Government consultation – transferring credit regulation to FCA (March
2013)
FCA webpages for Consumer Credit
Raising Standards in Money Advice & Financial Inclusion in Scotland
www.moneyadvicescotland.org.uk
Money Advice Scotland’s review of the
new regime.
More details coming soon.
For more information contact Craig
c.simmons@moneyadvicescotland.org.uk
The ingredients
in the Tin
Peter Maguire
Director of Strategy, Operations &
Training
Arum
In the Tin……
Evidenced ‘good practice’ ingredients
Balanced diet between commercialism and compliance
Good customer interaction vitamins
Enjoying the tasty outcomes
Wanting more of the same
A great experience
The Secret Ingredient
Front line staff are one of the best assets the industry current has in place to
earn top marks in the regulatory score card
Empower and support front-line staff to engage with customers and make
appropriate decisions at all stages
Provide greater flexibility to support fair treatment of individual customers,
based on specific personal and financial circumstances
Having policies will not be enough. Firms will need to demonstrate, invest
and train.
Ultimately in the TCF quest, it is the interactions of the collections teams with
customers that will drive success.
The secret ingredient? EQ.
What is EQ?
Stands for ‘Emotional Quotient’
Sometimes referred to as EIQ
A measure of ones Emotional Intelligence
The higher the EQ, the more we achieve an Emotional Balance between two
or more people
Often unfairly plays second fiddle to its brother IQ!
EQ – all the ‘great’ people have it
Daniel Goleman, well-known for popularising the term ‘emotional intelligence’,
is adamant that EI can be learned through the right coaching and training.
Goleman maintains that great/exceptional leadership styles are underpinned
by EI and not traditional IQ. Good leaders, he says, are able to master a
number of these styles and apply them when needed.
EMPATHY
SOCIAL
SKILLS
SELF
MOTIVATION
SELF
CONTROL
SELF
AWARENESS
The Five Pillars of EQ
HR
Changes in recruitment – IQ versus EQ
Right-shoring
Onshore
Offshore
In-house
Outsourced
Changes in Training and Development
Communication styles, techniques and behaviours
Listening not hearing
Body language
Vocal style – PETER ICU
Use of words / phrases
IQ vs EQ
IQ vs. EQ
The Objective of EQ
To achieve an emotional balance – EQuilibrium
The Emotional Orbit
EVENTS
EQ
EMOTIONS
BEHAVIOURS
The EQ Forces
Friends
Customers
Colleagues
Strangers
Family
Service
Providers
The 3Rs of EQ
From a CUSTOMER point of view success is measured in terms of how well
collections teams are able to:
REASURRE – have the confidence to have a natural, adult conversation with the
customer and build a platform of trust.
RELATE – deal with the customer as an individual by adapting communication
style and questions to match the customer’s position.
RECOMMEND/RESOLVE – have the credibility to shape the conversation to reflect
a balanced agenda and provide customers with solutions that work for both them
and the organisation
The Key to it All
Amy G Dala
Meet Amy
Amy G Dala - Amygdala
Pillar 1 Example – Self Aware
“oh what a great gift we would have, if we could only
see ourselves as others see us………”
Answer
The late, great, Rabbie Burns
The Behavioural See-Saw Mix
Vocal Style
70/30 – VS / Words
Words Used – powerful or weak
Listening or simply hearing or neither?
Body Language
Inner Voice Control
“Empathetic Assertiveness”
The Dreaded Collections Call
Agent
Having a good day?
Having a bad day?
Stressed?
Behind target?
Customer
Worried?
Fearful?
Embarrassed?
Depressed?
?
Pear shaped EQ
Agent - poor control, aggression,
doesn’t listen,
Customer - becomes angry, abusive,
defensive
big brother attitude
Customer - doesn’t see resolution, gets
frustrated, clams up or becomes aggressive
Lose / Lose
Agent - gets “hooked”, poor control,
fails to manage customer, takes it
personally, doesn’t offer help.
?
Lose / Lose
High IQ = Emotional Ease
WIN / WIN
The Old Collections Way
Cranking up the dialler
spin, spin
Shouting the loudest
aggressive
Inflexible and false scripting
McDonalds
Veiled threats
see you in Court
Full balance
or else
Cash is king
badly designed bonus schemes
Not listening to customer
reason for non payment
Affordability?
liar, they have Sky TV
Stickability?
I’ll call again next month
Anger from customer
I’ll terminate this call
Reactive negative repercussions
positive?
The New Collections Way
An EQ based modular call structure
Early building of rapport and trust
Identify reasons for non payment quickly
Good vocal style
Empathetic Assertiveness
Empowered to make decisions - affordability
Fair and ethical questioning
Highly qualified EQ personnel – right communication
Good guys get right payment – stickability - real TCF
Listen-Pause-Understand-Respond
Achieve an Emotional Balance – win/win
Our View of EQ in Today’s Creditor World
How it is:
Still the exception rather than the rule
Executives ‘talk the talk’ in the Boardroom
Not well implemented on the floor
Poor at handling angry customers – low EQ
Poor questioning – naturally closed, don’t get to the root cause
Poor listening – stop listening when emotions affected negatively
Don’t deal with aggression well
Don’t think of the customers emotional state
Too formal and dictatorial – negative repercussions
How it will be
Real TCF
Positive
consequences
and win/win
outcomes
Demonstrable
ROI from EQ
From the heart
rather than the
script
Big change in
communication
behaviours
Right thing for
customer,
business and
regulator
Thank You
Have a relaxing
and emotionally
stress free
day / conference / life
