As we have entered the New Year, the regulatory and legislative changes that we had seen from a distance are now just around the corner.
The most rushed changes come from the Insurance Distribution Directive which applies to firms carrying out life insurance and non-investment insurance business. The FCA only recently issued its second policy statement, albeit they are still ‘near final’ rules, with the third (and hopefully final) statement expected this month. Firms should keep a watchful eye on developments as the requirements come into effect 23 February.
Open banking launched earlier this month although 5 of the 9 banks have not been able to meet the deadline, so have deferred implementation until February. Customers will now be able to request that their bank give third party providers access to their data, with customers not being responsible if an unauthorised payment is made. PSD2 comes into effect at the same time, so that these third party providers giving customers access to a single dashboard for their accounts or personalised comparison services will have to be authorised by the FCA. Whether lenders will move to require customers to provide them with more data as a result remains to be seen, as they will be making judgements based on new sets of information with no history cycle to apply criteria. A key factor will be once they acquire this data they cannot “unknow” some of it. This could mean that some cases which might have flown through would now be rejected due to gambling or other cashflow data. If lenders go further in the data they access, they will have to soon justify why they need to hold it under the General Data Protection Regulation effective 25 May.
If firms consider what this regulation is trying to achieve then they will not only find it easier to comply with, but also end up in a positive position from a regulatory perspective. In the current world we have tech firms holding full profiles of individuals and using their data for purposes that are not particularly transparent, nor do they allow opting out of additional processing. The regulation is designed to address this by empowering individuals and giving them more rights; it will be consumers who control their data. If firms aim to effectively communicate how data is held and what it will be used for, instead of relying on complex terms and conditions or trying to find alternative ways to avoid complying with certain requirements, then these firms are unlikely to be a focus for either the FCA or Information Commissioner’s Office. The ICO is continuing to issue guidance for firms and AMI is updating its member factsheet.
Later this year we expect to see developments in the FCA’s mortgage market study, with the interim report due in Spring and the final report due Q4, which will outline any remedies. The study has focused on whether competition can be improved for the benefit of consumers, in particular whether the available tools (including advice) help consumers make effective decisions and if commercial arrangements lead to consumer detriment. With the recommendations not due until Q4 we can at least expect any changes not to be effective until 2019/20.
With this year focusing on individual empowerment, access and protection, 2018 really is the year of the consumer. This perspective may help firms in their preparations, but they should also be ready to embrace technology if they are to survive the disruptors that these changes allow to enter this market.
Senior Policy Adviser