UK financial regulatory and compliance highlights: Q1 2025
In this update, we focus on three current regulatory issues that are high on the agendas of many Voyc clients and followers. We hope you find it informative and valuable.
1. FCA motor finance review
For months, this issue has been in the spotlight for motor finance lenders and intermediaries, including car dealers arranging customer credit facilities.
It focuses on discretionary commission arrangements (DCAs). Lenders allowed intermediaries to use these arrangements to increase interest rates and hence their commission earnings – without disclosing this to the customer.
The FCA banned DCAs in 2021 and launched its review of their past use in January 2024. If it concludes that DCAs were unfair, it wants to ensure that customers affected are fairly compensated.
Current situation
Right now, the review is at a critical stage.
In October 2024, the Court of Appeal judged three cases involving motor finance customers and lenders, focusing on commission payments.
Significant points in the judgment were:
- Motor dealers must act impartially and in the customer’s best interests when arranging finance.
- Commissions must be fully disclosed to customers, who must also give their consent to these payments.
- If commissions were not disclosed, lenders are responsible for ensuring that the resulting harm to the customer is redressed.
- Even if the commissions are disclosed, brokers have a fiduciary responsibility for ensuring that the customer provides fully informed consent.
Two lenders raised an appeal against this judgment, which will be heard by the Supreme Court from 1st to 3rd April.
If the Supreme Court upholds this appeal, the FCA will decide its next steps on DCAs andcommission disclosure. If it dismisses the appeal, the FCA will still decide on action regarding DCAs.
Likely redress scheme
On 11th March, the FCA released a statement, indicating that it will announce next steps within 6 weeks of the Supreme Court’s decision.
If the FCA concludes that consumers have lost out from widespread failings, it will probably consult on an industry-wide redress scheme.
This could have profound implications for the motor finance industry.
Such a scheme would probably require firms to contact every customer affected and pay compensation according to rules set out by the FCA.
If this applies to DCAs only, the costs to the industry could be high. Should it apply to commission disclosure cases also, those costs could be breathtaking.
For now, the industry waits – in anticipation of the potential actions that the FCA’s decisions might demand.
Voyc’s viewpoint
This issue emphatically underlines the FCA’s commitment to delivering and enforcing good outcomes as set out in the Consumer Duty.
Voyc was created to help regulated financial services firms deliver consistency and care in every customer interaction. We’re committed to supporting high quality and compliance standards in line with changing regulatory requirements.
2. FCA review of firms’ treatment of customers in vulnerable circumstances
“Vulnerable customers” have been a compliance focus in the financial services industry for many years.
In 2024, the FCA reviewed how the industry treats customers in vulnerable circumstances. They concluded that these customers were still more likely to experience poor outcomes than those without vulnerability characteristics.
Research connected with the review also shows that among financial services customers in vulnerable circumstances:
- Only 4 in 10 have provided details of their vulnerability to the firms they deal with.
- Just 19% feel that their providers encourage them to do so.
Based on their findings, the FCA recently published guidelines featuring examples of good practice and areas for improvement.
How Voyc can help
Having monitored over 50 million financial services calls, we know it’s critically important to treat every customer in vulnerable circumstances as an individual with unique needs.
That’s why we built the Voyc platform to automatically identify and flag signs of vulnerability with “off the shelf” and fully customised Vulnerable Customer Alerts. This ensures that issues can be followed up and resolved in the shortest possible turnaround time.
What’s more, the data and reports generated through the Voyc platform can provide robust regulatory evidence of how customers in vulnerable circumstances are handled.
Our white paper, “Delivering care and good outcomes in conversations with vulnerable customers,” is a popular publication among contact centre and compliance professionals across the industry.
3. FCA home ownership initiatives
The FCA is taking steps to help make home ownership easier, more accessible and less complex for UK consumers.
The UK government welcomes these initiatives, which could offer promising opportunities for firms involved in the mortgage market.
They include:
- Promoting the flexibility that already exists in the “stress testing” of mortgage applications against potential interest rate rises. With the trend now towards lower rates, this could open doors to significant numbers of new borrowers.
- Starting March 2025, exploring how developments in smart data can improve the accessibility and quality of mortgage products and services.
- Starting May 2025, consulting on proposals to simplify remortgaging with a new lender, including more streamlined advice options and the ability to cut costs by reducing the mortgage term.
- Starting June 2025, a public discussion on the future of the mortgage market. This will include more flexible affordability testing and product innovation possibilities – such as the growing need to cater for borrowing at older ages.
The FCA stresses that the Consumer Duty is outcomes-based rather than focusing on processes and standards. This means firms have more flexibility than before to help creditworthy consumers access a quality mortgage solution.
Voyc’s viewpoint
We’re pleased that the regulator is positively addressing the ongoing serious housing problems in the UK.
Delivering high-quality outcomes for the consumer is what matters and all the planned initiatives aim for that result.
Voyc is designed to support excellent consumer outcomes by handling every customer interaction with consistency and care.
Could Voyc help your firm consistently achieve high compliance and regulatory performance?
Find out more with a no-obligation discussion or free demonstration.
Contact Voyc here or call us on 0207 459 4384
