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Raising Standards in Money Advice & Financial Inclusion in Scotland www.moneyadvicescotland.org.uk Raising Standards in Money Advice & Financial Inclusion.

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Presentation on theme: "Raising Standards in Money Advice & Financial Inclusion in Scotland www.moneyadvicescotland.org.uk Raising Standards in Money Advice & Financial Inclusion."— Presentation transcript:

1 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland The New Consumer Credit Regime The New Consumer Credit Regime Will it do what it says on the tin?

2 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

3 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

4 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland What is the FCA’s approach? Principle based regulation

5 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland The 11 principles to live by

6 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

7 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland Gateway: Comparing then and now OFTFCAEnhanced protection To become licensed, firms must: Pass basic ‘fitness’ test as set out in CCA Assessment of competence of higher risk firms at gateway To become authorised, firms must: Meet threshold conditions which are more demanding than the CCA fitness test Report more information which will be subject to greater scrutiny by the FCA Obtain pre-approval for those in key roles in firms 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 Firms already in the market will need to pass this new, more stringent gateway by 2016 Approved persons regime will lead to improved compliance by placing responsibility for specific functions on individuals

8 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

9 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland Supervision: Comparing then and now OFTFCAEnhanced protection No ongoing supervision Reliance on third party information, intelligence, information and data gathering Reviews of compliance Close supervision of higher risk firms Less intensive regime for lower risk firms Firms will have regular reporting requirements Thematic work in response to systemic issues More intensive monitoring (with greatest focus on highest risk areas) will help the FCA deal with problems earlier FCA can take a market-wide approach by requiring action from all firms in a sector

10 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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.

11 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland Enforcement: Comparing then and now OFTFCAEnhanced protection Revoke licences Impose conduct requirements on firms, if breached can fine up to £50k per breach Bring criminal and civil proceedings Complementary enforcement role of local authority trading standards services (LATSS) and Department of Enterprise, Trade and Investment (DETI) in Northern Ireland 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 Continued LATSS role in relation to CCA provisions carried forward to FCA regime Enhanced policing of regulatory perimeter (i.e. enforcement against firms without appropriate authorisation/permissions) alongside LATSS/DETI Broad enforcement toolkit and stronger sanctions should act as strong deterrent More frequent and stronger enforcement action should incentivise greater compliance

12 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

13 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

14 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

15 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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.

16 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland Timetable DateRules coming into force 1 April 2014Principles 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 2014Payday – rules on rollovers, CPAs and risk warning on all promotions 1 October 2014 End of CONC transition period Client money rules for certain not-for-profit advice bodies 1 April 2017Debt management - end of transition period for prudential requirements that permits firms not to deduct certain items from there prudential resources

17 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

18 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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?

19 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland 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

20 Raising Standards in Money Advice & Financial Inclusion in Scotland Raising Standards in Money Advice & Financial Inclusion in Scotland Money Advice Scotland’s review of the new regime. More details coming soon. For more information contact Craig

21 The ingredients in the Tin Peter Maguire Director of Strategy, Operations & Training Arum

22 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

23 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.

24 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!

25 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.

26 The Five Pillars of EQ SELF AWARENESS SELF CONTROL SELF MOTIVATION SOCIAL SKILLS EMPATHY

27 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

28 IQ vs EQ IQ vs. EQ

29 The Objective of EQ To achieve an emotional balance – EQuilibrium

30 The Emotional Orbit EQ EVENTSBEHAVIOURSEMOTIONS

31 The EQ Forces Friends ColleaguesFamily Customers Strangers Service Providers

32 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

33 The Key to it All Amy G Dala

34 Meet Amy Amy G Dala - Amygdala

35 Pillar 1 Example – Self Aware “oh what a great gift we would have, if we could only see ourselves as others see us………”

36 Answer The late, great, Rabbie Burns

37 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”

38 The Dreaded Collections Call ? Customer Worried? Fearful? Embarrassed? Depressed? Agent Having a good day? Having a bad day? Stressed? Behind target?

39 Pear shaped EQ Agent - poor control, aggression, doesn’t listen, big brother attitude ? Customer - doesn’t see resolution, gets frustrated, clams up or becomes aggressive Lose / Lose Customer - becomes angry, abusive, defensive Agent - gets “hooked”, poor control, fails to manage customer, takes it personally, doesn’t offer help. Lose / Lose

40 High IQ = Emotional Ease WIN / WIN

41 The Old Collections Way Cranking up the diallerspin, spin Shouting the loudestaggressive Inflexible and false scriptingMcDonalds Veiled threatssee you in Court Full balanceor else Cash is kingbadly designed bonus schemes Not listening to customerreason for non payment Affordability?liar, they have Sky TV Stickability?I’ll call again next month Anger from customerI’ll terminate this call Reactive negative repercussionspositive?

42 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

43 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

44 How it will be Big change in communication behaviours Demonstrable ROI from EQ Real TCF From the heart rather than the script Positive consequences and win/win outcomes Right thing for customer, business and regulator

45 Thank You Have a relaxing and emotionally stress free day / conference / life


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