This annual publication explores some of the core focus areas for UK-regulated financial services firms in the year ahead. 2023 saw significant progress on the regulatory reform agenda, and many measures consulted on or reviewed as part of the Edinburgh Reforms will be finalised and/or implemented in the course of 2024.
We also saw the passing of the Financial Services and Markets Act 2023, many provisions of which have already come into effect and have made important changes to the
The joint statement provides helpful guidance on the civil rights implications of considering an individual’s immigration status under the ECOA.
By Parag Patel, Justin Talarczyk, and Deric Behar
On October 12, 2023, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) issued a joint statement (the Joint Statement) to clarify the civil rights implications of considering an individual’s immigration status under the Equal Credit Opportunity Act (ECOA). The Joint Statement is intended to assist creditors and borrowers in understanding these implications.
The ECOA and its implementing regulations (known as Regulation B) do not expressly prohibit the consideration of immigration status. However, they do prohibit creditors from using immigration status to discriminate on the basis of national origin, race, or any other protected characteristic.[i] The DOJ and CFPB are responsible for enforcing the antidiscrimination provisions of ECOA, which are crucial for ensuring fair, competitive, and nondiscriminatory lending markets.[ii]
The changes will significantly modernise the regime and enhance consumer protections.
By Nicola Higgs, Becky Critchley, Ella McGinn, and Charlotte Collins
The EU has adopted a new Consumer Credit Directive, known as CCD2, which repeals and replaces the existing EU consumer credit regime under the 2008 Directive. Member States are required to transpose CCD2 by 20 November 2025, and apply the new measures from 20 November 2026. CCD2 aims to keep pace with the digital transformation that has led to new credit products and services being offered which may currently be outside the scope of regulation, and different consumer behaviours and expectations. It is also intended to significantly enhance consumer protection, and to reduce in some respects the current lack of harmonisation across Member States that has resulted from unclear provisions in the 2008 Directive.
CCD2 makes wide-ranging changes to the existing regime, with the European Commission taking the view that the best way forward was to proceed with a wholesale revision of the consumer lending framework rather than continue to make incremental amendments to the 2008 Directive. In this blog post we outline some of the key changes to the regime.
A proposed rule would lower the maximum amount that large debit card issuers can charge merchants for each transaction.
By Arthur Long, Parag Patel, Barrie VanBrackle, and Deric Behar
On October 25, 2023, the Board of Governors of the Federal Reserve System (FRB) published a proposal that would lower the maximum interchange fee — transaction fees that a merchant must pay to card issuers whenever a customer uses a debit card to make a purchase — that a debit card issuer can charge per transaction (the Proposal). The Proposal would apply only to issuers with at least $10 billion in total consolidated assets (covered issuers). It would also establish a process and formula for updating the maximum fee amount every other year going forward, based on data voluntarily reported by covered issuers to the FRB.
As the pace of reform increases, we take a look at key developments and the timeline ahead.
Significant progress has been made on the Edinburgh Reforms since they were announced in December 2022, with developments gathering pace before the summer break. Given the breadth and speed of the reforms, now is a good time to take stock of where things stand and what we can expect in the months ahead. In this publication, we highlight some of the key developments and set out expected dates for future progress.
A consultation that will remain open until 11 April 2023 offers further clarity on the proposals to regulate buy-now-pay-later products.
By Rob Moulton, Becky Critchley, Ella McGinn, and Dianne Bell
On 14 February 2023, HM Treasury published its consultation and accompanying draft legislation on the regulation of buy-now-pay-later (BNPL) lending. The consultation follows the proposals in HM Treasury’s prior publications released in October 2021 and June 2022, since the government announced its intention to bring currently unregulated BNPL products within scope of the regulatory perimeter. This latest consultation provides some welcome clarity on the approach to this upcoming sea change for firms operating in the BNPL space.
The key changes will be effected by amending the current fixed-sum interest-free credit exemption in Article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). BNPL lending usually falls within this exemption as such agreements meet the conditions as interest-free loans repayable in under 12 months and in 12 or fewer instalments. Article 60F(3), which provides an exemption for running-account credit, will remain unchanged.
The timetable sets out three tranches of extensive regulatory changes to UK and EU law in 2023 and 2024.
By Rob Moulton, Becky Critchley, Denisa Odendaal, and Dianne Bell
The “Edinburgh Reforms”, a series of announcements made on 9 December 2022 by the Chancellor of the Exchequer (see here), set out the UK government’s reforms to drive growth and competitiveness in the financial services sector. The Reforms build upon the reform agenda that the government is taking forward through the Financial Services and Markets (FSM) Bill and which implements the Future Regulatory Framework Review.
The Woolard Review emphasises the urgency to bring all BNPL products under FCA supervision and sets out recommendations for the unsecured credit market.
By Stuart Davis, Becky Critchley, and Anna Lewis-Martinez
The UK government has announced that interest-free buy-now-pay-later (BNPL) credit agreements will be regulated by the FCA. Currently, the BNPL market operates under an exemption from regulations for consumer credit lending.
The announcement comes as a review of the unsecured credit market, led by Christopher Woolard, unexpectedly urgently recommends regulating all BNPL products.
The Woolard Review (Review) sets out 26 recommendations for the FCA, UK government, and other bodies to reform the unsecured credit market. The recommendations take into account the impact of the COVID-19 pandemic, changing business models, and new developments in unregulated BNPL unsecured lending.