DCA: Discretionary Commission Arrangements FAQ

Following the recent announcement from the FCA in relation to DCAs (Discretionary Commission Arrangements) and ahead of tomorrow’s ‘Temporary changes to handling rules for motor finance’ Webinar, Kind’s Selena Tye thought the following Frequently Asked Questions may come in handy.

Q: Our firm never did DCA’s, therefore we do not need to act, do we?

A: Firms need to be mindful that the scope of work may go further than just DCA’s, therefore think about any other arrangements that you have in place.  To head off unnecessary contact from customers and others in relation to DCA, you may want to make a statement in your website making it clear that your firm did not offer these.

Q: We know we have a problem with DCA, but we don’t know where to start?

A: A great start would be to:

  • Identify your timeline – when were DCA’s offered and for how long?
  • Identify your customers that are impacted.
  • Identify what your financial exposure could be, based upon recent FOS decisions.
  • Identify your resource and additional requirements.
  • Identify how you will engage do you keep the regulator informed.

Q: What if we are unable access data or the data quality is variable/not reliable

A: You need to quickly establish what you can do and what you are unable to do, create a methodology which enables you to proceed with confidence.

Q: How do we identify customers with BAU complaints who fall within the DCA population?

A: It is important that first line staff are fully trained on customer outcomes and can identify those that are affected.  You might want to think about a soft hand off process where these customers can be transferred to a specialist team to help further.

Q: With the timescales given to us by the regulator, normal business pressures and to give this the attention that’s needed, are there any quick wins that we can use?

A: Look back at previous projects that have impacted on your customers base, specifically around complaints and commission payments to see if there are any adaptable processes or metrices that you can use.

What about your current MI, is there anything that you can take from there to help with identification of customer cohorts.

Are you able to flex your current teams to accommodate increased work.  Setting up a project team to support will enable ring fenced specialist resourcing.

Q: How do we know if we are doing this right?

A: There will be support from internal compliance and audit teams who can assist with oversight and guidance over regulatory expectations. Think about reaching for external help to validate your internal findings and provide expert assistance.

Q: We need to engage with the regulator, how are we best to approach this.

A: Think about your PRIN 11 obligations and if you must make a notification, make sure you have a plan in place for rectification purposes.

Kind Consultancy’s 2023 Year in Review

One of the great things about working at Kind is that we never really have a huge amount of downtime. It’s never quiet, and never boring. The downside of keeping up that year-round momentum is that it can be tricky to remember to take a step back and look at what we’ve achieved – and we achieved a lot this year.

Kind Consultancy has steadily grown every year since I created the company alongside Lynsey Moore, but this year was particularly explosive – we took on 2 new members of staff, bolstering our capacity to keep up with client demand. This has also allowed us to add a new specialist Change & Transformation team, led by Rebecca Williams who is a veteran of Change recruitment. We’ve worked on Change roles for many years now, but being able to direct our clients to a true specialist has allowed us to expand that offering. Rebecca’s C&T focus also gives all involved peace of mind that they’ll get the same level of outstanding service and top-tier candidates that they trust Kind to deliver elsewhere.

We’ve also expanded our pre-existing ways of working – Interim recruitment is a huge part of what we do now, and we’ve continued to grow the Kind Agile Solutions bench, adding more and more specialist contractors who we know have the skills and experience our client-base needs and deserves. This year saw us reaching a new record for the most contractors we’ve had out on placement at the same time, and I wanted to thank Selena Tye for the work she does overseeing Agile Solutions this year, alongside Laura Kind who has continued to ensure all our KAS contractors have their documentation up to date and can be deployed as soon as a relevant need comes in.

This has been our most successful year on record, and that’s thanks to the hard work of the entire Consultancy team. But I didn’t want to just celebrate the big revenue and placement numbers we’ve achieved – though I am very proud of them. I’m also proud that Kind is an organisation that gives back. We think a lot here about our impact on the local community and the wider world – with that in mind I wanted to highlight our work with Future Forest and our annual winter charity drive.

This year we chose to support our local foodbank here in Lichfield, and I was very pleased that we were able to deliver several large boxes containing a wide variety of food, other essentials, and plenty of Christmas treats. Our partnership with Future Forest is an ongoing programme where a tree is planted for every placement we make. Future Forest specifically works in locations in the UK where trees are needed to foster a liveable environment for local wildlife, as well as helping to reduce carbon in the atmosphere. So far, we’re on track to have planted 132 trees by the end of 2023, and it always feels good at the end of a month to look at the placements we’ve made and know that each of those people is also playing a part in helping to care for the environment.

With all this growth and the variety of projects we’re engaging in, we felt this year was the time to refresh the Kind Consultancy branding and build an all-new website. Launched at the beginning of this month, we’re very pleased that Kind has a professional, easy to use and eye-catching web presence that we feel now matches the level of work that we deliver. If you’ve not already taken a look around the rest of the site, have a click around – make sure you check out the video on the Kind Agile Solutions page breaking down why it’s not your average interim recruitment service, and catch up on all of this year’s articles and columns produced by the Kind team elsewhere in the News section. If you missed the announcement that we’re finalists for Lichfield Small Business of the Year award, you can find out about that too.

2023 has also seen us recognised by Hyer’s “The People’s Platform” award highlighting firms with exceptional company culture, and Kind made the cut of just 100 recruitment companies selected from over 1000 entrants. We’ve continued to drive that culture by achieving the Bronze level from Thrive, a WMCA programme that certifies companies that go above and beyond for their employee’s physical and mental health and wellbeing.

The timing has lined up nicely to launch a new site , be awarded as an outstanding employer and shout about how great this year has been at Kind, because we’re not going to slow down any time soon. The number and range of client organisations we’re working with is greater than ever, and we’re currently on the look out for more experienced recruitment consultants to join us in 2024.

It wouldn’t really be accurate to say that we’re “winding down” for the year – everyone on the team is busy and I know we’ll all keep the pace up right until we finish for the Christmas break on the 22nd. I want to once again thank everyone at Kind for their contributions to a truly spectacular year, alongside all of our clients and candidates that make this possible. We’ll be back in the office on January 2nd, and I look forward to seeing where we can go next. It feels like we only ever get better at Kind, and from here anything is possible.

Are You Equipped to Tackle APP Fraud Scams?

What is an APP Scam?

Get ready to start hearing a lot more about APP (“Authorised Push Payment”) scams. APP is a type of fraud where someone is tricked into sending a payment to the account of a criminal. The UK government’s policy paper on APP last year said that these scams “have increased both in value and volume, with many individuals suffering significant financial and emotional harm” and UK Finance’s 2022 fraud report showed over £485 million lost to APP by both individuals and businesses.

The Payment Systems Regulator and the Financial Services industry have been working together to reimburse victims of APP for years now. In 2019 they introduced the Contingent Reimbursement Model Code, a voluntary scheme under which payment service providers voluntarily commit to reimbursing people after an APP scam. In theory, this covered around 90% of all affected transactions, but the government and the Payment Systems Regulator (PSR) agreed it wasn’t enough.

The New APP Rules

As of last week, we now know what the next stage of regulation around this issue looks like. The PSR has published a consultation on proposed new rules on reimbursing those who fall victim to these scams, which will be part of a package of changes which will also address reducing the number of APP cases through measures such as expanding the use of “Confirmation of Payee” checks.

The deadline for those rules coming into effect is now set for October 7th 2024, with a final revised set of rules to be published before the end of this year. From that date, the new rules will cover all transactions carried out using Faster Payments where the payer has either been misled about who they are transferring money to or misled about the purpose of the transfer – with exceptions for cases involving civil disputes, international payments and any payment made for unlawful purposes.

The provider of the victim’s payment services will be required to reimburse the person who has lost money within 5 days of the fraud being reported, and they will then seek to reclaim 50% of that cost from the payment provider of the fraudster.

Getting Rule-Change Ready

Organisations now have essentially one year to get everything in place to meet these new requirements. Failure to do so will incur financial penalties from the PSR, and there is also a substantial risk of an organisation’s reputation amongst customers being damaged if they’re seen as not dealing with fraud fairly and quickly.

Changes will need to be made to systems and policies, ensuring that the right result can be arrived at quickly if a customer is defrauded. APP is thought to be significantly underreported – something that’s likely to change if customers know a refund is guaranteed. The new rules will allow a customer to raise a claim as long as 13 months after the incident, so organisations should therefore expect to see a fairly immediate spike in these reports, which will need turning around in that tight 5-day deadline. It seems likely that we’re going to see very large-scale redress projects needed very swiftly once the rules are in effect.

Preparation and Prevention

Many businesses are already working to make APP scams harder to commit in the first place, but the new rules will definitely motivate more organisations to put time and resources into this. Investing in prevention will be crucial to reducing the overall number of APP fraud and in turn, lessening both the financial loss and the workload for remediation teams.

Payment providers will need to re-assess and re-think how they can build checks into the user interface for online banking and mobile apps, as well as informing customers about how this type of fraud is committed and giving people the tools to help them make legitimate transfers with confidence whilst spotting any potentially fraudulent requests.

How Can Kind Help?

So how can Kind Consultancy help you get ready? We work with a number of regulatory compliance experts who can help your organisation to create and implement the frameworks you need, including:

  • Creating and delivering training to both management and frontline staff
  • Policy and process review
  • Gap analysis
  • Enhancing your firm’s existing due diligence
  • Designing the new reimbursement framework

Every firm is different, and our industry-best subject-matter-experts in Kind Agile Solutions will tailor an approach that suits the specific size, scope and needs of your business.

Redress

Kind Agile Solutions is our interim talent service, built on a pre-screened bench of contractors who we know and trust to deliver exceptional work to our clients. This means we’re also uniquely positioned to assist with any volume resource needs relating to redress projects, with the ability to have skilled contractors with relevant experience on-site faster than any of our competitors.

We expect there to be a high demand for consultants working on APP fraud requirement readiness, so we recommend contacting us on 0121 643 2100 or lynsey@kindconsultancy.com soon for a confidential discussion about your needs.

[This article originally appeared on Kind Consultancy’s LinkedIn on October 2nd, 2023]

Checking In On Fair Value Preparations

Earlier this month the FCA published their findings from a review of Fair Value frameworks. Fair Value is one of the 4 outcomes on which firms will be assessed under Consumer Duty when it comes into effect in July. To help establish the regulator’s expectations, the FCA is providing feedback based on organisations’ proposals. For this report, they looked at the Fair Value Assessment Frameworks of 14 firms, with the aim of both highlighting good practice and areas of improvement to provide clear examples.

What kind of evidence does the FCA want to see to prove that your business offers customers Fair Value? The Fair Value rules within Consumer Duty focus on ensuring that the price a customer pays for a product or service provides “reasonable value” relative to the overall benefits. The regulator will want to see clear proof that organisations have considered the nature of their products and services, any limitations of the product or service and the expected total price customers will pay across the lifetime of the product.

For this review, the FCA assessed the Fair Value Assessment Frameworks on their understanding of Fair Value rules, how costs and benefits to customers (including non-financial costs and benefits) are being assessed, how the firm has included wider contextual factors in their assessments of value, what approach has been used to assess the range of possible consumer outcomes (including outcomes for vulnerable customers) and how a firm is using data to monitor and measure fair value.
The good practice sections for each of these five assessment factors are encouraging reading, suggesting many firms have a good understanding of what they need to do and are on the way to achieving it. For example, the report says that the majority of frameworks have clear principles for how they will apply the concept of fair value, most frameworks have a reasonable view of how to assess consumer benefit, including non-monetary factors, and many firms are considering the interplay between Fair Value and the other elements of Consumer Duty.

I would recommend anyone working on Consumer Duty preparations read the full report, but I wanted to highlight some of the key Areas for Improvement that the FCA names.

First, looking at the “understanding fair value” assessment, they raised a concern that some firms “planned to rely on high-level or unevidenced arguments that their business models or ethos are inherently fair value”. This is something we’ve talked about in previous Consumer Duty articles – almost everyone working in Financial Services believes they’re putting out good products for their customers. It’s going to be crucial to get past that kind of belief in the “self-evident” and to provide substantial evidence that your products are providing fair value. The FCA is also concerned that some firms have “not given sufficient thought to the distinction between manufacturers and distributors in PRIN 2A.4”. Whether a firm is a manufacturer, a co-manufacturer or a distributor makes a substantial difference to how they should assess the costs and benefits of their services.

Next, within the “assessing value” findings, they flagged that some firms who operated across multiple markets were using a single generalised template for assessing Fair Value. Any business with a wide range of products across different market sectors is going to need to think about how they adapt their approach for each of those sectors. The FCA also mentioned that some firms had failed to make any reference to their profit margins on products and services and pointed out that this is “likely to be a relevant factor in assessing [a product’s] fair value.”. Finally, on assessing value, they were concerned that some firms were not considering non-financial costs and benefits – for example, quality of product and level of consumer service on the benefit side and the time taken to decide about a product and the effort needed to make an amendment or cancellation on the cost side. It’s going to be important to think about those factors that can’t be reduced to numbers on a page, providing a holistic view of how your organisation is providing Fair Value.

Under the “considering contextual factors” section, the FCA were alarmed that some firms were simply not giving substantial consideration to broader contextual factors and their impact on Fair Value. Again, it’s not going to be enough to say a product provides positive financial value, organisations are going to need to look beyond that – especially for larger firms and complex offerings. There was also concern that some firms were not considering what information they needed from other firms in their distribution chain, which will be vital to assessing fair value of any product that involves third parties.

In the fourth section, “assessing differential outcomes”, they noted that some of the information being presented in frameworks had a tendency to “rely on average outcomes rather than analysis to understand the full distribution of outcomes”. Remember that averages are likely to mask outliers and what the report calls “pockets of poor value” – just because you have an average positive outcome, your assessment needs to consider the value being provided to customers who do not have the normal positive experience with your product.

Finally, under the “data and governance” findings, the FCA raises concerns that some firms have not identified how they plan to monitor Fair Value, what data they want to use and how they will address data gaps. A lack of proper data will lead to vague, “high-level” cases being made which, again, will not be enough. A related issue is firms failing to consider the limitations of the data they were using to evidence Fair Value, making it unclear how decision-makers would be able to critically review this evidence. There was also a point raised about firms using market-level benchmarks and presenting their case for Fair Value in terms of relative comparisons – this can hide value issues which are prevalent across the wider market. Finally, where firms are using “traffic light” or points-based approaches in their Fair Value Frameworks, there needs to be substantial critical analysis around those scores and ratings – firms need to examine how thresholds between different ratings and points are drawn and whether sufficiently detailed information is being provided to review and challenge the assessment of Fair Value.
It’s a lot to consider, but there is still time to get your organisation ready before the July 31st deadline.

Kind Consultancy recently supported a client through an initial Review of Target Market Fair Value and processes to ensure they were in line with FCA and industry expectations. This included examining the way the firm had assessed their target markets, benchmarking against those in and outside the sector, looking at what was needed to maintain a cycle of continuous improvement, agreeing on what conditions would trigger an urgent out-of-cycle Fair Value review and how senior management were informed in order to provide assurance that their risk tolerance was being kept within the required parameters.

If you are looking for a ‘fresh pair of eyes’ to act as a critical friend, Kind Consultancy work with a number of consultants who are available to provide you who can independently assess the work you have carried out so far and highlight any changes needed in order to be Consumer Duty ready. framework and highlighting any changes needed to be Consumer Duty ready.
For more information, please get in touch on 0121 643 2100 or e-mail selena@kindconsultancy.com for a confidential conversation about your needs.

What Are the 2023 IR35 Rule Changes?

If you’re a contractor in the UK, you’ve probably been paying close attention to discussions about the IR35 rules and have probably read and seen reports of possible IR35 rule changes set to happen in 2023. But what are the rule changes and how will they effect you?

IR35 is not changing in 2023.

In April 2023 the UK government had announced plans to repeal off-payroll rules, which would have moved responsibility for determining if a contract sits inside or outside IR35.

These plans were rolled back shortly after their initial announcement in the September 2022 mini-budget.

There will now be no changes to IR35 rules, and contractors will continue to be bound by the off-payroll rules introduced to the private sector in 2021.

A Review Of The Year 2022

Kind Consultancy – The Year in Review 2022

 As we head towards the end of the year, I wanted to take a look back at what 2022 has been like for both the recruitment world and for our clients in the Financial Services GRC space.

 Regulations

Most years we see different themes come to the forefront and then recess across the 12 months . In 2022 though, it felt like Consumer Duty has dominated the Governance Risk & Compliance conversation all year long – and understandably, when it constitutes the biggest change to UK Financial Services regulations in a decade. The need to pay close attention to every single step of the customer journey was made even more crucial with FCA expectations around helping customers through the rising cost of living and the knock-on effect on their wider personal finances. Other issues that have been important include both high tech and low-tech fraud and the KYC challenges faced by purely digital banks and other fintech start-ups. All of which made for a very busy year for us, with high demand for proven collections and complaints teams and more clients than ever seeking out bespoke consultancy services from the experts on our Kind Agile Solutions bench.

 Recruitment

 In the recruitment world, the most prevalent themes of the last two years continued . The candidate shortage rolls on, creating a recruitment marketplace that is as candidate-led as it ever has been. This has been a tricky transition for some organisations, but I think the second half of the year has seen a shift with many businesses now recognising that they need to showcase themselves better to attract the best candidates, rather than the other way around. Keeping salaries competitive has remained important but for skilled specialist candidates, the deciding factor has often not been monetary, with flexibility and remote work being the real make or break issues instead.

According to the ONS data, at the start of the year there was a huge number of vacancies – that has reduced in the second half of the year, but the most recent data shows unfilled job levels are still higher than before the Covid-19 pandemic. There’s also been an increase in reliance on contractors, a sure sign of a shortage of readily available skilled candidates, and anecdotally I can say that we’ve definitely seen more and more of our own clients looking for interim talent who have not previously considered it an option. It will be interesting to see if this shifts in the next year as the wider effects of the current economic uncertainty continue to build up. One thing I’m sure of is that in this kind of challenging labour market, we can deliver exceptional value as specialist recruiters and make a big difference to our clients.

 Our Team

 Here at Kind Consultancy Ltd, we’ve had an exceptional year. We continued to grow the team, with Hetal Chavda joining us in May and quickly proving herself an important addition . Hetal Chavda flew through her probation period last month and Catherine Tieley took the step up to Senior Recruitment Consultant in August and Shai Cassidy was promoted for a second time to Executive Consultant back in June. The core recruitment team have all undertaken regular training on Financial Services industry topics to ensure we continue delivering on our promise to have a better understanding of our clients than they would get from a big corporate recruiter.

We’ve also helped to share knowledge to keep our clients ahead of the game, running a series of industry roundtables and seminars, sharing thought leadership around Consumer Duty and how Financial Services businesses can best help customers in the Cost of Living crisis.

 The continuous focus and hard work from the whole team has paid off – at the time of writing we’re on track to have our most successful year ever! We’ve made a record number of total placements, with 66% of them being contract / interim and 33% being permanent. I’m also very proud that this year, 42% of our placed candidates were women and 60% were from ethnic minority backgrounds. This year we also carried out 9 retained search projects and also delivered on 11 specialist regulatory projects, all of which were bespoke plans crafted for each client’s individual compliance needs. Offering these truly specialist solutions and working with top-tier industry experts sets us apart from the competition, and for me personally it’s some of the most satisfying work we do.

Looking Ahead

 In 2023, Kind Consultancy Ltd is going to keep reaching for new heights. Continued demand from our large client base enables us to grow year on year, and we are currently planning to expand our offices in Lichfield as we grow our team further. We will also continue to develop our fantastic staff, by investing in more training in both recruitment skills and Financial Services industry knowledge. We will also continue to run round tables and webinars to ensure the best-in-the-industry talent we work with can share their knowledge and experience, enriching our clients and our own team.

 Thank You

 As we near the end of the year, I just wanted to take this opportunity to say thank you to all of our clients, candidates, connections and followers – every one of whom contributed to our amazing 2022. I hope you all have some time and space over the winter break to relax, rest and celebrate.

To stay up to date on all of our latest opportunities and other news from the Kind team, keep following me and the Kind Consultancy Ltd page on LinkedIn.

As demands on Customer Care teams rise, is automation the answer?

It’s clear now, in the winter of 2022, that the cost of living crisis is real, and is not going away any time soon. A variety of complex, interlocking factors is driving up prices, with the increases hitting especially hard for household essentials and energy bills.

Ofgem has said this week that energy firms are “failing vulnerable customers” this week, with a review of their treatment leading to all 17 of the assessed suppliers being told they need to improve. A range of weaknesses were highlighted, including setting unaffordable debt repayment levels and failing to assist customers who couldn’t read their own meters.

We’re likely to soon see very similar scrutiny applied to Financial Services organisations. The FCA has set expectations that the industry should be doing all it can to support customers in this period of difficulty – and that’s on top of the expectations set around the general treatment of vulnerable customers, and the increased scrutiny of customer treatment at the heart of the new Consumer Duty rules.

The effect on Financial Services is going to be gradual. Every person and household has a different level of financial resilience – some people have more savings and higher paying jobs, more frequent and reliable income than others. Gradually in the coming months we will see more and more people reaching their threshold and struggling to make their regular loan, mortgage and credit card payments, or finding themselves only able to pay one or two of their multiple regular financial commitments. When that time comes, the workload for Collections teams is going to increase gradually and then dramatically.

How should businesses prepare for that uptick? Recently I’ve seen a number of articles about automated solutions. Technology has always been a crucial tool for the sector, and exploring the possibilities of software and AI that can guide customers through their issues certainly sounds appealing. But I would caution anyone who thinks they can buy an off the shelf product, direct their customers to an automatic chat-bot and think the problem is taken care of.

A human response is going to be absolutely vital over the next year. We will be dealing with customers in a very wide variety of circumstances. Even if the cost of living crisis the same root cause for many of them, how exactly that has manifested and effected them, and what kind of position it’s put their finances in is going to be unique to each customer. And that’s before even beginning to consider how pre-existing vulnerabilities will complicate the situation for many – as well as the barriers it may place on them being able to engage with automated systems. I think the key is going to be having well trained, empathetic listeners with an awareness of the regulatory expectation being placed upon them.

If your business does not currently have that capacity, Kind Consultancy can help. We’ve worked with organisations across Financial Services, including Banks, Building Societies and FinTech start-ups to provide both permanent and interim Collections and Complaints talent who we know already have trustworthy Vulnerable Customer expertise. We can also provide consultants with expertise in Consumer Duty and Problem Debt to act as a Critical Friend, assessing your current approach and if needed, designing and guiding any necessary transformations.

Whether you want to bring in an expert to train the Collections and Complaints staff already have, or if you want a full interim team from Kind Agile Solutions to immediately engage with an increased customer contact workload, get in touch today on 0121 643 2100, lynsey@kindconsultancy.com or selena@kindconsultancy.com for a confidential conversation if you’re interested in discussing further.

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