FCA extends fair dealing principles to payment services and e-money providers

In a policy statement (46 page / 1.1MB PDF), the FCA said its Principles for Business (Principles), which clarify its expectations for firms’ conduct, will now have their application extended. The FCA consulted  last year on extending the application of the Principles to "the provision of payment services, the issuance of e‑money and other connected activities " by payment institutions, e-money issuers, registered account information service providers (RAISPs) "and  (where not already a regulated activity) by credit institutions" according to the regulator.

 The Principles set out the FCA's high-level expectations of firms in relation to the way they operate, including in respect of the integrity and skill, care and diligence with which they conduct business; as well as their consideration of customer's interests, fair management of conflicts of interest and that their interaction with regulators is open and cooperative, among other things.

As well as extending the application of the Principles to a wider range of firms, the FCA is also extending the application of some of its communication rules and guidance to communications with payment service and e-money customers. It has made new "rules and guidance on the communication and marketing of currency transfer services, applicable to payment services and the issuance of e-money involving a currency conversion".The regulator said the new application of the communications rules seeks to address its concerns about consumer harm in the marketing of currency transfer services. 

Financial services regulation expert Chris Davidson of Pinsent Masons, the law firm behind Out-Law.com, said: “While the primary aim of the new rules is to prevent misleading advertising of currency transfer services, the changes have wider application.”

 “These firms have until 1 August 2019 to make sure that their business complies. They now need to start reviewing their business practices and processes to ensure they comply not just with the specific rules and guidance in BCOBS 2 on client communications, but also more widely so the over-arching business standards in the Principles are met,” she said..  

The consultation process revealed that many firms were already trying to comply with the Principles when providing payment services or issuing e-money.

The FCA said it did not consider that complying with the principles imposed a “significant burden” on firms, or would create a competitive disadvantage when UK firms were compared with EEA firms passporting into the UK.