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| E-Newsletter | Issue 1
In this issue: • FSA Guidance for PPI Complaints. • Addressing the Problems in Temporary Recruitment. • Foreign Account Tax Compliance Act (FATCA) - the Regulations. • Auto-enrolment and its Impact.
FSA Guidance for PPI Complaints
The Financial Services Authority (FSA) has published guidance consultation to help firms provide redress to victims of payment protection insurance (PPI) mis-selling. With the extensive media coverage that has centred around the mis-selling of PPI, this guidance is expected to raise public awareness of the situation and will generate even greater levels of complaints/enquiries. The guidance sets out the FSA’s view of: • what a PPI Customer Contact Letter (CCL) should contain and how it should be presented so it is clear, fair and not misleading; • how the FSA’s rules on complaint handling and the time limits on a consumer making a complaint are relevant to PPI CCLs; and • other relevant obligations including record-keeping. The FSA guidance provides a framework for the steps firms should take when writing to these customers. The key word here is ‘clarity’ - with the firm required to stress the importance of these communications, to explain clearly why the customer could have been mis-sold and be entitled to redress, what the customer should do to respond to the firm, the time limits involved and the need to act in a timely manner. The letters are part of a wider investigation being undertaken by PPI firms to understand and identify the root cause analysis of the complaints and the steps required to correct any systematic problems identified within the sales process.
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The firm must take a proactive approach in contacting the customer to offer them the chance to claim redress. The FSA expects that the letters should be clear, fair and not misleading, including a clear explanation of the following: • That the letter contains important information and should be read carefully. • That the customer may have been mis-sold. • The specific failings that led the firm to believe the customer may have been mis-sold. • That the customer may have suffered a financial loss and could be entitled to redress. • That the letter requires careful and immediate consideration and there is a time limit for making a complaint. The FSA is also asking firms to ensure these letters are free from financial jargon or marketing material. The guidance consultation stresses the importance of keeping records of the cutomer’s response and the resulting actions taken by the firm. As well as content guidance for customer letters, the FSA has taken a step further to clarify when and how firms might consider that a complaint is ‘time barred’. Normally, the time limit for a complaint is six years or if later, three years from when the customer became aware (or ought to have become aware) that they had reason to complain. If a complaint is made outside this time period, the firm is no longer obliged to consider it and can reject it. The Financial Ombudsman Service (FOS) may also dismiss a complaint made outside this timeframe.
Martin Wheatley, FSA managing director, commented: “This is important guidance and marks a key moment in the story of PPI. So far the majority of payouts have been for complaints received before, or put on hold during, the judicial review. However, we are now beginning to see firms considering how to treat customers who were mis-sold but have not complained. The British Bankers’ Association and Association of Finance Brokers have both indicated their strong support for the guidance, and - along with consumer group, Which? - have also been in discussions with the FSA to try and reach agreement on how best firms can communicate with affected customers, both in the context of these contact exercises and PPI more generally.” According to the FSA Consultation Paper 10/6, it is estimated that 16.1 million policies have been sold since 2005 (not including regular premium PPI on first charge mortgages) - equating to a value of £17 billion. In 2011 alone, £1.9 billion was paid in redress according to the FSA monthly statistics on PPI redress. The scale of the issue facing the industry means it is likely that PPI will remain a high priority until at least the end of 2012. Hazell Carr can help organisations meet this challenge by providing resource and expertise in the design and delivery of policyholder contact exercises, the assessment of a wide range of case types, redress calculations (including in-house calculation tools), quality checking and oversight, and project and operational management. Contact us on 0118 951 3971 for more information.
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“The letters should be clear, fair and not misleading”
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Addressing the Problems in Temporary Recruitment
Many organisations struggle to find and retain high quality temporary staff. Hazell Carr has been investigating the issue and developing an alternative solution. In December 2011, the Recruitment and Employment Confederation (REC) reported that the employment of temporary and contract staff has grown for 28 consecutive months. This figure is all the more startling given the wider economic situation and growing unemployment. The demand for temporary staff is clearly very high and looks set to continue growing. The demand for temporary staff is, to a large extent, fuelled by unpredictable resource shortages and fluctuating volumes of work. The causes of these peaks in work are many and diverse, from the requirements of regulatory reviews faced by financial services organisations, through to the impact of bad weather on utilities companies. While the causes vary, the response to these issues is often the same; temporary staff
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are engaged from recruitment agencies to supplement existing operations. Deploying temporary staff on low hourly rates appears to provide a simple, cost effective solution, but masks a number of underlying issues. Temporary staff often lack the required skills and experience, meaning time has to be invested in training, coaching and ongoing monitoring. Experienced staff are often removed from the operation to provide this training at a time when they are needed the most. Compounding the issue, insufficient time and effort is invested in developing candidate loyalty to the recruitment agency and end-client, which leads to low-levels of motivation. All of these factors lead to poor productivity, low quality and high staff attrition rates. Additional temporary staff often have to be recruited to backfill the gaps caused by attrition, which in turn leads to further training requirements and higher costs. The net result is that, at times of high demand, organisations are often wasting money on temporary recruitment that provides little effective support. Hazell Carr has been discussing this issue with a number of organisations across a range of industries, including the financial services and utilities, for many years. This research has highlighted a common requirement for better interim resource, particularly to assist with high-volume customer service issues and special projects. The type of resource required needs to be of a higher quality than low-level agency staff, but not as senior (or expensive) as consultancy resource.
In response to this requirement, Hazell Carr has developed the “Academy Solution”; a high quality alternative to traditional temporary staffing. In creating this solution, Hazell Carr has sought to address the recruitment issues outlined above. The key features of the Academy Solution include: • High quality graduates with strong literacy and numeracy, great communication skills and an enthusiasm to learn new skills. • Comprehensive pre-employment screening which ensures only the best candidates are selected. • Training and assessment centres to ensure that candidates have a strong understanding of client requirements prior to deployment. • Operational management that ensures project delivery remains on target. • Low attrition achieved through deploying the right candidates and providing them with the support and motivation they require to succeed. If the demand for temporary recruitment continues to grow, many organisations will continue to experience problems with staff quality and attrition. It is vital that organisations find an efficient and cost effective solution to this ongoing problem. Hazell Carr is keen to discuss the specific recruitment issues being faced by HR departments across the UK. To find out more visit www.hazellcarr.com/academy
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Foreign Account Tax Compliance Act (FATCA) - the Regulations
FATCA was signed into law in March 2010 and will be enforced by the US treasury. It is aimed at foreign financial institutions (FFIs) and other financial intermediaries to prevent tax evasion by US persons through the use of offshore accounts. The law will take full effect from 30 June 2013 and requires all non-US financial institutions and intermediaries to comply - including banks, asset managers and insurers if they have either US clients or hold US assets in any form. The legislative intent of FATCA is to ensure there is no gap in the ability of the US government to determine the ownership of US assets in foreign accounts. The proposed regulations bring some clarity, but require FFIs to step up and urgently plan their response, recognising that significant time and operational resources will be required to become properly FATCA compliant.
The regulations have the potential to affect and realign the current information and reporting systems of the whole financial services industry. Key dates to note: • 18 March 2012 - Clarification of the Scope of Grandfathered Obligations. • Summer 2012 - Treasury and the IRS anticipate publishing final regulations and issuing draft and final versions of the FFI Agreement and reporting forms. • 31 December 2012 - Qualified Intermediary and Other Withholding Agreements expiring on this date will be automatically extended until 31 December 2013. • 1 January 2013 - effective date of FATCA legislation. FATCA legislation will also introduce a 30% withholding tax on all withholdable payments of a FFI. This tax is only deducted from FFIs if they don’t comply with certain reporting requirements to the Internal
Revenue Service. If a foreign law prevents reporting of any information with respect to a US account maintained by the FFI, the company will need to either attempt to obtain a valid waiver of the law from each holder of such an account, or exit the relationship. The requirements to comply with FATCA: • Maintain verification and due diligence procedures to identify US accounts. • Obtain information of each account holder - identify US clients when an account is opened and through the whole client lifecycle. • Report detailed information regarding US accounts to the IRS on an annual basis - in the correct manner, within the correct timeframe. • Provide IRS with additional information regarding US accounts upon request. • Deduct and withhold 30% tax of pass through payments made by recalcitrant account holders of FFIs. If this level of client disclosure is not acceptable to the FFI, they will need to put in place an exit strategy for their US clients. The key challenge for FFIs under FATCA will be the identification of US clients and, in the case of institutional clients, potential US-owned foreign entities. This means putting in place more detailed information gathering and due diligence procedures during the ‘know your customer’ and anti-money laundering procedures.
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Auto-enrolment and its Impact
Staging will be rolled out based on the largest to smallest PAYE schemes.
In the UK, it is estimated that over 7 million people are not saving enough for retirement and according to Scottish Widows, 20% of individuals are not saving anything at all. The importance of tackling under-saving has increased, and auto-enrolment is being introduced to support this.
To find out your staging date visit: www.thepensionsregulator.gov.uk/pensionsreform/staging-date-timeline.aspx From 1 October 2012 (subject to the employer’s own introduction date), it will be mandatory for all eligible exsisting and new jobholders to be auto-enrolled into a qualifying pension scheme.
Starting from October 2012 all eligible employees will have to be automatically enrolled into either their employers’ existing workplace pension scheme or an alternative qualifying pension scheme. The aims of these reforms are to increase retirement savings, in particular for the low paid who have a tendency not to save and small employers who are less likely to have workplace pension scheme.
Eligible jobholders are: • aged between 22 and state pension age; • working, or ordinarily working, in the UK; and • have qualifying earnings payable by the employer in the relevant pay reference period that are above the earnings trigger for automatic enrolment (currently £8,105).
The minimum contribution rates an employer must pay into their staff pension scheme will be introduced gradually. From October 2012, minimum contribution levels will be a total of 2%, which will gradually increase to 8% from October 2018.
Automatic re-enrolment must take place approximately every 3 years if the eligible jobholder has opted out. If the individual was struggling financially and opted out, their situation may have improved 3 years later.
The staging date is the date that the automatic enrolment duties start and this is the first piece of information employers need to know to start planning.
Transitional period 1 2 3
Duration Employer’s staging date to 30 September 2017 1 October 2017 to 30 September 2018 1 October 2018 onwards
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Because of the requirement of record keeping, documentation must be kept for
Employer minimum contribution
Total minimum contribution
1%
2%
2%
5%
3%
8%
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a minimum of 6 years. The Pensions Regulator website has a checklist detailing record keeping requirements. Employers need to know their staging date and if their current scheme fits in with the automatic enrolment requirements. They also need to identify their entitled “jobholders�, understand their contractual relationships and the relevant qualifying earnings. Auto-enrolment is not just a pensions issue; it will impact your human resources, payroll, pensions and finance functions. Broader reward and benefit provision will also be affected and you may need to learn ways of mitigating costs and reducing risk.
Help and Support The Pensions Regulator has excellent guidance and online tools. They have created a 7 step guide which details every stage of the automatic enrolment process: www.thepensionsregulator.gov.uk/ employers/7-steps. There is also a news alert that employers can sign up to: www.tpr.gov.uk/news If your organisation requires temporary resource to help implement your auto-enrolment duties contact us on 0118 951 3971
For more information about auto-enrolment visit: www.xafinity.com/autoenrolment
Communication is needed as early as possible to all who will be involved. This is not just to employees, but to pension and software advisers and providers. Auto-enrolment is going to cost companies money and planning is essential. If an employer fails to comply with their automatic enrolment duties there will be penalties. It will be a criminal offence for an employer not to auto-enrol and re-enrol every 3 years. It will also be a criminal offence for an employer to make an inducement encouraging jobholders to opt-out.
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Hazell Carr is one of the UK’s leading providers of skilled resources operating in the financial services industry today. For more than a decade, Hazell Carr has provided companies with a range of placement services, focusing on complaint handling, customer services, pensions administration and actuarial expertise. With experience across many different sectors and projects, our clients benefit from a highly experienced, skilled and versatile resource pool (staff and associates), helping them manageworkloads, develop best practice and transform their levels of customer service.
Contact Us 0118 951 3971 contact@hazellcarr.com www.hazellcarr.com Hazell Carr is a trading name for Xafinity Paymaster Limited. Registered Office: Sutherland House, Russell Way, Crawley, West Sussex RH10 1UH. Registered in England and Wales No. 3249700. Paymaster (1836) Limited is authorised and regulated by the Financial Services Authority. A Xafinity Limited Company. The information contained in this newsletter should not be relied upon for detailed advice or taken as an authoritative statement of the law.