Payment Services Regulations: Update 3

February 2010

In this update we provide further information on our experience in dealing with authorisation applications submitted to the Financial Services Authority and we also focus on the important area of complaints handling as follows:

Applications for authorisation

Since the last update, a number of points have arisen in relation to the submission of authorisation applications:

  • it is likely to take several weeks from the commencement of an application to its completion. The FSA may ask for further information after its review of an application. This may, itself, take a number of weeks to collate.  Given that the deadline for established businesses seeking authorisation is 1 May 2011, we would therefore advise that you submit your authorisation application by the end of the Summer 2010 at the latest.    If you do not obtain authorisation by the deadline, you will be forced to cease trading
  • the FSA is required to make a decision on a complete application within 3 months of submission  
  • if an application is incomplete, the FSA is only required to make a decision within 12 months of its receipt. 
  • if the FSA concludes that your application should be refused, it will issue a warning notice, setting out the reasons for refusing your application and giving you 28 days to make representations on the decision 
  • if there are delays in providing answers to questions raised by the FSA in relation to your application for authorisation, you must advise the FSA of the reasons for the delay and the date by which you anticipate being able to reply
  • the FSA requires all replies to questions arising from the review of an authorisation application to be made by the applicant firm not the advisor
  • the underlying principle of the Payment Services Regulations (PSRs) is customer protection and, the FSA pays particular attention to aspects of a business which impinge on this.  One such aspect is risk management and the FSA therefore requires detailed information about your risk management procedures when an application is submitted

  • your authorisation application must include details of the individual responsible for the management of an Authorised Payment Institution.  This individual is required to provide detailed information about themselves, including their fit and proper status.  It is worth mentioning that should the applicant have ever been subject to an investigation into any allegation of misconduct or malpractice in connection with any business activity, this must be disclosed even if the applicant was cleared of the allegation.  If the FSA determines that a required disclosure has not been made, this may result in the authorisation application being refused.

Complaints handling

As stated above, the principal objective underlying the PSRs is consumer protection. One key element of consumer protection is the procedures that a business has in place to handle complaints.

This element of the PSRs applies to all remittance businesses from 1 November 2009, whether those businesses are authorised/registered or not. So if you do not have FSA based complaints handling procedures in place now, you are in breach of the PSRs.

It's a key area to get right. The FSA has stated that monitoring of complaints received either by the FSA or the Financial Services Ombudsman will determine whether it will refer the case to its enforcement division for investigation.

The supervisory strategy of the FSA is complaints led.  When the FSA receives a complaint alleging a breach of the conduct of business rules, it will consider whether the complaint is significant or involves a systemic problem.  If it believes it does, it will take supervisory action. This could involve a visit to the remittance business and making the complainant aware of their right to make a claim to the Financial Services Ombudsman.

To minimise the risk of an FSA enquiry into your business you should have complaints procedures in place which are based on the FSA Handbook. These procedures need to be explained to staff dealing with customers and documented within a manual for on-going reference.

The areas that you will need to cover in relation to complaints handling procedures are as follows: 

  • defining a complaint
  • developing a customer complaint procedure leaflet
  • acknowledging complaints
  • keeping customers informed at regular intervals of the complaints handling process
  • internal monitoring of complaints
  • advising customers of their right to take their complaint to the Financial Services Ombudsman
  • resolving complaints by the end of the next business day
  • a review of existing practices in the light of a complaint
  • how to conclude the complaints procedure process 

 How we can help

Littlejohn is able to advise you in relation to establishing FSA based complaints handling procedures.We can also assist you in the following areas in relation to the PSRs:

preparation of applications for authorisation

  • preparation of applications for registration
  • advice in relation to complaints procedures
  • advice in relation to conduct of business rules
  • compliance reviews in relation to the PSRs
  • completion of FSA annual returns

 Littlejohn can also provide the following services:

  • audit of financial statements
  • preparation of financial statements
  • corporation tax services

If you would like further information, contact Azhar Rana on 020 7516 2232  or email

 

 

 

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