FCA regulated fees and levies for 2019/20

FCA regulated fees and levies for 2019/20

The FCA recently published PS19/19 FCA regulated fees and levies2019/20: Including feedback on CP19/16 and `made rules', in which the final periodic regulatory fees for the year are outlined. This paper covers the fees and levies for the:

Financial Conduct Authority (FCA) Financial Ombudsman Service general levy Money and Pensions Service (formerly the Single Financial Guidance Body) Devolved Authorities Illegal money lending levy

Not all of these may apply to your firm. The best way for a firm to project and compare fees is to use the FCA fee calculator We outline the key points for each area below as follows:

Financial Conduct Authority (FCA)

The FCA has confirmed its annual funding requirement (AFR) as unchanged from the ?558.5m proposed, a 2.7% increase on the previous year. The ongoing regulatory activities (ORA) budget is set to increase by 2.0% across the board.

2019/20 AFR breakdown

Source: FCA PS19/19

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Periodic fees for authorised firms

The FCA will:

Increase the 2019/20 minimum and flat fees by 2% in line with our policy to link these fees to movements in our ORA.

Continue keeping the variable fee rates for the consumer credit firms in the CC1 and CC2 feeblocks unchanged in 2019/20. The FCA expect that continuing to keep these fee rates unchanged will eliminate the consumer credit scope-change deficit by 2020/21, 6 years earlier than the 10 years originally planned (2026/27).

Mortgage fee-blocks ? explanation of the rising costs

The FCA received a number of questions relating to the increase in the costs for mortgage fee-blocks. The year on year movements for 2019/20 reflect that in 2018/19 the FCA rebated part of the scope change costs for the Mortgage Credit Directive (MCD) allocated to those fee-blocks in 2017/18. Those fee-blocks benefited from that rebate in 2018/19 but as it is not repeated in 2019/20 the impact is to increase the year on year movement for 2019/20.

The FCA has spread the recovery of the MCD scoped change costs over several years and its impact of increasing fees for mortgage providers and intermediaries was for that period only. Before the start of that period (2015/16) the combined AFR allocation to A.2 and A.18 was ?34.3m compared to ?35.5m in 2019/20, a 3.5% increase compared to a 15.9% increase in the overall AFR.

The proportion of the total AFR these fee-blocks represented in 2015/16 was 7.1% compared to 6.4% in 2019/20. This does not indicate an escalation in the ongoing allocation of the AFR to the mortgage fee-blocks nor does the FCA believe it is a disproportionate allocation of the overall AFR.

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Changes in data used to calculate draft and final fee rates and year on year movement in actual fee rates between 2018/19 and 2019/20

Source: FCA PS19/19 This confirms the reduction in the proportion the overall AFR that fee-block A13 will be liable for.

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Financial penalty rebates for 2019/20 The final amount of retained penalties for 2018/19 is ?47.5m, which is 2.4% less than the ?48.6m that was estimated in CP19/16. Full details of how the retained penalties have been distributed across fee-blocks is outlined in the paper (table 4.1). This is in the same proportions as previously were proposed.

Financial Ombudsman Service general levy

The final budget for the ombudsman service is ?331.8m (up from ?289.8m in 2018/19), as agreed by the FCA Board in March 2019. This covers the `general levy' payable for compulsory jurisdiction, cases fees and the number of cases per firm where no case fee is chargeable (first 25 cases each year). Around 85% of the ombudsman service's funding comes from case fees which are invoiced and collected once cases are resolved. The FCA is recovering ?44.5m (up from ?24.5m in 2018/19) through the general levy. The increase of ?20m will allow the ombudsman service to:

recover the under-collection in last year's general levy (?1.5m) manage the set-up and year 1 costs of 2 new jurisdictions:

o complaints made by small and medium-sized enterprises (SMEs, ?5m); and o complaints made about claims management companies (CMCs, ?2.2m) scale up to meet both increasing complaint volumes and a change in product mix (?11.3m) In 2019/20 the ombudsman service is expecting a total of 210,000 new cases outside of Payment Protection Insurance (PPI) ? this is the highest number the service will have ever received, and is approximately 30% higher than the 2018/19 budget assumption of 160,000 new cases.

Money and Pensions Service (formerly the Single Financial Guidance Body)

This is made up of a number of elements, previously itemised separately. The FCA will allocate the various costs for the Money and Pensions Service (M&PS) to fee-blocks in the same proportions as last year (2018/19) for the predecessor bodies, MAS and Pension Wise.

2019/20 M&PS funding requirement ? consultation compared to final

*The amount for pensions guidance includes ?4.7m for the pensions dashboard. Source: FCA PS19/19

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A firm will contribute to the debt advice levy if it carries out regulated consumer credit lending as defined in the FCA Handbook, or if it is a home finance provider or administrator (fee-block A2).

Devolved Authorities

This relates to the delivery of debt advice in Scotland, Wales and Northern Ireland. The total budget for provision of debt advice in the Devolved Authorities is ?7.845m. The FCA is allocating the costs in the same proportions as they were allocated last year for the MAS debt advice levy, as proposed.

Illegal money lending levy

This levy covers the expenses the Treasury incurs by providing for teams tackling illegal money lending (IML). The total amount to be recovered from consumer credit firms is ?5.7m.

2019/20 IML levy rates

Source: FCA PS19/19

FSCS Levy 2019/20

Details of the FSCS Levy 2019/20 have already been published, and we referred to this in our June Newsletter (No.2). While it is straightforward to provide the headline figures in terms of FSCS levies, the actual impact at a firm level basis will depend on the particular fee blocks and levels of income generated, and of course can always be affected by interim levies later in the year. Further details on the FSCS Levy can be found in the FSCS Newsletter Outlook, here. The best way for a firm to project and compare fees is to use the FCA fee calculator.

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