The transfer of consumer credit regulation from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) is little more than eight months away. Firms who run a tight ship compliance-wise and who comply with the existing OFT requirements should have little to fear from FCA regulation. However, perhaps the most important thing for credit firms to be aware of right now is the application process they will need to follow.
The FCA has written to all firms who hold Consumer Credit Licences (CCLs), informing them of the application process and the application fees payable. Firms must obtain interim permission from the FCA by April 2014, and applications can be made from September 2013 on the FCA website. Existing CCLs will lapse at the end of March 2014. Firms are advised not to leave their application until the last minute as there will inevitably be a large number of applications made just before the deadline. All firms will need to obtain interim permission initially, and must then obtain full permission by April 2016 at the latest.
Firms will need to pay an application fee of £350, while sole traders will be charged £150. This fee is payable by all applicants, including those who have previously paid fees to obtain indefinite CCLs, however the OFT has said it will look into whether it is appropriate to reimburse firms who find themselves in this situation.
The FCA has published a guide to the application process on its website at http://www.fca.org.uk/firms/firm-types/consumer-credit. Prior to the start of the application process in September, the FCA advises licence holders to check that their existing CCL is up to date, and to make the necessary changes prior to their FCA application if it is not. A CCL should record:
- Name of firm or sole trader
- Business address
- Company details
- All activities with which the firm wishes to continue after 1 April 2014
Credit firms will need to ensure that their stationery is updated by the switch over date to state that they are regulated by the FCA. This stationery will also need to state if the firm holds interim permission or full permission.
The FCA will conduct two further consultations regarding consumer credit regulation later in 2013. Firstly in September it will consult on its detailed proposals for how it will supervise the sector, and then in October it will consult on the annual fees it will charge.
Indications are that the FCA consumer credit rulebooks will be based around many of the requirements of the Consumer Credit Act and the OFT’s existing guidance. Consumer Credit Act requirements regarding advertising are not expected to be incorporated into the new regime, and firms are likely to be subject to the current FCA rules on financial promotions instead. Payday lenders, pawnbrokers and debt collectors will be regarded as higher risk firms by the FCA and are expected to pay higher fees. Examples of firms that will be classed as lower risk are retailers and motor dealers for whom credit is a secondary activity.