The Financial Conduct Authority (FCA) became the regulator of consumer credit in the UK on April 1 2014. Any firm wishing to practice consumer credit activities thus needs to obtain authorisation from the FCA.
Firms who were licensed by the previous credit regulator, the Office of Fair Trading (OFT), were allowed to follow a basic process to obtain what is known as ‘interim permission’ from the FCA. These firms are listed on the Consumer Credit Register on the FCA website. Firms who now hold this position will shortly be provided with details of when and how they need to apply to upgrade to full permission.
However, the interim permission application system closed at the same time as the switch of regulator took place. Any firm wishing to enter the credit market for the first time needs to follow the FCA’s comprehensive application process in full, as does any previous Consumer Credit Licence holder who did not make use of the interim permission system. Firms who applied to the OFT but who have not so far received a final decision on their application should note that their applications have now been passed to the FCA.
New credit firms will need to apply for either full authorisation or limited permission.
Firms requiring full authorisation are:
- Lenders (including peer to peer lenders)*
- Credit brokers*
- Commercial debt adjusters and debt counsellors
- Debt administrators
- Commercial providers of credit information services
- Credit reference agencies
Lenders and brokers should note the special circumstances, explained below, as to when a limited permission application may be sufficient.
Firms for which only limited permission is required are:
- Consumer hire firms
- Lenders, where this is a secondary activity, where the main business of the firm is selling goods or providing services of a non-financial nature, where there is no interest or charges on the loans and where the lending does not take place under a hire purchase or conditional sale agreement
- Credit brokers, where this is a secondary activity, and where the main business of the firm is selling goods or providing services of a non-financial nature
- Not-for-profit debt counsellors and debt adjusters
- Not-for-profit providers of credit information services
An application for FCA authorisation requires the firm to supply certain financial and non-financial information, including details of the systems and controls that will be used, and to give details of key individuals within the firm. In some types of firm, these key individuals will need to be approved in their own right by the FCA.
Firstly, the firm will need to satisfy the FCA that it meets the Threshold Conditions – a set of basic requirements all regulated firms must meet. The conditions to be satisfied include:
- To have a head office and registered office in the UK
- To be established as a body corporate, or as a partnership or sole trader
- Not to have close links with another organisation that would prevent the FCA supervising the firm adequately
- To maintain adequate resources
- To have a business model that promotes both the interests of consumers and the integrity of the UK financial system
- To be fit & proper – assessment may cover areas such as: any previous dealings with regulators; the quality of internal systems & controls; the skill levels present within the organisation; and the financial crime risk posed.
The FCA authorisation fee for consumer credit applications will be between £600 and £15,000, depending on the size of the firm’s turnover and the activities it intends to carry out. Many small brokerage firms will pay the lowest amount.