22Apr

Interim Permission from the FCA

Scott Robert offers excellent personalised services. We’ll provide the information and guidance you need to obtain interim permission from the FCA. This permit will allow you to trade smoothly without worrying about common regulatory problems and compliance.

Consumer Credit Firms Prepare for FCA Regulation

From 1 April 2014, regulation of consumer credit in the UK will transfer from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA).

Detailed rules for credit firms to follow under the new regime are yet to be published. An initial consultation on this issue ended on 1 May 2013, and it is expected that a more wide-ranging consultation will take place in autumn 2013. Indications are that the rulebooks will be based around many of the requirements of the existing 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.

All credit firms will need to obtain ‘interim permission’ to trade from the FCA by 1 April 2014, unless they intend to become an appointed representative of an FCA-authorised firm. It is expected that firms will require ‘full permission’ by 1 April 2016. Existing Consumer Credit Licences will lapse on 31 March 2014.

In order to obtain FCA authorisation, firms must first satisfy the regulator that they meet its ‘Threshold Conditions’, which include:

  • The head office must be located within the UK
  • The firm must hold sufficient financial resources
  • Key individuals within the firm must be ‘fit and proper’

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.

Credit firms will need to ensure that their stationery is updated by the switchover 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 has greater resources to supervise firms than the OFT, and has more wide-ranging powers. Larger firms can expect to be allocated a dedicated FCA supervisor, while smaller firms will be subject to collective supervision by a team of specialists in their business sector.

Firms should expect that action may be taken against them should they:

  • Breach FCA rules and/or principles
  • Breach any consumer credit legislation which remains in force after 2014
  • Breach anti-money laundering legislation
  • Conduct business without the required permissions

The FCA will be able to impose the same sanctions on credit firms as it can on firms it currently regulates. It can issue fines and warnings, ban individuals from working in financial services or withdraw a firm’s authorisation to trade. It will be able to take action regarding conduct in credit firms that occurred prior to 1 April 2014, but only in accordance with the legislation that applied at the time.

Unlike other FCA regulated activities, it is not anticipated that consumer credit will be covered by the Financial Services Compensation Scheme.