The importance of providing full and informative answers to questions on authorisation application forms was highlighted by the Financial Conduct Authority (FCA)’s recent decision to refuse a consumer credit application from West London-based Secure Property Consultants Limited.
In its Final Notice refusing the application, the regulator first commented that the firm had applied for as many as nine different consumer credit permissions. When questioned, the firm said that it was applying for some of these ‘just in case’ they were required, but the FCA believes that applying in so many different categories suggests that the firm did not fully understand what the different permissions related to.
The most noteworthy aspect of the application though was the brief and somewhat confusing answers the firm gave to some of the questions on the application forms. Examples included:
Q: Please tell us how the fair treatment of customers has been considered in the development of the Applicant’s business plan.
A: The sale value of any property is guaranteed by the applicants and therefore any potential client is fully informed prior to instructing the applicant as to whether they wish to proceed.
This answer did not give details of how the firm ensures customers are treated fairly.
Q: How will the applicant’s senior management ensure that TCF is embedded in the culture of the firm and that it can demonstrate that the firm is consistently delivering fair outcomes to consumers?
A: All prospective clients are dealt with by a director of the applicant.
This answer did not explain how having a director deal with the case guarantees fair treatment.
Q: What have the management of the applicant identified as the key risks to consumers in its model and what action has been taken to mitigate these risks?
A: The prospective client is not faced with any uncertainty over potential fees.
Later, when asked the question about the main risks their business model would pose, and how these risks would be mitigated, the firm answered simply ‘We do not foresee being a risk to customers as we operate on a fixed sum repayment’. Taken together, these two answers suggest the firm does not understand what the FCA means by risk management.
Q: Are staff, including any self-employed agents you may hire, trained on compliance and regulatory rules? Please describe in detail your policies and procedures in this area.
This single word answers the first part of the question, but no details at all were provided for the second part of the question.
Q: Recognising that your borrowers tend to be in financial distress, what policies or controls do you have for dealing with them in circumstances where they are vulnerable?
A: We do not lend to vulnerable individuals as this is apparent from our face to face interviews.
The FCA was not satisfied from this answer that the firm would be able to identify a vulnerable client. It also noted that the firm’s business plan appears to contradict the assertion that its clients will not be ‘vulnerable’ when it states that ‘vendors [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][clients] are normally in a distressed state due to arrears on their loans’.
The FCA also had concerns over the firm’s financial resources. Its sole director, Rajinder Singh Gill, turned down an FCA invitation to discuss the matter further at interview.
In summary, the regulator was not satisfied that the firm could meet as many as four of the threshold conditions: 2C (effective supervision), 2D (appropriate resources), 2E (suitability) or 2F (business model).
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]