On August 5 2015, the Financial Conduct Authority (FCA) announced that it had refused an application made by Belfast-based M8 Rates Loans Limited to act as a consumer credit lender. The FCA had previously issued a Warning Notice expressing its concerns about the application, and inviting the firm to make representations. When no representations were received, it published a Final Notice regarding the refusal of the application. The deadline for appealing the FCA’s judgement to the Upper Tribunal has also passed.

M8 had held interim permission from the FCA from April 1 2014. The application for full permission has been refused due to issues regarding the documentation supplied with the firm’s application, and concerns over the competence of its sole director, Neil Green.

Issues the FCA has with M8’s application include:

• The example credit agreement provided did not contain all the information required under the Consumer Credit (Agreements) Regulations 2010
• No procedure for dealing with customers in arrears was provided
• No clear indication of how vulnerable customers would be identified was provided
• No application was made for any individual to carry out the post of Money Laundering Reporting Officer. This role is a requirement for all authorised firms
• Mr Green has no previous financial services experience, and other than conducting reading and research in his own time, has not committed to any formal training
• The application indicates that the firm has failed to understand the meaning of ‘approved persons’, confusing this term with potential customers
• The application incorrectly stated that the firm intended to engage an appointed representative, indicating that it had misunderstood the meaning of this term
• Examples of promotional material stated that the firm was authorised by both the FCA and Office of Fair Trading (OFT), did not contain a representative APR and only described the benefits of the relevant products and not the risks and downsides. The OFT in fact ceased to exist in April 2014, so it is not possible to be authorised by both bodies

Firms still preparing their consumer credit applications should take note of the reasons why this application was refused, and ensure that their applications fully address all of these issues.

According to FCA figures summarising the authorisations process, up until March 31 2015 only 18 firms saw their applications refused. 775 firms initially made an application but then withdrew it. However, over 90% of applicant firms applying within each authorisation period ended up becoming authorised.

All consumer credit firms who are yet to submit their authorisation application need to make sure they know when their allocated application period is. They also need to ensure that they are totally clear as to whether they can apply for limited permission, or whether full permission will be required. An important consideration here is to carefully study the specific criteria lenders and brokers must meet in order to qualify for limited permission.

Then firms need to ensure they start preparing the required financial and non-financial information well in advance of the time they need to apply.

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.