With a little over six months to go until consumer credit regulation transfers to the Financial Conduct Authority (FCA), firms should ensure they fully understand the process to be followed. The FCA has provided plenty of guidance on this subject.
In early September 2013, the FCA wrote to all consumer credit licence holders. The top of the letter reads:
If you can answer Yes to the following, you must take action
• My business holds an Office of Fair Trading (OFT) Consumer Credit Licence.
• My business intends to continue with activity covered by this licence after March 2014.
The letter goes on to explain that those who can answer Yes to both questions must apply for interim permission from the FCA. It explains that the standard application fees are £150 for a sole trader and £350 for a firm, but that a discount of 30% will apply if the application is made by the end of November 2013, i.e. sole traders will only pay £105 and firms will only pay £245. The letter concludes with a vitally important statement to the effect that, if a firm does not obtain interim permission by April 1 2014, it will be unable to continue with credit activities.
Much of the same information is contained in the FCA’s leaflet on the subject, however this also provides the answers to a number of frequently asked questions. The leaflet highlights the need for firms to check that the information the OFT holds about them is correct by visiting oft.gov.uk/changemydetails, before they make any application to the FCA via fca.org.uk/clicked. Two important issues highlighted on the leaflet are, firstly that if you apply early for FCA authorisation, you must still retain your credit licence until March 31 2014; and secondly, that there are some changes regarding exactly who will require authorisation, further details of which are available on the FCA website.
For the most part, organisations currently regulated by the OFT for credit business will need to obtain FCA authorisation prior to the switchover date, but there are some circumstances in which those not currently regulated by the OFT will require FCA authorisation, and vice versa. One way that a credit business can avoid the need to be authorised is to become an appointed representative. The term ‘appointed representative’ currently has no relevance to OFT regulation of credit. However, this is an option under the FCA regime, and is currently used by many financial advice firms who are members of networks. Essentially the appointed representative (AR) firm does not hold an FCA authorisation, but is supervised by another firm which does, known as the principal firm. The regulator will hold the principal firm accountable for any failings in the AR’s activities.
A further FCA leaflet explains the step-by-step process to be followed in obtaining interim permission. The FCA has taken out advertisements in many newspapers which suggest that the application process via its website takes only a few minutes.
Comprehensive information regarding the changes are available via the FCA website at http://www.fca.org.uk/firms/firm-types/consumer-credit. Applications for interim permission are already being accepted via the site, and with the discount period ending in November, firms would do well to make addressing this matter a priority.