On November 20 2015 the Financial Conduct Authority (FCA) conducted a webinar for newly authorised consumer credit firms. Andrew Kay from the Supervision team led the webinar, accompanied by colleagues from Supervision and the Firm Contact Centre helpline.
The first important point made was that the FCA has a supervision programme designed to assess whether firms are meeting the regulator’s Threshold Conditions, and whether they are treating their customers fairly. Supervision may be conducted via audits of individual firms, or via a thematic review – a review of standards at a range of firms regarding one specific issue. This active monitoring was said to be the main difference firms may notice, given that the former consumer credit regulator, the Office of Fair Trading, was very much a reactive regulator.
Other differences firms may notice include:
• The FCA has stronger enforcement powers to fine and/or ban individuals and firms
• Firms need to keep the FCA updated regularly – the regulator requires firms to complete periodic data returns of financial and non-financial information; and to notify them of any significant adverse events affecting the firm, such as financial problems, significant rule breaches, purchases or sales of loan books and significant data loss. Notifications of significant events should be made via the Notification Form on the FCA website, and firms were asked in the webinar to register for the GABRIEL electronic data returns system if they have not already done so. Firms who fail to complete regulatory returns on time will first be fined, and risk losing their authorisation if the submissions remain outstanding. Changes to basic information, such as a firm’s contact details or changes in its approved persons, should also be notified via the FCA’s Connect system
• Firms are expected to conduct internal compliance monitoring, identify issues of concern themselves and take steps to put matters right
With regard to the most important rules firms need to follow, the panel asked firms to look initially at the 11 Principles for Business, a set of generic criteria all regulated firms must meet. These include: the need to treat customers fairly; the need to ensure all communications are clear, fair and not misleading; and the need to co-operate with the FCA. Firms were then advised to look at the relevant sections of the Consumer Credit section of the Handbook, and if relevant, at the Client Assets section regarding the handling of client money.
Firms were asked to retain records so that they can be easily accessed when the FCA wishes to monitor the firm. This may include customer files, documented procedures and recordings of client phone calls (if available). Firms wanting to see examples of the scope of an FCA thematic review were asked to look at the reports from the recent reviews into high cost short-term credit (which includes payday lending) and the quality of consumer credit advice.
Another warning issued to firms was that, while their authorisation with the FCA is for an indefinite period, any firm that wishes in due course to branch out into areas of credit for which it not currently authorised will need to complete a Variation of Permission application before commencing the new activity.
The panel also reminded firms to disclose on their stationery and website that they were ‘authorised and regulated by the Financial Conduct Authority’. Firms are not permitted to use the FCA logo in any circumstances.
The issues covered in the webinar apply equally to firms whose main activity is not financial services, but who may still act as a lender or credit broker, for example.
The FCA Contact Centre is available throughout office hours to assist with regulatory queries firms may have. They can be contacted by phone or by email. The webinar also highlighted the existence of the FCA’s e-learning package relating to regulatory returns.
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.