With only days to go before some consumer credit firms need to upgrade their existing interim permission to either limited permission or full permission, the Financial Conduct Authority (FCA) has published three Credit Ready guides to assist firms with the application process.
The first of these is the Credit Ready Decision Tool. This contains a flow chart which firms can use to determine whether they need to apply for limited permission or for full permission.
Essentially, all lenders will require full permission, unless they never apply interest or charges on the loan, and their principal business is of a non-financial nature. Peer-to-peer lending companies, who operate a platform whereby borrowers and lenders are brought together, also need full permission.
The next section of the tool is entitled ‘Activities related to debt’, and covers debt counselling, debt adjusting, debt administration and debt collection. All debt collection and debt administration firms will require full permission, as will any debt counsellors and debt adjusters who cannot satisfy a series of very specific conditions.
For hire firms, the situation is less complex, and these firms should expect to need full permission if they offer agreements secured on land, and limited permission if they do not.
Most credit brokers should expect to require full permission. Exceptions include certain vehicle finance brokers and Green Deal brokers.
Credit reference agencies will require full permission, while credit information providers will be able to apply for limited permission only if the information they provide is solely in connection with other limited permission activities.
The second Credit Ready guide is a checklist of items firms need to prepare for a limited permission application. These include:
- Details of the firm – such as its contact details, place of business, registration details, organisational structure and professional advisers
- The firm’s future plans – when it wishes to be authorised from, whether it will use any additional trading names and whether it plans to have appointed representatives
- Financial details – such as estimated turnover and the amount of client money held
- The firm’s history – including any previous trading names, regulatory authorisations, insolvency events, regulatory enforcement action, civil or criminal actions against the firm or complaints
- The firm’s business – including expected numbers of clients and whether a regulatory business plan and risk management strategy is in place
- Evidence that the firm will treat its customers fairly
- Evidence that the firm has documented compliance procedures
- Evidence that the firm has systems in place to combat financial crime
- Who the firm’s approved persons will be
The third guide concerns items to be prepared for a full permission application. These include all of the above, plus additional items such as:
- More detailed financial information
- Evidence of IT-related systems and controls and business continuity planning
- Copies of disclosure documentation to be supplied to customers
- Information regarding the firm’s remuneration structure
- Details of marketing strategies to be used
- Whether Continuous Payment Authority will be used, and if so, the terms on which this will be used
Firms already regulated by the FCA for other activities, and who wish to add consumer credit permissions, are not subject to this application regime. These firms should instead submit a Variation of Permission application.
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.