09May

An April 2016 data bulletin from the Financial Conduct Authority (FCA) revealed the progress it had made in authorising consumer credit firms. All figures are correct as of December 31 2015.

As of this date, there were 37,336 firms authorised to carry out consumer credit activity in the UK (excluding appointed representatives). This figure comprised 25,220 who had either full or limited permission, and 12,116 who still held interim permission.

68% of the firms that hold, or did hold, interim permission applied for authorisation (this includes interim permission firms who became appointed representatives of authorised firms). The other 32% are understood to have left the credit industry.

An additional 1,281 applications from firms new to the credit market were also being considered.

Looking at cases where a decision has been reached, 94.7% of applications for credit authorisation have been successful. The total number of firms approved by the FCA as of December 2015 stood at 25,645 (425 of these have since cancelled their permissions), which includes 7,443 firms that are new to the credit market. Of this 25,645, 22,122 (86%) were credit brokers and an additional 1,952 (8%) were providers of credit information or credit repair services.

It was taking eight weeks for the FCA to reach a decision in a limited permission application, 11.8 weeks for a variation of permission application and 27.4 weeks for a full permission application. The FCA must determine an application within six months of it being complete or 12 months from receiving it (whichever is earlier), and had breached these deadlines in just 46 cases since the credit regulation switchover date in April 2014.

Addressing the 2016 Credit Summit, the FCA’s acting chief executive Tracey McDermott made reference to firms who had seen their applications refused, or who had decided to leave the industry with the advent of FCA regulation. Ms McDermott said:

“We have refused authorisation to 40 consumer credit firms who didn’t meet our standards. We have also seen over 100 debt management firms leave the industry. Over 1400 firms in total have either been refused or decided to withdraw their application.

“We have set out our expectations of the standards firms must meet to be authorised. And in many cases these are a step change from what was required in the past. But they are not a nice to have. They are critical to ensuring proper protection of your customers.

“We are content to see firms leave the industry if they cannot meet these standards.”

Ms McDermott cited the example of PDHL, a large debt management firm whose application for full authorisation was declined by the FCA even though they had been trading for a number of years under the auspices of the Office of Fair Trading. She said that, when considering PDHL, her organisation found “cases of customers’ files not being reviewed for months despite them reporting job losses. In one instance, we found the firm insisting a client should maintain £30 monthly repayments, despite the client having no income.”

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.