Consumer Credit Regulation

Credit firms are required to obtain authorisation from the FCA. Scott Robert’s role is to make sure you’re following the FCA consumer credit regulation. We have the knowledge and experience in dealing with the FCA representatives and processing licence applications and renewals.

FSA Consults on FCA Consumer Credit Regulation

In March 2013, the Financial Services Authority (FSA) outlined proposals for how its successor body the Financial Conduct Authority (FCA) will regulate consumer credit. The FSA has commenced a formal consultation on its proposals, for which the deadline is 1 May 2013.

From April 2014, the FCA will regulate all types of consumer credit activity, a responsibility that currently lies with the Office of Fair Trading.

Consumer Credit Licences will lapse on 31 March 2014, and from 1 April 2014, consumer credit firms will need to hold ‘interim permission’ from the FCA. Without this permission, firms will be unable to trade. After 1 April 2014, firms will need to apply for full authorisation by a specified date, which is expected to be no later than 1 April 2016.

Not-for-profit organisations, such as debt charities, will be subject to FCA regulation.

A detailed set of principles and rules for consumer credit firms is yet to be published, but the Treasury’s own paper on the proposals suggests many conduct requirements will remain the same. A separate consultation will be conducted in autumn 2013 regarding this. However, firms can expect differences in the enforcement regime. The Chapter Summary attached to the FSA consultation paper says: “How the FCA will supervise consumer credit will be different from the OFT. Our approach to supervision will be consistent with the approach for all other firms we regulate,” and then under the heading ‘Enforcement’ it goes on to say: “Our powers under FSMA [Financial Services and Markets Act] are significantly greater than the OFT’s powers under the CCA [Consumer Credit Act].”

The FCA will regard payday lenders, pawnbrokers, credit reference agencies and debt collection firms as posing a higher risk than the other credit sectors, and will require these companies to pay higher fees. The Treasury document says: “Urgent intervention is required in the high cost credit market, in particular in the payday lending sector,” and says that the FCA has a “commitment to prioritise action on payday lending from day one.”

Firms can expect that action may be taken against them should they:

  • Breach FCA rules and/or principles
  • Breach any consumer credit legislation which remains in force after 2014
  • Breach anti-money laundering legislation
  • Conduct business without the required permissions

The FCA will be able to issue fines and warnings, ban individuals from working in financial services or withdraw a firm’s authorisation to trade. It will be able to take action regarding conduct that occurred prior to 1 April 2014, but only in accordance with the legislation that applied at the time. Larger firms can expect to be allocated a dedicated FCA supervisor, while smaller firms will be subject to collective supervision by a team of specialists in their business sector.

Contact us so we can find solutions to your business’s regulatory problems.