February 21 2014 marked another key date in the countdown towards the transfer of consumer credit regulation from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA). This is because if a new application for credit authorisation is submitted after this date, regardless of whether it is from a low or high risk firm, then the OFT does not expect to be able to complete its assessment of the application prior to April 1, when the FCA becomes the regulator.
Nevertheless, any firm seeking credit authorisation before April 1 still needs to apply to the OFT, as they remain the regulator until the switchover. However, it is likely that what will happen is that the application will be amongst those passed to the FCA by the OFT on the switchover date. The final decision on the application will then be made by the FCA, using its criteria.
Online applications can be made via the OFT website until March 26.
The FCA has not explained the process for applying for first-time credit authorisation with itself, and in view of the above, it is not expected that this will occur until April 1. However, the usual FCA authorisation process involves providing extensive amounts of financial and non-financial information.
All applicants for FCA authorisation will need to meet their existing threshold conditions, which relate to the organisation’s legal status, business model, financial resources and fitness & propriety. Key individuals within the firm will require individual approval to carry out their roles.
In addition, there are of course only weeks left for existing credit firms to apply for interim permission with the FCA, via their website. This is a simple exercise, which takes a matter of minutes, and allows existing Consumer Credit Licence holders to become authorised by the FCA without having to provide large amounts of extra information. The interim permission system can only be used by firms that currently hold a valid licence, and who will continue to do so up until March 31. Firms are also urged to ensure that any maintenance charges due on their licence before the switchover are paid.
Once existing firms have obtained interim permission, they will be given details at a later date of when and how to apply to upgrade their FCA authorisation to ‘full permission’. It is at this stage that firms will be required to provide the comprehensive information normally required with an application to the FCA.
Once authorised, whether they are new to the credit industry or not, firms will need to comply with the FCA’s Principles for Business, and with the requirements of the FCA Handbook. Publication of the new rules is expected in late February or early March 2014.
Many of the rules will be based around the Consumer Credit Act and existing OFT guidance. However, there are a series of new requirements that apply to all credit firms, e.g. the need to submit data reports; and additional requirements for certain types of firm, e.g. rules regarding rollovers, continuous payment authority, affordability checks and promotional material for payday lenders.