The Financial Conduct Authority (FCA) has issued a supplement to its consultation paper on authorisation fees for the consumer credit industry. The once proposed change that is likely to be welcomed is that the minimum fee payable will reduce from £1,000 to £600, reducing the amount that many of the smallest firms can expect to pay. Some trade associations had suggested that a £1,000 fee would place an undue burden on smaller firms, and many firms commented on this issue at the consumer credit roadshows the FCA has hosted. However, for some firms, the amounts payable will increase, although the maximum fee payable remains unchanged at £15,000.
In the supplement, the FCA acknowledged: “that our proposed application fees might constitute a significant barrier to entry for some small firms.” The paper goes on to say: “The smallest home collected credit lenders and debt management firms would pay a fee of £1,000 while the smallest brokers would pay £600.”
The original proposal was for all straightforward applications to cost £1,000, moderately complex applications £5,000, complex applications £10,000 and very complex applications £15,000.
Now, a much more complicated system of authorisation fees is proposed. The fee payable will now be dependent not only on the type of activity undertaken, but also on the firm’s annual income from credit activities. Five fee bands have been created based on the firm’s income level: up to £50,000; between £50,000 and £100,000; between £100,000 and £250,000; between £250,000 and £1m; and over £1m.
- Straightforward applications will cost £600, £750, £1,000, £1,500 or £5,000 in each of the fee bands.
- Moderately complex applications will cost £800, £1,000, £1,500, £5,000 or £10,000
- Complex applications will cost £1,000, £1,250, £2,000, £7,000 or £15,000
So for example, a ‘straight forward’ firm with income of £90,000 p.a. will now pay £750 instead of £1,000. A ‘complex’ firm with income of £1.2 million will now pay £15,000 instead of £10,000.
The ‘very complex’ category has been created specifically for credit reference agencies, with the FCA expecting that regulating these firms will place a considerable burden on its resources. There is no change proposed to the £15,000 fee that these firms will pay. Payday lenders, logbook lenders and home-collected credit agencies will fall into the complex category, while peer-to-peer lenders and other types of lender will be classed as moderately complex. Credit brokers can expect to be in the straightforward category.
A firm applying for both consumer credit authorisation and other FCA permissions will pay the higher of their two applicable fees – application fees for other areas regulated by the FCA can be up to £25,000. Firms already authorised by the FCA who need to add consumer credit permissions will pay half the usual consumer credit authorisation fee for their firm type.
The FCA invites responses to the supplementary consultation by January 16 2014. Firms who originally replied to the credit fees consultation are still welcome to submit a further response, in light of the changes.
The proposed changes apply only to applications for full permission, and have no impact on the fees to be charged for limited permission applications. These remain at £500 or £100 for firms with annual income from credit activities of below £50,000.