31Jan

The Financial Conduct Authority (FCA) will take over as the UK’s regulator of consumer credit on April 1. Firms who are already authorised by the existing credit regulator, the Office of Fair Trading (OFT) now need to make an application to the FCA, after which they can expect to be granted interim permission to continue trading under the FCA regime.

However, new entrants to the consumer credit market still need to apply to the OFT. If their application is approved by the OFT before April 1, they will then need to apply to the FCA for interim permission once approval has been received. If the OFT has not reached a decision on a firm’s application by the switchover date, then their application will be passed to the FCA.

The OFT has issued some guidance on its website indicating how likely it is that a firm applying for authorisation today will receive their Consumer Credit Licence before the end of March. As 90% of ‘low risk’ applications are approved within 25 working days, the OFT expects that applications made after February 21 will not be approved in time. 75% of ‘high risk’ applications are approved within 50 working days, so here the OFT expects that applications made after January 17 will not be approved in time. Of course, there is no guarantee that any application, whether low or high risk, will be approved by the OFT before its responsibility for regulation ceases.

Firms wishing to make a new application for consumer credit authorisation, or to vary their existing permissions, are thus advised to submit their applications as soon as possible.

High risk firms include:

  • Lenders offering secured loans, sub-prime loans or payday and other high-cost short-term loans; or those selling loans in the customer’s home
  • Brokers offering secured loans or sub-prime loans; or those selling loans in the customer’s home
  • Debt adjusters (other than those carrying out not-for-profit activities)
  • Debt counsellors (other than those carrying out not-for-profit activities)
  • Debt collectors
  • Debt administrators who deal with secured loans or sub-prime loans
  • Credit information service providers
  • Credit reference agencies

Low risk firms include:

  • Lenders not offering secured loans, sub-prime loans or high-cost short-term loans; and who not offer credit in the borrower’s home
  • Brokers who avoid all the above activities
  • Debt administrators who avoid all the above activities
  • Not-for-profit debt adjusting or debt counselling

Firms intending to carry on with consumer credit activities after April 1 must retain their Consumer Credit Licences until the switchover date, even if they are informed before this that their interim permission application to the FCA has been successful. The FCA will only consider interim permission applications from firms who have licences valid until March 31, and who have paid the necessary maintenance charges to ensure that their licence stays in force until this time. The OFT webpage also urges firms to ensure that the firm details on their licence, e.g. contact details, are up to date.