Edition 9 of this Briefing included a reminder that responsibility for the oversight of the UK consumer credit regulatory regime transferred from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) on 1 April 2014. The FCA has made some additional information on the consumer credit regime available on its webpages to coincide with the introduction of the new regime and provide guidance to firms seeking permissions and authorisations under the new regime, which comprises:

  • A Direction for firms with interim permission setting out when firms wishing to carry on consumer credit activities need to apply for FCA authorisation or a variation of current Part 4A FSMA permission. In Section 9, the FCA sets out details of the application periods which will run from 1 October 2014 until close of business on 31 March 2016. Appointed representatives cannot take office until their respective principal(s) have been granted permission. The Direction also provides other information to firms not wanting to apply for authorisation (i.e. those wishing to cease credit-related regulated activities) and how to change an application period by deferring or bringing it forward (with the last application period to start on 1 January 2016, with all applications to be received by 1 April 2016). The FCA will write to all firms with interim permission by 1 May 2014 to confirm their application period, and provide details of how to apply (most applications will be made online). Firms wishing to apply for permission for activities not covered by their interim permissions (as well as new applicants) must make a fresh application to the FCA anytime from 1 April 2014. The FCA has also published a set of Frequently Asked Questions (FAQs) on its webpage relating to authorisation, and has updated its consumer credit FAQs to include information on 'inflight applications' (applications dealt with by the OFT before 1 April 2014).

  • A series of detailed guidance notes to assist firms in their new applications for authorisation, which are intended to be read alongside the full information provided in the Consumer Credit Sourcebook section of the FCA Handbook, aimed at:

    • Full consumer credit firms: (for firms that carry on "higher-risk" consumer credit activities, including consumer lenders and firms providing hire-purchase and conditional sale agreements, credit brokers, debt adjusters, debt counsellors, debt collectors, administrators etc). The detailed information required by the FCA from full consumer credit firms includes the products the firm intends to sell, how it trades, its legal status, address and contact details, trading names, required permissions, whether it intends to hold client money, history of applicant (including refusals or revocations of previous licences), fees declaration, the applicant's business plan, financial resources, opening and closing balance sheets, systems and controls, compliance monitoring, and numerous other pieces of information.

    • Limited consumer credit firms: (for firms that carry on "lower-risk" consumer credit activities, including those providing consumer credit on an ancillary basis where their main business is selling goods or non-financial services). It is expected that UK Special Purpose Vehicles (SPVs) will be able to apply for limited permission, but there is nothing in the FCA's published material that confirms this. The information required by the FCA from limited permission firms applying for authorisation is almost as detailed as that required for full consumer credit firms, save for the financial resources information.

    • Consumer credit sole traders: which reflects the different information to be gathered from an individual as opposed to a firm, such as personal information, national insurance number, passport number, address history, previous names, directorships, employment status and history, fitness and propriety, civil and criminal proceedings, business and employment matters and regulatory matters.

  • The Consumer Credit Register, an extremely useful public record of firms that have interim permission to carry out consumer credit activities (which can be searched to check on the regulated status of any firm, including a UK SPV), and an accompanying webpage providing details about how to use the Register. Once firms are granted full authorisation by the FCA they will be moved from the Consumer Credit Register to the wider Financial Services Register.

  • A Guide explaining how the FCA defines "consumer credit income", to help firms use the fees calculator to estimate their consumer credit periodic fees, for the purposes of reporting those figures to the FCA.

Entities holding existing UK consumer credit licences (including SPVs) will have already been contacted by the FCA to make them aware that those licences lapsed on 31 March 2014, and that interim permission must be held by those wishing to carry on consumer credit business after that date. Now that 1 April 2014 has passed, the FCA will begin considering whether to grant previous licence-holders full authorisation, in a process that will be completed by 1 April 2016. As mentioned above, all applicants for authorisation new to the industry from 1 April 2014 (including new UK SPVs, to the extent a licence is deemed necessary) will have to apply to the FCA for full authorisation from that date, in a process that could take up to six months. Prospective applicants are advised to approach the FCA at as early a stage as possible in the application process, to ensure that the process does not unnecessarily delay any transactions.

Useful links

Financial Conduct Authority, Consumer Credit Pages and Consumer Credit Sourcebook FCA Direction for firms with interim permission Guidance note: Full consumer credit firms Guidance note: Limited consumer credit firms Guidance note: Consumer credit sole traders Consumer Credit Register and accompanying webpage