The biggest change to the regulatory landscape this year has been the FCA’s assumption of responsibility – transferred from the Office of Fair Trading – for about 50,000 consumer credit firms, many of which have never been regulated by the FCA.
Some may have assumed the consumer credit regulations apply only to firms carrying out payday lending and debt management activities but the scope is much wider.
Mortgage brokers, IFAs and insurance brokers are also covered because they may carry out activities such as credit brokering or debt adjusting.
Anyone wishing to perform these activities after 1 April had to apply for interim permission by the end of March.
If you were part of that process, we are coming to the next critical step where firms must prepare for full authorisation.
The authorisations gateway is one of the key differences between the FCA and OFT regime and will help to improve standards in the sector. Firms and individuals will need to prove that their business models are fair and robust, and demonstrate how they will put the interests of consumers first.
This process is deliberately more detailed than OFT licensing used to be and will result in some firms failing to secure authorisation.
But we believe it will help establish a minimum standard across the industry, which is in everyone’s best interest.
Given the large number of firms involved, each activity has been given its own application period. The authorisations process will start in October and run until March 2016. If you have interim permission, we have recently written to let you know your application period. You can also check the FCA website http://www.fca.org.uk/static/fca/article-type/application-periods-direction-to-firms.pdf.
As with all regulation, there are some exemptions, so we are asking firms to check whether they need authorisation before applying – even if they already hold interim permission.
For example, certain aspects of home finance transactions are exempt when carried out by an administrator and some of the deposit-taking rules do not apply to local authorities.
If your firm needs to be authorised, you should also consider what sort of permission you need.
Firms that carry out high-risk business such as payday lending need full permission, as do those whose core business is consumer credit.
Some firms require only limited permission – if their main business is not consumer credit but they perform some activities, such as debt adjusting or credit broking.
If you are already authorised by the FCA for another regulated activity, rather than going through the full process again you may be able to apply for a variation of permission to add consumer credit activities to your existing authorisation.
If you are a principal for appointed representatives, you can continue this arrangement for consumer credit.
However, you must apply for a variation of permission that covers the consumer credit activities that your ARs will be responsible for. We introduced an early application period for principals from June to August.
If you missed this, you can still apply for your application period to be moved forward.
We recognise that the application process will feel different to firms unfamiliar with FCA regulation and we want to make this as straightforward as possible.
If you are still unsure which elements apply to you, the FCA has an online decision tool and step-by-step guide to authorisations which can help you navigate the process.
We believe the new authorisation system can help build a consumer credit market that people can trust and that will work well for firms.
Susan de Mont is acting director of credit authorisations at the FCA