Dealers have until the end of the month to be eligible for a 30% discount on the interim permission essential for them to carry on handling consumer credit after April 1, 2014.
Without an interim licence, any dealer offering finance after April 1 will be breaking the law.
Dealers should also check that the licence they hold at present is for the right Consumer Credit Licence categories. Without CCL categories D and E they are operating illegally. If this is the case, they should apply to the Office of Fair Trading immediately to have their licence adjusted. To facilitate this process, if required, dealers should note on their application to the Office of Fair Trading that their for-debt adjustment (Category D) relates to them being dealers who only need this for settlement purposes. This may help to speed up the application process.
The Financial Conduct Authority – which will take over regulation of the sector in April and warns it will be “more rigorous” than its predecessor, the FSA – is asking dealers with strong views on the changes to let it know. The authority is still consulting, so there is still an opportunity to have your voice heard. FCA roadshows will continue through to January 2014.
The regulatory shake-up will create significant change for many dealers as the FCA moves to fulfill its three operational objectives: to secure an appropriate degree of protection for consumers, protect and enhance the integrity of the UK financial system, and promote effective competition in the interests of consumers in the markets.
The FCA is proposing that firms applying for ‘limited’ permissions to undertake lower risk consumer credit business will pay an application fee of £100 if their consumer credit income is less that £50,000 per year, with larger firms charged £500.
For firms which carry out higher-risk business and require full consumer credit permission, the FCA proposes charging the businesses based on how complex it anticipates processing the authorisation will be. The fees would range from £1000 for a ‘straightforward’ activity such as credit broking to £15,000 for the ‘very complex’ activity of providing credit references.
In setting out its approach to charging annual fees to consumer credit firms, the FCA has proposed fees based on companies’ income, with lower fees for firms with limited permissions. Not-for-profit organisations which provide debt counselling will be exempt from fees and there will be concessions for credit unions and community benefit societies.
1. The FCA’s consultation paper on proposed changes to fees can be read here: www.fca.org.uk/news/cp13-14-regulatory-fees-and-levies
2. The FCA will take over regulation of consumer credit from the Office of Fair Trading from 1st April 2014. A consultation paper on how the FCA plans to regulate the industry was published in October and can be found here: www.fca.org.uk/your-fca/documents/consultation-papers/cp13-10