A Freedom of Information (FOI) request has revealed that SME finance broker and consumer credit firms have withdrawn a total of 736 applications from the FCA (Financial Conduct Authority) authorisation process.
There have been 10,829 applications for FCA authorisation from consumer credit firms in total to date.
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Commercial finance group and broker LDF lodged the FOI request, and called for more support for brokers to meet the detailed requirements of the UK industry’s new regulator.
The FCA took over the regulation of commercial finance brokers from the Office of Fair Trading in April 2014 with the intention of driving up standards.
The application for authorisation is now more exhaustive than previously, covering financial and non-financial aspects of a firm’s operations. Following initial approval, further reporting will be required, said LDF.
Should those firms that have withdrawn from the authorisation process cease to operate, there could be serious consequences for the ability of their network of often long-standing contacts to find the best finance for their needs, it said. Many businesses which have withdrawn their application will be looking for an alternative that will allow them to continue to operate.
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By GlobalDataCallum Stevenson, head of strategic business development at LDF, said: "Recent problems over the treatment of small business customers mean that the FCA is committed to raising standards across the consumer credit industry. They want to ensure that customers are better protected so there are now much stricter rules surrounding how firms market their services and the affordability checks they carry out on borrowers."
"For most smaller brokers, full FCA authorisation presents a real challenge. Even if a firm gets its initial application approved, they will later need to demonstrate that they are continuing to comply with the policies they submitted. That may be a challenge for some."
LDF was one of the first organisations to be approved by the FCA to help SME finance brokers manage their regulatory responsibilities under the new FCA-run consumer finance regime. It has been approved as an FCA-regulated ‘Principal’, meaning that it can provide authorised regulatory representation to brokers, who then become Appointed Representatives in the eyes of the FCA.
