From 1 April 2014, the regulation of consumer credit activities switches from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA). With this change comes a host of new requirements contained in the FCA Handbook which firms are franticly implementing in readiness for the 1 April deadline.

Fortunately, the FCA is to give some flexibility for the majority of the requirements where a firm can demonstrate that it is complying with the previous OFT regime rule and this rule is equivalent to the new FCA requirement. Unfortunately, this flexibility does not apply to the status disclosure requirements, save for the transitional provisions below.

Disclosure rules

As with firms already regulated by the FCA, firms conducting consumer credit activities under the FCA from 1 April 2014 will be required in certain communications and documents to disclose the fact that they are "Authorised and regulated by the Financial Conduct Authority".

Letters and emails

Every letter or email which is sent to a customer or prospective customer in connection with consumer credit must include the statutory status disclosure required under GEN 4.3 of the FCA Handbook. For many consumer credit firms this will be "Authorised and regulated by the Financial Conduct Authority".

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This particular change is causing issues for many firms who are struggling to make the required system changes ahead of the looming deadline. Firms may take the view that the disclosure will be printed as part of their standard letterhead and email sign off, however, a firm must consider whether it is then necessary to also add wording to prevent the customer being mislead that the FCA also regulates the firm for non FCA regulated activities.

For the avoidance of doubt, the disclosure requirements do not apply to text messages, account statements, business cards or compliment slips (used as such).

Lending documentation

References in agreements and statutory notices regulated by the Consumer Credit Act 1974 to the Office of Fair Trading should be amended to the Financial Conduct Authority and their relevant contact details (where required).

Standard European Consumer Credit Information (SECCI) documents which include section five in relation to distance marketing also require an update to the supervisory authority and Interim Permission number.

The FCA has introduced a transitional provision for lending documentation which in effect creates a period where both supervisory authorities can be stated with the dates they have authority. Whilst this can help to avoid the issue of improperly executed agreements, it creates yet further system changes for firms who are already struggling under the weight of regulatory change.

Interim Permission

Any firm undertaking consumer credit activity from 1 April 2014, which has not already done so, must consider status disclosure and apply for their Interim Permission before 31 March 2014. Failure to do so will mean that that firm can no longer conduct consumer credit activity.

The FCA is also requesting that firms holding a consumer credit licence but not intending to apply for an Interim Permission, inform the FCA of their plans to exit the consumer credit market using a questionnaire on the FCA website.

 

By Daniel Bennett, Shoosmiths