Diane Forster looks at what consumer credit firms need to do to get interim and full authorisation under the FCA
Regulatory responsibility for consumer credit transfers from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) on 1 April 2014.
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Firms will only be able to trade under their Consumer Credit Act licence until 31 March.
Those wishing to trade afterwards must be registered with the FCA for interim permission (IP) to carry on regulated activities from 1 April. IP exempts firms from some aspects of the new regime until fully authorised.
The FCA consulted in Consultation Paper (CP) 13/10 on how it will regulate the consumer credit industry after 1 April. Its Consumer Credit sourcebook (CONC) includes conduct requirements for consumer credit firms, and prudential requirements for debt management firms.
Following consultation, the FCA will publish a policy statement in February setting out final rules and guidance.
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By GlobalDataThe consumer credit industry remains concerned about some aspects of the new regime, and feedback suggests some
concerns with FCA proposals need resolving.
The FCA has confirmed that most of the rules in CONC come into effect from 1 April. However, the enforcement of some is subject to a six-month transition.
The FCA can and will enforce rule breaches from 1 April where appropriate.
The FCA rules for consumer credit will contain more than just old CCA regulations.
In addition, consumer credit firms must comply with the FCA’s High Level Standards which include the overarching requirements for all authorised persons (firms) and approved persons.
All consumer credit firms will be subject to the FCA’s Approved Persons (AP) regime, under which persons carrying out certain Controlled Functions (CF) must be approved by the FCA. They will also have personal liability for regulatory failings.
There are some important things you should do to ensure your business is best placed to implement changes swiftly, including:
– Gap analysis against the draft CONC rules to identify key gaps;
– Review resource needs, including system challenges. Many teams are already overwhelmed with the volume and complexity of the proposed changes;
– Set up a dedicated project team and governance framework, bringing together relevant strands of change;
– Review your governance arrangements to ensure management responsibilities are defined and documented;
– Identify documents needed, including required regulatory status disclosure from 1 April;
– Ensure you have effective and appropriate policies and procedures in place to show customers are being treated fairly, including customers whose accounts fall into arrears; and vulnerable customers, including those with mental health issues;
– Review business policies and procedures – ensure they are documented, up to date and being followed
– Get to grips with current FCA authorisation process. Get a feel for the information required and what you will need to demonstrate when applying for FCA authorisation, including familiarising yourself with the wider FCA handbook.
The FCA will begin directing firms to apply for full authorisation from 1 October 2014, with different deadlines for different
categories of firm.
The industry is calling for the FCA to provide firms with an early indication of when they will be called for authorisation, so they can prepare accordingly.
Diane Forster is head of compliance, Recoveries Services Group, at Shoosmiths
