The Financial Conduct Authority (FCA) has called on consumer finance companies to offer an opinion on whether the definition of consumer hire leases should be revised.
In its Regulatory fees and levies: policy proposals for 2018/19, the FCA said a number of firms had argued that its definition of income for fees purposes required them to report total hire charges as income, whereas lenders of unsecured loans were able to deduct repayments of principal, reporting only the interest and other financial charges they levy.
In order to decide whether to update its definitions, the FCA has asked for firms to give an opinion on the matter, adding that companies which undertake consumer hire agreements should use representative examples to illustrate how they interpret the current definition of income when reporting.
The regulator is seeking information on how firms calculate and define income as well as ways it could be improved.
This would involve further information on experiences on variables involved in finance leases, such as depreciation, implicit interest and indefinite agreements.
“We understand that there are several ways of reporting income under finance leases and they may not readily correspond with our definitions of income for fees purposes,” said the FCA.
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“We welcome further information from firms on the assumptions they currently build into reporting their income in their accounts and for their credit-related FCA income if different, and any suggestions for adapting our definition to align it more closely with the ways they prepare their accounts.”
The FCA said if it found there to be support for a reviewed definition, it would consider consulting in April 2018 around a revision, with a view to introducing it from 2019/2020.
The FCA also outlined plans to begin charging regulated firms which wished to continue receiving their fee invoices via a paper bill.
In its policy proposal, it said that online invoicing is an environmentally friendly process which ‘significantly enhances the efficiency’ of its fee invoicing and collection process.
Currently about 8,000 of the firms the FCT regulates receive paper invoices, and it said it was expensive and time-consuming printing and posting these firms their invoices.
Currently these costs are borne by the entire regulated base, but the FCA said it believes that firms wishing to preserve the manual service should pay for it.
As a result, the FCA has proposed a charge of between £50 and £100 per year for those wishing to receive paper invoices, but said it review these figures before consulting formally next year. This figure would likely increase in the future, the FCA said.