The Financial Conduct Authority has published its view of consumer credit regulation in a consultation paper (CP) today.
The CP represents a set of details for industry oversight by the body, which replaced the Financial Services Authority earlier this year and will take responsibility for consumer credit regulation from the Office of Fair Trading (OFT) as of April 2014.
The CP can be read here: http://www.fca.org.uk/your-fca/documents/consultation-papers/cp13-10
The FCA is also looking for industry feedback regarding the proposed regulatory framework, with an online form available here: http://www.fca.org.uk/your-fca/documents/consultation-papers/cp13-10-response-form
Responses to the CP will be taken until 3 December 2013, with final guidance published in February 2014.
Levelling the field
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Despite the national media concentration on high rate-for-risk unsecured lending, Stephen Sklaroff, director general at the Finance & Leasing Association, warned the rules "go far beyond the payday sector and have implications for all UK credit customers".
Sklaroff remained concerned over the timeframe for change to regulation by the FCA, including a 400-page rulebook for companies to make themselves aware of, which the Authority had acknowledged may reduce credit availability in some markets.
In 2012 FLA members provided £55.1bn of consumer credit, estimated to account for 30% of all unsecured lending in the UK, and Sklaroff noted ""the industry will be working with the FCA in the coming months to try to minimise any adverse impact on customers."
Meanwhile, Adam Wonnacott, sales director at Burlington Group, welcomed the proposals as potentially introducing a "level playing field" for the debt collection and enforcement sector.
With debt collection agencies regulated under the FCA, as opposed to licensed at present, Wonnacott was happy collections would be restricted to businesses which could "demonstrate the required level of competency and sustainability".
Instead of licensed companies using third-party field collectors, without a ‘fit and proper’ persons’ test, explained Wonnacott, the FCA will introduce a regime of Appointed Representatives (ARs), individuals of whose work the Authority must be kept informed by the Principal Authorised Business.
Prime and non-prime
Around the publication of the proposals, both prime and non-prime lenders are holding meetings with dealers and intermediaries in preparation for the transfer of regulatory responsibility.
While Alphera Financial Services is advising all of its partners, with whom it is running a series of seminars regarding the FCA transition, to check their credit license details, Moneybarn held its first conference, addressed to its brokers, in September to address both Satisfactory Quality and the FCA.
In his address to delegates, Bill Scotney, head of corporate risk and compliance at the Hampshire-based finance provider, said the approach of the FCA was "scary" and the Authority’s estimation of a 20% dropout rate from the market may be an underestimation.
Lenders and brokers would do best to circumvent problems with the change by viewing it as an "opportunity" which could be managed with good record keeping.
Further comment and analysis regarding the CP and the transition to the FCA will be published in the October issue of Motor Finance magazine.