Compliance Questions and Answers

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    About Achieving Authorisation

Am I ready to apply?

If the answer to all of the following questions is "Yes", then you're ready to get started:

  • Do you know who the company’s owners and Directors are?
  • Are you sure your planned business activities are regulated?
  • Is the business commercially viable?
  • Do you understand what you need to invest, both for start-up costs and regulatory capital to make your business profitable?
  • Have you planned the resources you will need (people, capital, systems, premises, etc.)?
  • Will the FCA consider your management team to be competent and "fit and proper"?
  • Are you, and any other funders for the project and Directors of the business, committed to it?

Learn more about achieving authorisation.

How long does it take to achieve authorisation?

The timescale very much depends on the type of application being made and its quality and completeness.

For example, a Limited Permission Consumer Credit application might take anywhere between a few weeks and six months to be authorised by the FCA. By comparison, a full-scale Banking Licence application will take in the order of 12-15 months.

Does making an application guarantee authorisation?

No, not at all. The FCA apply a rigorous and detailed evaluation process to all applications. Generally speaking, applications prepared by experienced compliance professionals have a higher success rate and more rapid processing times. However, there are no guarantees and problems are most likely to crop up due to incomplete disclosure.

    About the Financial Conduct Authority

What is the FCA?

The Financial Conduct Authority (FCA) is an independent organisation responsible for the regulation of the financial services industry in the UK. It is accountable to the Treasury and Parliament, but does not receive any government funding. The FCA is funded by the fees it charges authorised businesses.

Does the FCA regulate Payment Services?

Yes. Payments Institutions in the UK are ultimately regulated by the European Commission issued Payment Services Directive (PSD) that became law on 1st November 2009. The FCA has implemented the PSD through the Payment Services Regulations, which came into effect in 2009. Similarly, Electronic Money Institutions are regulated mainly through the E-Money Directive (EMD), which was adopted by the European Parliament and the Council of the European Union in September 2009. The FCA implemented the EMD through the Electronic Money Regulations in 2011.

What does the FCA mean by Training & Competence?

Training & Competence is a specific aspect of the FCA's regulations and one of the compliance procedures you're required to document and follow. It refers to their aim of ensuring customers deal with competent business employees. The rules on Training & Competence cover assessing and maintaining competence and record keeping.

Learn more about compliance training.

    About Consumer Credit

What is Consumer Credit?

Consumer Credit is the broad term used to describe credit, loan and debt-related activities and services offered by businesses to consumers. For the purposes of regulation, a consumer is defined as a private individual, a sole trader or a partnership of three partners or fewer.

Does my business need to be authorised?

If your business offers regulated services to consumers then you will need to be authorised by the FCA.

Consumer Credit regulated activities include lending, debt-related activities, credit broking, hire and credit information. The FCA website provides a Jargon Buster that includes a full list of regulated services.

What kind of application does my business need to make?

There are two overall types of FCA Consumer Credit authorisation, which are referred to as Limited Permission and Full Permission. Whether you need to apply for Limited or Full Permission depends on the kind of Consumer Credit services your business provides (or wishes to provide). The FCA website features a Decision Tool document to help you determine which style of Permission you need.

What's the difference between Limited and Full Permission?

Broadly speaking, the two categories of Limited and Full Permission distinguish between the potential levels of risk of different activities to consumers. For example, a car dealer acting as a credit broker and introducing customers to 3rd party finance would be classed as being at the lower end of the risk scale and eligible for Limited Permission. By comparison, a loan company or a debt collection agency involved in higher risk activities would have to apply for Full Permission. Achieving and maintaining Full Permission authorisation is more demanding than Limited Permission.

What's involved in making an application for Consumer Credit authorisation?

At the heart of the process is the FCA's application form, which is completed online via their Connect system. The FCA provides sample forms for both Limited Permission and Full Permission applications that you can download to see the extent of the information required. In addition to the form, a regulatory business plan and compliance monitoring programme need to be prepared and a number of compliance policies and procedures need to be documented. When everything is ready, the application and supporting files are submitted by you to the FCA and you pay the FCA your application fee.

Can I prepare an application myself?

Yes, of course. The FCA have said publicly that they expect businesses to be able to make their own applications.

To help Consumer Credit firms with this, the FCA have produced a preparation checklist (Limited Permission version / Full Permission version) and application guidance notes (Limited Permission version / Full Permission version) that you can download.

However, many businesses prefer to have the reassurance of specialist experience rather than flying entirely solo. For some Consumer Credit firms that means subscribing to the "Plus" version of our Compliance Select service and completing their application themselves. Others choose to completely outsource their application preparation to our consultants. Very often this is because business owners simply don't have the time to dedicate to the process.

If I prepare my own application, how can I check that it's correct before I submit it?

We offer a consultant review service for a fixed fee depending on the kind of application you're making. This is included as part of the "Plus" version of Compliance Select subscriptions.

What is a Regulatory Business Plan?

The FCA describes a Regulatory Business Plan as a document that, "...will set out your business aims and objectives and detail how you will organise your resources to achieve them. The level of detail that your plan goes into should be proportionate to the complexity and scale of your business. Your business plan will help us assess the adequacy of your resources and the suitability of your business model. If you apply for full permission you must attach this to the online application form. If you apply for limited permission you will not need to include it with your application but you should be able to provide it later if we request it."

What is a Compliance Monitoring Programme?

The FCA uses the term Compliance Monitoring Programme to describe, "A document that shows how you establish, maintain and carry out a programme of actions to check that your firm complies and continues to comply with its compliance procedures."

Will the FCA ask me questions about my application?

Once an application has been submitted, the FCA will assign a Case Officer to review it. Case Officers will invariably need to clarify specific details and may request additional information. If you prepared your own application, the Case Officer will send their queries to you. If we're managing the application on your behalf, we'll help you answer them.

Separately, you should expect to receive a lengthy telephone interview from your Case Officer (even if we're managing your application) as part of their due diligence process. We've produced guidance notes on what to expect from this kind of call, which are included in the "Plus" version of the Compliance Select service.

How long does it take to become authorised by the FCA?

From the point of submission, the FCA says that it may take up to six months to review an application. In practice, processing timescales are sometimes much shorter, particularly for new applications.

How much does it cost to become authorised for Consumer Credit?

The FCA charges an application fee based on forecast annual regulated turnover. For Limited Permission applications the fee is £100 or £500 depending on whether regulated turnover is below or above £50k. For Full Permission applications the fee ranges from £600 up to £15,000. Further information about FCA fees is available on their website.

If you choose to use our professional services, then of course additional costs will be involved. The subscription rates for Compliance Select are listed here.

What on-going compliance obligations does my Consumer Credit business need to manage?

Whether your business has interim permission or is already authorised, it's committed to operating in a way that complies with the rules set by the FCA, the Consumer Credit Act (CCA) and other relevant legislation. At the heart of the FCA's Consumer Credit regulations are the conduct standards defined in their Consumer Credit Sourcebook (CONC) and the overall Principles for Businesses (PRIN). The policies and procedures you need to have in place should document how your business will manage its compliance with all the applicable regulations. There are a variety of things you need to do throughout each year to follow your procedures, check that you're operating compliantly and evidence that you're doing so. The Compliance Select service is designed to help you manage all these on-going requirements and stay on top of your compliance obligations. Levels 2 and 3 also include a number of File Checks and Remote Compliance Audits.

What is a GABRIEL Return?

The FCA requires authorised businesses to submit regular reports with updated information about their consumer credit activities. The reporting requirements are somewhat more involved for Full Permission than Limited Permission. Businesses with Limited Permission have to make an annual return, while Full Permissions have to make one every six months. The acronym GABRIEL stands for GAthering Better Regulatory Information ELectronically and is the name of the FCA's online reporting system. The Compliance Select service includes a formal review of your GABRIEL returns by one of our consultants.
 

 

What are File Checks and why does my business need them?

A File Check is an independent review of one of your sales records and is carried out remotely by one of our consultants. It's generally good practice to have a sample of around 10% of your sales records File Checked each year as part of your on-going monitoring of how your business is complying with its procedures. Levels 2 and 3 of the Compliance Select service include some File Checks, although many businesses may need to purchase more.
 

 

Will the Compliance Select service help me prepare my own application for Consumer Credit authorisation?

Yes. The "Plus" version of the Compliance Select service includes all the core features along with step-by-step guidance on how to complete your application, a formal review of your application by one of our consultants before submission and a primer on what to expect from your post-submission FCA telephone interview.

    About Payment Services & E-Money

What is a Payment Service provider?

Payment Service providers offer a wide variety of payment methods, including money remittance based on online banking, credit/debit card payments, prepaid cards and bank payments such as direct debit. The most common types of Payment Service providers are Payment Institutions and Electronic Money Institutions.

What on-going compliance obligations does my Payment Services/E-Money business need to manage?

Whether your business is authorised or registered with the FCA, it's committed to operating in a way that complies with the Payments Service Directive, Electronic Money Directive and any other relevant legislation. At the heart of the FCAs approach to ensuring compliance is the Payments Services Regulations for Payments Institutions and the Electronic Money Regulations for Electronic Money Institutions. The policies and procedures you need to have in place should document how your business will manage its compliance with the applicable regulations. There are a variety of things you need to do throughout each year to follow your procedures, check that you're operating compliantly and evidence that you're doing so. The Compliance Select service is designed to help you manage all these on-going requirements and stay on top of your compliance obligations.

What is a Regulatory Return?

The FCA requires businesses to submit regular reports with updated information about their activities. The reporting requirements for Payments Institutions are different from Electronic Money Institutions. Payments Institutions are required to report once a year whereas Electronic Money Institutions are required to report twice a year. There is also a difference between what is required of Small and Authorised Institutions. The main areas to report on are Capital Requirements, Safeguarding and volumes of business. The Compliance Select service includes a formal review of your regulatory returns by one of our consultants.
 

 

What are Capital Requirements?

The regulations specify that Authorised Payments Institutions and all Electronic Payments Institutions with outstanding E-Money of €500,000 or more are required to hold a minimum amount of capital. The minimum amount to hold and how it is calculated is dependent on your type of business and is laid out in the various Approach Documents.

What is Safeguarding?

The regulations specify that Authorised Payments Institutions and all Electronic Payments Institutions are required to safeguard customer funds (Small Payments Institutions can opt to do this if they wish, but it is not obligatory). The purpose of safeguarding is to keep customers' money safe should the firm become insolvent. There are two methods of safeguarding; keeping customer funds in a segregated client money account or arranging for customer funds to be covered by an insurance policy.

Does my business need to be authorised?

If your business is a Payment Institution it will need to be authorised under the Payment Services regulations, while if it's an Electronic Money Institution it will need to be authorised under the Electronic Money regulations.

What kind of application does my business need to make?

For both Payment Institutions and Electronic Money Institutions there are two types of application you can make, which are referred to as Small Institution or Authorised Institution. Small Institutions undergo a simplified application process and only need registering with the FCA. Authorised Institutions are subject to a more stringent application process and require full authorisation. Broadly speaking, the difference comes from the volumes that are transacted. A Payment Institution that transacts an average of less than €3 million per month would be classed as a Small Payments Institution. Similarly, an E-Money Institution that has outstanding E-Money of less than €5 million would be classed as a Small Electronic Money Institution.

What's involved in making an application to become a Payments or Electronic Money Institution?

At the heart of the process is the FCA's application form. There are several available to download depending on the type of application you are making. Application forms can be downloaded for Small and Authorised Payments Institutions, Authorised Electronic Money Institutions (EMI) and Small Electronic Money Institutions (EMI).

Generic information that's required for all applications includes basic details about your company and the Payment Service to be provided, details of individuals running the business and close links and/or qualifying holdings.

When everything is ready, the application and supporting files are submitted by you to the FCA along with your application fee.

Can I prepare an application myself?

Yes, of course. The FCA have said publicly that they expect businesses to be able to make their own applications.

The FCA have produced so called "approach documents" for both Payments Services Institutions and Electronic Money Institutions. These documents are aimed at helping you navigate through the regulations, the relevant rules and guidance and to understand the FCA's general approach in this area.

However, many businesses prefer to have the reassurance of specialist experience rather than flying entirely solo and choose to completely outsource their application preparation to our consultants. Very often this is because business owners simply don't have the time to dedicate to the process.

How much does it cost to become authorised for Payment Services or E-Money?

The fee levied by the FCA will depend on the type of application. The application fee for Small Payments Institutions is £500. It is £1,500 or £5,000 for Authorised Payments Institutions, depending on the activities for which you're seeking authorisation. The application fee for Small Electronic Money Institutions is £1,000. It is £5,000 for Authorised Electronic Money Institutions.

If you choose to use our professional services, then of course additional costs will be involved.

 

If you would like advice on your authorisation, compliance management or training requirements, please provide your contact details and we'll get in touch.

Or alternatively call us now on 020 7060 4499.

 

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