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.