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FCA Regime for Consumer Credit Consultation Paper

Posted by H3 on 2013-10-03 13:26:57 BST

The FCA have now released the consumer credit consultation paper which details the proposed changes which will take place when regulation switches from the OFT to the FCA on 1st April 2014.  

The full consultation paper can be found on the FCA website here.  We have briefly detailed some of the points below, this is however just a very brief news post and we would recommend reading the full paper.  Feedback on the consultation paper can be submitted up until the 3rd December 2013 here. 

If you have not already applied for interim permission we recommend you do this before the end of November to make use of the discounted fee – more information is available on our website services page here, including a link to the interim application page.  You will not be able to continue trading from 1st April 2014 without interim permission, your current OFT licence should also be valid on 31st March 2014, so firms cannot apply for interim permission if their OFT licence expires before the end of March 2014.  

From 1st April 2014 firms will be able to apply for full authorisation.  The depth of the application and fees will be proportionate to the type and size of firm.  Most firms will fit into the higher risk category which includes credit brokerage, debt counselling and adjusting.  The FCA has to make a decision on a fully completed application within six months.  Once authorised firms will expect to meet the following requirements:

- Approved persons requirements

- Prudential standards for debt firms

- Client asset operational oversight for debt management firms

- Controller requirements

- Periodic reporting

- Complaints reporting


From the 1st April 2014 firms will be expected to comply with the standard FCA status disclosures (GEN 4 of the handbook


Debt management firms which hold client assets of less than £1m will only need to have a named director or senior manager to be approved for the significant influence function for overseeing client assets.

Once authorised firms will need to comply with the reporting requirement which starts on the 1st October 2014.  Some firms will already be familiar with the twice yearly reporting on the Gabriel system which is to be used for consumer credit reporting as well. 


Debt firms will have prudential requirements which include:

- Capital adequacy requirements fixed at a minimum of £5k or the higher of 0.25% of the total volume of relevant debts held under management. 

- Firms will have to notify the FCA if the debts under management increase by more than 15%.

- All debt firms will be require to have an annual client account audit which will have to be carried out by an external independent auditor. The results of the audit will have to be sent to the FCA within four months of the firms annual return date.

- Debt firms will need to have better record keeping in place to easily identify money held between individual clients and record client payments in within internal records to confirm payments to creditors are made on time.


As explained this is just a brief news post and you should read the full paper for more information, this is just the consultation paper but it’s likely the majority of points within it will remain and form part of the new guidance.  Once the consultation has been completed and the final rules released we will look to update clients on the requirements and changes for them.  

For many of our mortgage broker clients the switch wont be as much a shock, for firms who have only ever been regulated by the OFT, may find the process daunting and will soon be under closer observation and more intense regulation.  We can help firms obtain authorisation from April 2014 and provide various compliance support services to ensure your firm is compliant with the changes and continues to evidence compliance going forward.