The Financial Conduct Authority (“FCA”) took over the regulation of Consumer Credit firms in April 2014 and since then has made a lot of changes and taken strong action to protect people, including by introducing a price cap and new rules on payday lending and restricting the way that credit brokers can charge fees.

Under the FCA’s rules, firms must lend responsibly and treat customers fairly. By 2018, firms that had failed to meet the FCA’s expectations had given over £900 million in redress back to customers.

The FCA is also seeking to provide more help to those who fall into arrears by improving the way that debt management firms operate, including requiring that they direct customers to free advice.

The range of activities that fall into the FCA’s Consumer Credit regime is broad, including those who lend money through to those who help companies collect it or advise customers on how to deal with debts that they can’t afford to repay.

Different rules and requirements apply to different firms depending on the permissions they hold and the services they provide while some requirements are common throughout, including the expectation that firm’s treat customers fairly.

Why do some firms hold Limited Permissions and others don’t?

Firms can be authorised by the FCA with permission to conduct particular activities, such as lending money. The permissions provided by the FCA can either be held on a ‘limited’ or ‘full’ permission basis to reflect the nature of the service that is being provided.

For example, if you’re a car dealer and you want to introduce customers to a lender so that they can afford buy your cars from you on credit, rather than in one lump sum, you may be able to do this activity on a limited permission basis.

Alternatively, if your service was solely to find customers and introduce them to a lender for finance, this would require full permission.

When applying for authorisation with a limited permission, you agree only to provide your activity in the way that is compatible with that limitation and therefore are restricted from providing the service in the same way that those with full permission are able. However, limited permission applications are more straightforward to apply for and generally quicker.

The FCA Consumer Credit ready tool can be used to help you assess whether you require limited or full permission. If you’re unsure, you can contact us and we can advise you on the permissions you need and whether you can do seek them on a limited permission basis. When applying for limited permission scopes you agree to trade in regulated activity within that restriction of it being a secondary and a complimentary source of income, as a result limited permission applications are more straightforward to apply for then full authorisation.

In all cases, applicant firms seeking FCA authorisation require an established and coherent compliance monitoring framework and must be able to demonstrate that the business model is one that meets the requirements of the FCA’s rules and principles. Those in control or who will have management responsibilities within the firm must also be suitable and appropriate.

Appointed Representatives and Principal Firms

Some firms that are authorised by the FCA can enter into an agreement enabling one or more non FCA-authorised firms to conduct regulated activity without first obtaining permission from the FCA. The FCA Authorised firm in this type of relationship is known as the Principal Firm whilst the other party is known as an Appointed Representative.

The nature of these relationships means that the Principal Firm is accountable to the FCA for ensuring the Appointed Representative complies with the FCA’s rules. For that reason, it normally comes at a cost to the Appointed Representative.

Many firms start as Appointed Representatives before seeking direct authorisation from the FCA, although this is not required.

For more information on Appointed Representatives and Principal Firms please click here.

FCA Authorisation

If you are looking to become authorised by the FCA, MEMA can help.

Each applicant who works with MEMA is assigned a dedicated Regulatory Adviser who will support you throughout your application, answering queries you may have relating to the application and providing you with guidance and support.

The process starts with a fact find between yourself and one of our Regulatory Advisors where we’ll get to know you and your business and how you intend to provide your services.

We will provide you with advice and guidance on how to comply with the FCA’s requirements and identify any risks.

We will then produce for you a series of documents to support your application and help ensure that you become authorised. These documents include a Regulatory Business Plan and Compliance Monitoring Plan. We also produce a compliance manual for you containing documentation for you to implement into your business upon authorisation to help enable you to comply with the FCA’s requirements.

An online application will then be completed along with all relevant forms, which will then be submitted to the FCA. Should there be any FCA questions, your Regulatory Adviser will work with you to draft a full response.

In short, we’re here for our clients every step of the way. We provide our clients with the benefit of our knowledge and experience to not only help ensure that your application is successful, but that your business has the right foundations to ensure positive customer outcomes.