Consumer credit – preparing for a move to the FCA

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We are on the verge of the biggest change in the regulation of consumer credit since the passage of the Consumer Credit Act 1974. Responsibility for consumer credit regulation will move from the Office of Fair Trading to the Financial Conduct Authority on 1 April 2014.

The change will result in a far more stringent regulatory regime and will require businesses that engage in consumer credit activities to devote greater resource and attention to compliance issues.

Among the significant changes that the new regime will involve are:

  • A deeper and more detailed authorisation process
  • Greater individual liability for those who run or direct consumer credit businesses
  • Substantially enhanced reporting requirements
  • Closer and more continuous supervision by the regulator
  • More potential sanctions including suspension of products and price capping

Businesses that are not prepared for this change will find the requirements of the new regime highly onerous and may fail to secure authorisation thus having to exit the market. In order to ensure that this is not the case, businesses need to review their current compliance systems and identify any shortfalls or gaps. They also need to understand what the new regulator will expect from them so that they are in a position to provide comfort to the regulator that they are a sufficiently well run amid competent business to merit authorisation.

The new regulatory system will be particularly challenging for small, businesses and while the FCA has indicated that it will keep proportionality and regulatory burdens in mind, it ahs also made clear that the new regime will be more demanding and more expensive.

There will be arrangements under the FCA regime whereby small businesses will be able to act as appointed representatives of authorised firms, rather than having to be authorised themselves. Small businesses interested in taking this route will need to understand what the process involves and the implications for their business.

Walker Morris can advise businesses of all sizes on the steps involved in transition from the OFT to the FCA regime. Its regulatory team is headed by partner Jeanette Burgess who is a leading consumer credit lawyer with many years experience including working for the regulatory authorities, acting as in-house counsel for a major UK consumer credit business and advising private clients engaged in activities that span the consumer credit market.

With this blend of experience gained from the perspective of both the regulators and the regulated, Walker Morris is exceptionally well placed to advise on the full range of issues facing consumer credit businesses, including:

  • Current consumer credit legislation and regulatory guidance
  • Compliance policies and systems
  • Business planning
  • Training for managers and staff
  • FCA Transitional provisions – including applications for interim permissions
  • Preparation for the new regulatory regime