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FCA update: Full permission firms must review debt permission limitations

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28/03/2017

Full permission firms with the permission of debt adjusting and/or debt counselling with a ‘no debt management’ limitation must now review and, if necessary, vary their permissions. The Financial Conduct Authority (FCA) has published a webpage on debt permission limitations and introduced six new debt limitations which may be relevant, as Jeanette Burgess and Andrew Northage explain.

The issue

Some firms with the ‘no debt management’ limitation may be carrying out debt management activities so that the limitation they hold is not appropriate for the business they carry out. This is because ‘debt management activity’ is broadly defined.  The FCA’s Perimeter Guidance Manual (PERG) defines debt adjusting/debt counselling and provides guidance on what constitutes debt advice (see PERG 2.7.8B and 2.7.8C and PERG 17).

Additional requirements are placed on debt management firms, including minimum capital requirements and the need for someone in the business to hold the compliance oversight function (CF10).

The new limitations

The FCA has introduced the following six new debt limitations, which may be relevant:

  • For firms who only broker Asset Finance: permission limited to 1) debt adjusting / 2) debt counselling – provided in connection with the whole or partial settlement of credit agreements in relation to the sale of goods.
  • For firms who only broker Vehicle Finance: permission limited to 3) debt adjusting / 4) debt counselling – provided in connection with the whole or partial settlement of credit agreements for vehicle finance.
  • For firms who broker unsecured loans for businesses: permission limited to 5) debt adjusting excluding the conclusion or administration of debt management plans; and 6) debt counselling excluding giving advice about debt management plans. ‘Debt management plan’ means “a non-statutory agreement between a customer and one or more of the customer’s lenders the aim of which is to discharge or liquidate the customer’s debts, by making regular payments to a third party which administers the plan and distributes the money to the lenders”.

What should firms be doing now?

Firms should check their existing permissions on the Financial Services Register, consider whether the permissions are still appropriate for their business, and email details of any necessary limitation changes to VOPLimitation@fca.org.uk.  There will be no fee and requests will be processed within 28 days.

Should you have any queries, or require any assistance in relation to the issues raised in this briefing, please contact Jeanette Burgess or Andrew Northage who will be happy to help.

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