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Revised FCA authorisation application fees now in force

Woman-signing-document-and-hand-holding-pen-putting-signature-at-paper-order-to-authorize-their-rights Print publication

07/02/2022

Walker Morris financial services expert Andrew Northage explains recent changes to the structure of Financial Conduct Authority (FCA) authorisation application fees and what they mean for businesses.

What has changed?

A new structure for authorisation application fees came into effect on 24 January 2022. The FCA published a policy statement on 10 January 2022 setting out the detail. The previous 80 separate charges for FCA applications have been condensed into ten new pricing categories. They have been increased in line with inflation from the date of their introduction and then moved up or down to the nearest category.

A table setting out the various application types and the new pricing category they fall into can be found here and in Annex 1 on page 8 of the policy statement.

In relation to consumer credit applications, the previous fee bands (which were derived from the applicant’s income) have been replaced by flat rate fees. The FCA has explained that the old structure was introduced to protect small firms that were already trading when it took over consumer credit regulation in 2014. It says that, while income is a reasonable basis for charging a firm that is trading and has accounts to quote from, it is less reliable for a new applicant working from estimates, and could be manipulated. The revised fees are as follows:

Range-of-previous-fees

Following concerns raised during the FCA’s consultation, the category 3 charge of £1,000 applies when firms that apply for the credit-related permissions of debt counselling and debt adjusting request restrictions on their permitted activity because it is ancillary to their main business. This affects firms such as mortgage brokers and retailers. Debt counselling and debt adjusting were considered complex under the old structure and would otherwise therefore attract the higher category 6 fee of £10,000.

A new charge of £250 for standalone long Form A applications under the senior managers regime and in relation to controlled functions for appointed representatives will be introduced later. Notice will be given in a handbook notice.

Why?

The FCA explained in its policy statement that its application fees had not changed since they were introduced by the Financial Services Authority nearly 20 years ago. Inflation has eroded their value and authorised firms have been left to pay an increasing proportion of the FCA’s processing costs for authorisation applications through their periodic fees. The FCA also described the old structure as ‘confusing’ and is seeking to simplify it with the introduction of the new pricing categories.

What this means for businesses

The FCA believes that the overall impact of the changes will raise the contribution of applicants towards the cost of processing their applications from about a third to about two thirds, although there will not be a large practical impact on existing fee-payers. Allocating the different application types to the new pricing categories is somewhat of a blunt tool – inevitably, some applicants will pay more and others will pay less as a result of the restructuring than they would previously. The FCA says that 49 of the previous charges will increase, 23 will stay the same and 11 will be reduced.

The category values will be reassessed annually in line with the increase or decrease in the FCA’s operating costs, as part of the March/April annual consultation on fee rates. The revised charges will come into effect in July each year.

How we can help

If you have any queries in relation to these changes, or need advice or assistance on any other regulatory or compliance issue, please contact Andrew who will be very happy to help.

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