Two strikes and you’re out! – the FCA give further insight into the new consumer credit regime

close up of a credit card chip Print publication


In a live webinar yesterday, the FCA answered questions from consumer credit businesses about its proposed approach to regulation as set out in its October consultation paper.

The FCA confirmed its intention to impose a ban on the use of a Continuous Payment Authority following two unsuccessful attempts and confirmed that the two attempts rule would apply for the full term of a loan and not to each payment due.

In relation to rollovers, the FCA remains open on the proposed limit to two, but did highlight that it has received a broad scope of responses on this issue, including calls to impose a ban on rollovers altogether.

Lesley Titcomb, the FCA’s Chief Operating Officer, very briefly mentioned the Government’s new proposal to pass primary legislation to enshrine the FCA’s duty to enforce a cap on the cost of payday lending. Ms Titcomb hinted that the FCA may use a definition to identify which firms will be subject to a cap which will be separate from the ‘high-cost short-term credit’ definition used in the consultation paper.

Ms Titcomb said the FCA does not intend to publish specific guidance on affordability, but instead will provide examples of good and poor practice. The FCA made clear that, in relation to affordability checks, it is “for firms to challenge themselves”.

In relation to the authorisation application process, Ms Titcomb referred to the FCA’s intended use of separate registration windows (or ‘Landing Strips’) for specific types of consumer credit firms to submit their application. Failure to submit an authorisation application by the end of the Landing Strip deadline will result in a firm’s Interim Permission immediately expiring. The FCA hinted that all payday loan businesses will be given the same time-period window to submit their full authorisation application and will communicate such deadlines next year.

The FCA’s priority will be to process the applications for authorisation of businesses requesting ‘Principal’ status, but it is unlikely that the FCA will be in a position to complete these registrations, and therefore any linked Authorised Representatives registrations, until late 2014.

In terms of the requirement for overseas-based, non-EEA firms to have their “mind and management within the UK”, the FCA clarified that this means that the people who hold control and management roles within the business must be based in the UK. It is therefore important that non-UK based consumer credit firms conducting regulated activates within the UK take note of this requirement from the new regulator.

The OFT is continuing to process new consumer credit licence applications, and the FCA stressed that all current licence holders must ensure that their licence with the OFT does not lapse before 31 March 2014, as this will void their Interim Permission registration. Should a firm have changes which require amendments to be made to its OFT licence following its Interim Permission registration but prior to April 2014, both the OFT and the FCA should be contacted in order to correctly implement the licence and Interim Permission amendments.

The FCA intends to publish the outcome of the October 2013 consultation paper on the detailed proposals for the FCA regime for consumer credit in February next year.