Consumer Credit Proposals

This article has been written for financial services firms who are likely to have to apply for Full Authorisation rather than non-financial services firms who are likely to have to apply for a Limited Permission. If you are not a financial services firm and would like assistance from ATEB please click here.

The FCA has issued two consultation papers; CP13/10 the ‘Detailed Proposals for the FCA Regime’ here and more recently CP13/14 ‘Regulatory Fees and Levies’ here. These documents are lengthy;  however, there will be specific sections that are, and are not relevant to your firm. The FCA is very keen to receive feedback from these consultation papers and we would strongly advise those affected by the changes to give feedback before 03 December for CP13/10 and 06 January for CP13/14.

CP13/10 details the proposals for the FCA regime which for most financial services firms will be little changed to what they are used to. They will have a risk based approach to supervision with a ‘lighter touch’ for low risk firms. They will be focusing on payday loans, advertising and affordability assessments.

CP13/14 is likely to be more emotive for smaller financial services firms. This paper details the proposals for initial application fees and the framework for periodic fees following the FCA taking over regulation. Note that these will be in addition to your interim permission fee.

For Full Authorisation the Application Fees are:

  • Straightforward (e.g. credit broking) – £1,000
  • Moderately complex (e.g. lower risk lending i.e. initial adviser charges paid over time) – £5,000
  • Complex (e.g. debt advice & adjusting), example used was adding a CCA loan to a mortgage – £10,000
  • Very Complex (providing credit references) – £15,000

Firms who are already authorised by the FCA – Variations of Permissions (VoPs):

  • Additional ‘straightforward’ permissions – £250
  • All other VoPs to increase scope of permissions – 50% of the relevant fee

So, what does this mean to a typical small IFA firm? We have assumed that you will be varying existing permissions rather than paying for full authorisation. You may note that a multi-national bank will be paying the same initial fees as a one man adviser (periodic fees are subsequently based on turnover).

A firm that advises on insurance products like buildings and contents, which the client will subsequently pay via monthly instalments (CCL category ‘C’) will need to pay £250 for a straightforward VoP.

A firm that allows its clients to pay for regular premium advice over a period of time i.e. more than 4 payments in a 12 month period (CCL category ‘A’) will need to apply for a moderately complex VoP which with the 50% reduction will be £2,500.

Finally a firm (and this was an example discussed by the FCA) that refinances an existing CCA loan onto a first charge mortgage (CCL ‘D’ & ‘E’) will need a complex VoP costing, after reduction, £5,000.

Chapter 2 of CP13/14 also details periodic fees i.e. those based on income generated from these specific permissions. The income could be minimal but the minimum annual fee is likely to be £500.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

This change could have a significant cost impact on firms who carry a CCL particularly those who have, or should have category ‘A’, ‘D’ & ‘E’ licences.

Firms do have the opportunity to influence the FCA’s final policy, but only if they give the FCA feedback.

Action Required By You

  • Apply for your Interim Permission if you have not already done so;
  • Read the consultation papers;
  • Feedback to the FCA regarding one or both of the papers;
  • Review your CCL permissions to ensure they are relevant to your business;
  • Amend your firms permissions if appropriate to do so;
  • Advise any advisers of limitations you impose as a result of any changes.

Note, the 30% reduction in the Interim Permission fee expires at the end of November so apply now to benefit from the discount.

About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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