With less than a year until the new regulator begins, the FLA’s director general talks to Fred Crawley.
The Finance & Leasing Association (FLA) has urged the credit industry, including those in car finance, to read the consultation paper by the Financial Services Authority (FSA) on the transfer of consumer credit regulation from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) planned for April 2014.
Go deeper with GlobalData
The FLA, trade body for car and asset finance industry, has said recent comments that the transfer will include keeping the majority of the Consumer Credit Act (CCA) intact, and that the FSA will ‘listen’ to the industry, were "gratifying", although it remained scepticalthat a satisfactory transfer could be achieved by the proposed deadline of April 2014.
Stephen Sklaroff, director general of the FLA, said that "anybody involved in the credit market in any capacity should be reading these documents," particularly asset finance intermediaries. "This is big and happening very soon," Sklaroff continued.
"In terms of which businesses will be covered by the scheme, the Government is intending the boundary [between business and consumer credit] to remain where it is, but they’ve completely changed the way it’s written into the legislation.
"The business finance broker market will have to look at the way that this is defined."
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData‘Forward planning’
With the launch of the FCA next year, the consumer credit licence will cease and bereplaced by a new system of authorisation. Existing credit licence holders registering before April 2014, will be granted "interim permission" to continue by the FCA, according to Sklaroff.
"It is very important people check they already have all the licences they will need in 2014," he explained. After April 2014, it is not known how long it will take an applicant to receive authorisation or licensing under the new regime, meaning businesses should consider what operations they may want to offer after April 2014 and apply for the licences "right now", so as not to find themselves in a "difficult position" after the transition, said Sklaroff.
"People need to be a doing a little forward planning," he advised. "Nobody knows how long it will take to get a new license while the interim permission stage is up and running."
Sklaroff added there would be a potential "threat to innovation if people can’t get the right paperwork. The regulator must avoid becoming an unintended barrier to entry. That is a big question for the FSA."
‘Tight timescale’
Although Sklaroff was pleased with the extent to which the Government had listened to the Association regarding consumer regulation and been "very consultative" over specific FLA proposals, apparent in the "high-level design of the system", he added the timescale to implement change was too "tight".
"The Government has said there will be a two-year transition period for the regime, including the authorisation process," said Sklaroff.
"The FSA has said that for the first six months nobody will be required to demonstrate they comply with the new rule book, only that they complied with the old rule book. I think we need to push back on both the two-year and six-month periods.
"This rule book is supposed to cover those parts of the CCA being repealed, but they’re repealing a lot less than originally planned. So what goes in the new rule book? Then there’s the OFT guidance, on irresponsible lending among other things, what does the FCA do with all that?
"The less is put in the new rules, the easier it will be to hit the deadline. I hope they realise the simpler they keep the rule book, the better.
"To be fair to the FSA, a lot of decisions were taken by the Government. They are deciding how much of the CCA to keep. In a sense, they have to cope with a deadline the FSA probably wouldn’t have chosen."
Sklaroff explained FLA members were still concerned over the content of the rule book to be followed as of April 2014 and that "the Government has said it will leave more of the CCA in place than initially proposed, but looking at the CCA, and OFT guidance, it is unclear what exactly will be covered by the FCA. There is a lot of practical work to do.
"The learning curve for a new authority as a whole is very important. This is not a market they have previously regulated and there’s a real issue of understanding of the market.
"The regulator is taking on two or three times as many new companies to regulate as they currently have."
Victories
Sklaroff pointed to the "victories" secured by the FLA ahead of the change, including Government appreciation of ‘lighttouch’ direct authorisation for the intermediary sector, rather than full-scale authorisation by the FSA or an appointed representative scheme, and highlighting the impracticality of capital adequacy requirements for lenders.
"The balance of risk is different from the saving and banking sectors, as is the supervision, fee and information framework, and the Government has agreed," said Sklaroff.
"There will be a lighter touch for credit, with lower fees and fewer information requirements. The proposal of approved persons has been diluted for the credit market, as have the regulatory tasks."
The FLA will look to post regular updates on the changes over the next year, including after the Government’s consultations and the publishing of revised secondary legislation during the summer, the first draf t of the rule book in autumn, more information on fees later in the year, and the final version of the rule book in March 2013.
fred.crawley@timetric.com
