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.
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 sceptical that a satisfactory transfer could be achieved by the proposed deadline of April 2014.
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Speaking to Motor Finance, Stephen Sklaroff, director general of the FLA, advised "anybody involved in the credit market in any capacity should be reading these documents. This is big and happening very soon."
Meanwhile, Karen Wagstaffe, training and compliance director at Finance Cover & Training, told Motor Finance dealership staff with responsibility for consumer credit licensing and compliance – managing directors, compliance managers, group F&I managers, sales directors – "should be keeping an eye" on the paper.
"The consultation paper is very much geared towards improving protection for consumer groups," said Wagstaffe. "That will only mean one thing: Additional rules and guidance."
‘Forward planning‘
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By GlobalDataWith the launch of the FCA in April 2014, the consumer credit licence will cease and be replaced 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 of forward planning," he advised.
‘Robust systems’
Wagstaffe advised the FCA would be looking at areas of lending identified as problematic in consumers’ credit lifecycle, such as payday loan providers.
Additional rules to cover these may affect dealers’ sales procedures, said Wagstaffe, and require dealers to hold "more robust systems and controls in place," including "documented procedures, training and competency".
The paper states there will be a two-tiered approach to consumer credit, split between lower and high risk activities, with the credit activities of "most" dealers registering as lower risk, according to Wagstaffe.
Key proposals
According to a statement issued by the FSA, the paper, which closes on 1 May 2013, is looking for "your thoughts on the proposed framework and rules for the consumer credit regime".
The FSA is looking, in particular, for responses from:
– firms that currently hold individual or group consumer credit licences issued by the OFT under the CCA;
– firms that want to carry out consumer credit activities in future;
– trade bodies representing consumer credit firms;
– consumer bodies;
– not-for-profit bodies providing debt advice;
– operators of peer-to-peer platforms; and
– other bodies currently involved in regulating consumer credit, including the Local Authority Trading Standards Services and the Department of Enterprise, Trade and Investment (Northern Ireland).
The key proposals of the consultation paper are:
– An interim permission for OFT licence holders to continue to carry on regulated consumer credit activities.
– The authorisation process, including:
– a normal Financial Services & Markets Act-authorisation process for higher-risk regulated activities;
– a lower-cost limited permission authorisation option for firms carrying on certain lower-risk credit activities;
– the option to be an appointed representative for firms carrying on certain credit activities;
– an approved persons regime, which is different depending on the type of firm applying;
– a proposal that interim permission holders will need to apply for full authorisation from late 2014; and
– a proposal that new entrants wanting to begin consumer credit regulated activities after 1 April 2014 will need to apply for authorisation.
– The supervision of credit advertising being subject to the FSMA financial promotions regime.
– Prudential requirements for debt management firms.
– A number of the Consumer Credit Act (CCA) provisions being kept as part of the new FCA credit regime (e.g. S75CCA).
– The supervision of – and reporting by – firms.
– How the regime will be funded.
A second consultation paper on the design of the regime will be run later in the year.
Further comments by both Stephen Sklaroff and Karen Wagstaffe will be published in the April issue of Motor Finance magazine.
richard.brown@timetric.com
