On 1 September the Financial Conduct Authority (FCA) opened registration for ‘interim permission’ for firms wishing to continue with current consumer credit operations.
The interim permission will allow companies to continue offering retail finance after the 1 April 2014 deadline, when responsibility for consumer credit regulation will pass from the Financial Services Authority (FSA) to the FCA.
Firms will have to pay a fee for interim permission, set at £150 for sole traders and £350 for other businesses, although the FCA has offered a 30% discount on companies completing interim registration before 30 November. This would bring the cost down to £245 for most companies or £105 for sole traders.
The Office of Fair Trading said it will consult on more detailed proposals for the changes this autumn, while the FCA has said it will write to firms again before the interim system opens to offer a detailed explanation of how to remain compliant.
Applications and exemptions
Interim permission applications may be submitted online, and Karen Wagstaffe, training and compliance director at Finance Cover & Training, said she is advising clients to "take advantage of the 30% discount and get yourself registered early".
Applications will include voluntary information regarding transactions, complaints, use of agents and more, and Wagstaffe said the process should be expected to take no longer than 20 minutes if applicants have to hand the requisite information.
After 31 March firms who have been granted interim permissions will have to submit more detailed applications, which the FCA will review before granting full authorisation.
Wagstaffe also explained a firm may become exempt from the procedure if it operates as an Appointed Representative of an authorised business, as it is the latter which is responsible for the finance business of the Appointed Representative in the eyes of the FCA.
She highlighted the position of motor dealerships: "Many of your finance house partners will not permit you to become an Appointed Representative of another firm so this may not be an option for you. You should check and confirm this with your finance house partners."
Directors, senior managers and individuals within a company responsible for compliance, therefore managing a controlled function, must also be authorised as an Approved Person, once vetted by the FCA and subject to a Code of Practice.
Last month the Finance & Leasing Association (FLA) expressed some worry over the timescale for the switch. Director general Stephen Sklaroff said it could lead to liquidity supply problems for customers, and also expressed concern at the lack of time finance providers would have to adapt.
Sklaroff said it should be noted "that although the new regime starts in April 2014, the final version of the rule book won’t be published until March 2014. There’s a lot to do in a short time."
He also expressed concern at the level of strain from extra responsibilities to be taken on by the FCA, which could see the number of firms it regulates increase from 26,000 to around 40,000, with 100,000 Approved Persons to monitor.
However, the FCA believes it is capable of handling such a quantity of work, with a spokesperson saying: "As an organisation the FCA is used to dealing with a large number of companies and their requests."
Sklaroff also said that, doubts aside, the FCA has made attempts to smooth the transition and minimise worry, such as the joint letter with the FSA and its advice for adequate preparation, which he described as an "important move" which he hopes will herald regular communication, with extra communication throughout the year.
The FCA will provide regular email updates to firms that request it, while the OFT has information available on its website.
The FLA will run a series of conferences and seminars for members on topics including the structure of the new regulatory body and details of application procedures. It also has a Regulatory Reform Group keeping abreast of developments on a monthly basis.
The FCA has published a step-by-step guide to interim permission registration, available at: fca.org.uk/static/fca/documents/ip-registration-step-by-step.pdf