RegulationSep 2 2013

Advisers set for rebate as gov’t bows to credit fee pressure

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Advisers that have previously paid for indefinite consumer credit licences with the Office of Fair Trading are set to receive rebates from the government to compensate for ‘double charging’ when the Financial Conduct Authority takes the reigns and applies new interim and annual fees.

The FCA confirmed on Friday (30 August) that the government has decided to initiate a programme of rebates to consumer credit licence holders to reflect the ending of the OFT’s oversight on 31 March 2014.

Full details including eligibility criteria as well as when and how the rebates will be delivered are set to be revealed in the autumn, the FCA added. It said the move was “designed to ensure that the cost of the transfer of regulation is proportionate.”

Pressure had been mounting on the regulators after the FCA issued bills for interim licences that will be valid until October 2014. Sole traders were to have to pay £150, with “most other firms” paying £350.

After that date firms will require a full licence valid until April 2016, but fees for this have yet to be finalised.

Credit licence holders, including advisers that provide credit or debt services or whose charges are such that their services are effectively provided as ‘credit’, that had paid for a permanent licence with OFT had been pushing for rebates, but there had been no sign this would be forthcoming.

In addition to confirming the rebates, the FCA revealed that it will offer a 30 per cent discount for interim licences where firms register on or before 30 November. This will reduce fees for sole traders and other firms to £105 and £245 respectively.

Following enquiries from FTAdviser earlier this year (24 July), neither the FCA nor the OFT could definitively state which advisers if any would need to pay for a licence. Concern was raised after the OFT stated that new adviser charging arrangements could lead to more advisers needing providing services as credit.

In February Kevin Edwards, a chartered financial adviser at Midland Financial Solution, told FTAdviser that an “unintended consequence” from the Retail Distribution Review was that advisers may “fall foul” of the Consumer Credit Act if they move to a retainer fee model for some clients.

A spokesperson for OFT responded that this is a “complex area” and explained that if a “significant period” passes between any work undertaken and a fee being paid advisers could fall foul of the rules. This would include advisers operating a quarterly retainer structure, the spokesperson added.

The spokesperson said it is “unlikely” that advisers will need a licence if they are paying as they go, for example using a monthly retainer. Advisers should obtain “independent legal advice” to see if they qualify, the OFT added in July.

Additional reporting by Ashley Wasssall