We’ve written a number of stories in recent months citing ongoing confusion among advisers as to when the do and do not need to hold a consumer credit licence. The wait is (hopefully) nearly over.
We are imminently awaiting final guidance from the Financial Conduct Authority, which takes over regulation of consumer credit next year, expected in the next couple of weeks.
From April 2014, consumer credit will fall under the City watchdog’s remit and from last month all firms that hold a licence were able to apply for necessary ‘interim permission’ to continue any activities covered by the rules until full licences are available in the autumn of next year. You’ll even get a 30 per cent discount for ordering one early before November.
There have been debates on both sides over whether most advisers need a licence. Some say it’s only for certain types of more complex mortgage advice or full-service debt advice, others that all advisers need one as they will inevitably touch on debt with some clients. Others still suggest that many new world charging models that are paid in errears would require a CCL irrespective of the above, as services are being provided as credit.
We’ve asked the existing regulator, the Office of Fair Trading, and the FCA a number of times for clarity. Their go-to (and only) answer is: seek legal advice.
Amongst all of this, there is the question of which type of firm would need a licence. Previous guidance from network Positive Solutions suggested that all advisers should have one: they buy into the ‘all advisers do debt advice’ argument and, crucially, believe that ARs are not covered under a parent network licence.
In a guidance note to members, PosSol states members that do not get a licence would be “breaking the law” and also that member firms cannot be covered under the parent network’s licence because they are not direct “employees” of Positive Solutions.
Maybe that is set to change. The FCA’s proposals on this topic state that under the new regime “a business may be exempt from needing to be authorised if it is an appointed representative”.
The FCA said this is because ARs are not directly authorised as they have a contract with a firm which allows it to carry on certain activities under the principal’s permissions. It seems consumer credit is one of them.
So what do the networks think?
Steve Young, commercial director at Sense network, told me that the majority of his network’s firms already hold a CCL.
He said: “The FCA guidance is still under consultation and we are awaiting clarification on a number of points, including whether or a network will hold a central CCL or whether individual ARs need to have one. As soon as the final guidance is available, we will inform our ARs how they should proceed.”
A spokesperson for Sesame said: “We have informed our members of the changes to consumer credit regulation in April 2014. Many network firms conduct some form of consumer credit activity that requires them to hold a license.