The Financial Conduct Authority seems to have confirmed that advisers within networks will not need an individual consumer credit licence after the government “persuaded” the regulator to allow authorised representatives to operate under a parent firm licence.
In the FCA’s consultation paper on consumer credit, published today (3 October), the FCA said that a “principal” will accept responsibility for AR’s that have have “no direct relationship” with the regulator where they are conducting activities that fall under the remit of the rules.
The paper offers to specific guidance on when advisers might need a consumer credit licence. The existing regulator the Office for Fair Trading and the FCA have previously told advisers to seek legal advice.
Previous guidance from network Positive Solutions suggested that all advisers should have a CCL as it believes all advisers will fall under the rules in that they will at least occasionally discuss a client’s debts, and that ARs are not covered under a parent network licence.
This guidance is in line with that given by other networks, however Positive Solutions and Sense have all confirmed they are currently advising that their members do not apply for interim permission until final guidance is confirmed. Sesame is advising members to get interim permission.
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.
This latest consultation paper says that the government decided that becoming an AR should be “an option” for most consumer credit firms, including lenders, if they are providing “interest-free credit without any other charges”.
The FCA also proposed that consumer credit will follow the same FCA firm classification model, meaning that classification will be based on firm size. The largest firms will be in the C1 category, and the smallest in the C4 category.
The FCA said it expects the “vast majority” of firms will be classified as C4, although it is likely that this population of firms in itself will be quite varied in terms of size, ranging from sole traders to firms with a significant number of customers and staff.
The watchdog has also proposed to reduce the reporting requirements on firms who provide second charge loans, “to ensure budgets are kept to a minimum during the interim period”.
It said that some firms are currently required to report their second charge data to the FCA because they are authorised in relation to first charge mortgages. These requirements will continue to ensure the continuity of data, but there will be “no new burdens” on the firms in relation to reporting.
The deadline for responses is 3 December 2013.