Advisers remain unmoved as FCA begins consumer credit push

Donia O’Loughlin

The Financial Conduct Authority’s homepage has a new addition, urging businesses to register for interim permission for a consumer credit licence before the offer lapses in a little more than two weeks.

From 1 April 2014, the FCA will take over the regulation of the consumer credit industry from the Office of Fair Trading.

It caused an outcry when it published details of how it will fund the activity: firms must apply for interim permission at a cost of £350 for most firms and £150 for sole traders. This will carry you to next autumn, when you’ll need to get a new licence and, presumably, part with more money.

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For those that paid for an indefinite licence with the OFT, this stuck in the craw.

The government has since said it will pass on a rebate to compensate for this. Subsequently, the FCA also showed generosity of spirit by offering a 30 per cent discount to those firms that sign up for interim permission by 30 November.

How lovely. It seems few advisers will be benefitting from the discount, however.

Why? Because most still do not know if they even need one. We’ve been banging the drum for some clarity to be offered for months now, but we still seem to be no further forward. All we’ve got from both the OFT and FCA is that advisers should seek independent legal advice.

There have been debates suggesting that all advisers need a licence because they may touch on debt issues with clients. It was even suggested that irrespective of this some advisers outside of the mortgage space may need one because they are effectively providing services on credit by allowing clients to spread fees on, say, a quarterly basis.

Complicating matters further, when it published a consultation in early October the FCA seemed to hint that advisers within networks will not need an individual licence after the government “persuaded” the regulator to allow authorised representatives to operate under a parent firm licence.

Previous guidance from network Positive Solutions suggested that all advisers should have one. The network had always bought into the ‘all advisers do debt advice’ argument and, crucially, believed that ARs are not covered under a parent network licence.

PosSol’s position was not unique under the old model. But during this clumsy transition, many are telling us they don’t know what to advise members.

Steve Young, commercial director at Sense network, told me that the majority of his network’s firms already hold a CCL but that the company would not be issuing formal guidance to ARs until the final rules are published.

Sesame said the same, reiterating their previous comments that members need a licence by 31 March 2014 and that it would not be issuing further guidance until “the FCA publishes further details of its new application process for full authorisation from 1 April 2014”.

The deadline for responses to the FCA’s consumer credit paper is the 3 December, which means advisers will most likely not know until well into next year if they need one or not. If they do and they haven’t got an interim licence, they will not benefit from the FCA’s generosity of a 30 per cent discount.