Most advisory firms offer a ‘debt counselling’ that goes beyond mortgage services and those firms will need a consumer credit licence, Tenet has said.
The Financial Conduct Authority takes over responsibility for regulating consumer credit from the Office of Fair Trading in April.
Earlier this month, the FCA confirmed its finalised rules for regulating the consumer credit market but still did not confirm whether financial advisers needed a consumer credit licence.
Tenet welcomed the Association of Mortgage Intermediaries’ clarification confirming mortgage brokers will not need a CCL if their only consumer credit activity is advising clients to repay existing loans and debts out of the proceeds of a regulated mortgage contract.
Tenet said any advice to pay off debts is likely to be considered as ‘debt counselling’, but the need for authorisation by the FCA in this instance is avoided due to an exemption in the 2013 (Regulated Activities) Order relating to mortgage services.
However, Tenet doubts that this exemption will extend to similar debt counselling outside of mortgage business. Tenet also concurs with Ami that the exemption does not apply when arranging loans, including secured loans which are not regulated mortgage contracts.
As a network, Tenet said it has applied for interim permissions with the FCA and by the end of summer of 2014 it hopes to have obtained full permissions for credit mediation and related activities.
At that time, Tenet intends to offer its network members the opportunity to extend their appointed representative agreement with the group, provided their credit mediation activities are ancillary to their main business activities.
Previously both the FCA and the OFT told FTAdviser that firms who are in doubt should seek legal advice but refused to offer their own views.
Mike O’Brien, managing director of TenetConnect and TenetSelect, said: “All of this illustrates just how complex the consumer credit regulations are and is why Tenet has issued detailed guidance to our membership.
“Whilst it may be possible for a financial adviser to be able to avoid debit counselling, the fact is that most advisers who deal with a broad range of clients will from time to time need authorisation for debt counselling.
“Given the potential adverse consequences of not being correctly authorised Tenet believes many firms will decide that payment of an additional fee (c£200) is worth contemplating for peace of mind.”
Firms must apply to the FCA for interim permission before 31st March 2014 or stop any credit mediation activity.