FCA Guidance on Consumer Credit Lending Authorisation

A key supporting document for applications to the Financial Conduct Authority for authorisation and permission to carry on a regulated activity is the 'regulatory business plan'. 

The requirements for what the plan must cover are usually summarised in various guidance, depending on the type of authorisation or permission being sought, but there's a lot of variation as most advisers have developed their own templates. 

Helpfully, however, the FCA has published a sample regulatory business plan for use by firms seeking authorisation/permission that is also useful for consumer credit lending, with a web page that also contains link to other relevant guidance for prospective lenders.

What is consumer credit lending?

This is a huge topic, but very broadly...

Permissions required for consumer credit lending activity will include entering into regulated credit agreements as the initial lender (under article 60B(1) of The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) and/or buying or exercising the rights under pre-existing regulated credit agreements (under 60B(2)), subject to exemption under article 55 of The Financial Services and Markets Act 2000 (Exemption) Order 2001, for example). That deserves a post of its own.

A similar regime applies to regulated consumer hire agreements (under article 60N of the RAO), while hire purchase and conditional sale agreements are treated as regulated credit agreements.

There are also various related permissions that will likely be required to deal with credit agreements and consumer hire agreements, including credit broking (article 36A, RAO), operating a peer-to-peer lending platform (article 36H), as well as debt adusting (39D), debt counselling (39E), debt collecting (39F) and debt administration (39G). These activities and various exemptions also deserve their own post.

Regulated credit agreements do not generally include "exempt agreements" (based on many exemptions in articles 60C-60K of the RAO that would require yet another post), but carrying out credit broking in relation to exempt agreements is still a regulated activity, and facilitating entry into exempt agreements can also still constitute peer-to-peer lending.

There are also specific exemptions for consumer hire agreements (articles 60O-60R, RAO).

Regulated credit agreements and consumer hire agreements and so on are also subject to the Consumer Credit Act 1974 and related regulations, though some provisions (including those relating to the 'form and content' of agreements) will not apply to "non-commercial agreements" or exempt agreements (though some exemptions require certain declarations in the paperwork). The CCA also deals with pawn receipts, revolving credit (e.g. credit cards), small loans and so on - yet another whole post in itself.

Finally, the FCA's 'Handbook' of rules generally apply to authorised firms who conduct consumer credit/hire activity, as well as specific rules on consumer credit (CONC) which distinguish between different types of consumer credit (e.g. pawnbroking, high cost short term (payday lending) and P2P agreements) for certain purposes.

Please get in touch if any you need advice on any of this.

Equivalence Is No Solution For Most UK Financial Services Accessing The EEA

At the end of 2020, any UK financial firms operating in the EEA under a 'passport' will lose that right. They must either get a new subsidiary authorised in an EU/EEA country and passport from there, or get the subsidiary registered as an agent etc of a local firm with the right passports. Meanwhile, there are calls for the UK government to ask the EU to declare that UK financial regulation is "equivalent" to standards under EU law, so UK firms can continue to access the single market under UK rules. Here's why nobody should wait for that.

The UK has no 'right' to equivalence, even if it can demonstrate a basis for it.

Equivalence is at the discretion of the European Commission, so political considerations can affect the outcome and timing.

Equivalence can be withdraw at any time without any right of appeal (ask the Swiss).

Only two areas of EU financial regulation allow for equivalence - MiFID (2,250 firms as at August 2016) and AIFMD (212 firms).  In particular, an equivalence finding is not available for deposit-taking (102 banks), insurance (220 firms), insurance distribution (2,758 firms), e-money issuers (66) or other payment services providers (284).

While there have been calls within the EU for a broader framework, the European Commission has considered it and explained that this would be "extremely difficult".

Relying on equivalence would also require the UK to align with EU regulation in the relevant area, with no say in shaping the rules. The UK government is sending mixed messages on this point, having repeatedly said that it is against alignment while repeatedly claiming that it wants future trade arrangements (e.g. a 'Canada deal') that would require it. Johnson is probably hoping that his voters won't understand the magic trick, but everybody else does. Either way, the government is along way from being able to help the Commission work through an "extremely difficult" equivalence process.

You're on your own. The only viable option is to set up a subsidiary in the EU27 and passport from there. 

 

Let me know if I can help, either in the UK or in Ireland/EEA - particularly on e-money and payment services.