Ever since April 1st 2014, the Financial Conduct Authority became responsible for the regulation of consumer credit in the UK, taking over from The Office of Fair Trading.
The FCA provides a guide for consumer credit by which all participating firms must follow. In addition, there is also a Consumer Credit Sourcebook which outlines a set of conduct standards which companies are obliged to adhere to.
Therefore, it is vital for any company which offers loans, insurance or investments to have the compliance and regulatory framework in place in order to start or continue trading in their industry. If a company decides to carry out financial and credit related activities without this authorisation, it can lead to serious fines and potentially imprisonment.
If you feel as though you need answers in regard to FCA authorisation, we have put together a guide below.
Do I need to be FCA authorised?
If you offer any consumer credit or certain financial products, then you are required to obtain authorisation. This includes products and providers such as:
- payday loans
- guarantor loans
- logbook loans
- insurance companies
- investment providers
Can I be FCA registered instead of authorised?
If a firm is considered ‘low-risk’, then they just need to be registered rather than authorised in full. This low-risk category includes the middlemen such as payment service providers, community lenders and technology providers.
Charities and not-for-profit organisations will require different regulation altogether under Prudential Regulation Authority.
Those exempt from FCA authorisation are:
- Professional firms – Lawyers, solicitors and accountants who work with insurance companies do not need to be authorised on their own account
- Appointed representatives – websites, companies or individuals which have been appointed by an external company with a full license to carry out regulated activity
- Local authorities – including councils, churches and not-for-profits.
There are also some types of finance that are not regulated, largely due to the risk taken on by the provider. This includes investing in cryptocurrencies, business loans (because it is like investing in another business), peer to peer investment and invoice finance.
How long does it take to become FCA authorised?
To receive your FCA authorisation, it can take up to 12 months, but you should receive some initial feedback within the six-month mark. You may need to amend your application upon receiving feedback, hence it is not uncommon to wait up to 24 months.
For a broker or introducer, the process can take around six months. This is because you are acting as a conduit for financial products with no direct provision of the service. Examples of this include companies that compare car insurance, pet cover or compare payday loans.
To fast-track your application, you can consult with FCA compliance professionals who will charge a fee but be in a better position to help you tick all the boxes and get approval. Leading consultants include Scott Robert, Fintech Compliance and Robert Quinn.
The application process
Some of the main components of the application include:
- A business plan
- Capital requires (that is to say, enough money to be able to lend out)
- Checks for important members of the company.
In short, the FCA needs to know that the people who are running the company are qualified to handle the responsibility of doing so. You will have to provide detailed information about the business structure, controllers, management and personal as part of your application.
The cost of submitting an application can vary and is dependent on the complexity of your business. To make a straightforward application, you are looking at a fixed fee of £1,500. Likewise, there is a fixed fee of £5,000 to submit a moderately complex application. To submit a complex application, you will have to pay out £25,000. Please be aware that there are additional costs for start-ups, expert adviser costs as well as capital costs.
To apply for FCA authorisation, click here.