Diane Forster lists the important actions to take before the FCA takes charge on 1 April
Regulatory responsibility for consumer credit transfers from the Office of Fair Trading to the Financial Conduct Authority (FCA) on 1 April 2014.
Firms will only be able to trade under their Consumer Credit Act (CCA) licence until 31 March 2014. Those wishing to trade afterwards must be registered with the FCA for interim permission (IP) to carry on regulated activities from 1 April 2014. IP will exempt firms from some aspects of the new regime until fully authorised.
The FCA consulted in Consultation Paper (CP) 13/10 on how it will regulate the consumer credit industry after 1 April 2014. Its Consumer Credit sourcebook (CONC) includes conduct requirements for consumer credit firms, and prudential requirements for debt management firms. Following consultation, the FCA will publish a policy statement in February or March 2014 setting out final rules and guidance.
The consumer credit industry remains concerned about some aspects of the new regime, and feedback suggests some concerns with FCA proposals need resolving.
The FCA has confirmed that most of the rules in CONC come into effect from 1 April 2014. However the enforcement of some is subject to a six-month transition. The FCA can and will enforce rule breaches from 1 April 2014 where appropriate.
The FCA rules for consumer credit will contain more than just old CCA regulations. In addition, consumer credit firms must also comply with the FCA’s High Level Standards which include the overarching requirements for all authorised persons (firms) and approved persons.
All consumer credit firms will be subject to the FCA’s approved persons (AP) regime, under which persons carrying out certain controlled functions (CF) must be approved by the FCA. They will also have personal liability for regulatory failings.
There are some important things you should be doing to ensure your business is best placed to implement changes swiftly, including:
- Conduct a gap analysis against the draft CONC rules to identify key gaps;
- Review resource needs, including system challenges – many teams are already overwhelmed with the volume and complexity of the proposed changes;
- Set-up dedicated a project team and governance framework, bringing together relevant strands of change;
- Review your governance arrangements to ensure management responsibilities are clearly defined and documented;
- Identify documents needed, including required regulatory status disclosure from
- 1 April 2014;
- Ensure you have effective and appropriate policies and procedures in place to show customers are being treated fairly, including customers whose accounts fall into arrears; and vulnerable customers, including those with mental health issues;
- Review business policies and procedures – ensure they are documented, up to date and being followed;
- Get to grips with current FCA authorisation process, get a feel for the information required and what you will need to demonstrate when applying for FCA authorisation, including familiarising yourself with the wider FCA Handbook.
The FCA will begin directing firms to apply for full authorisation from 1 October 2014, with different deadlines for different categories of firm. The industry is calling for the FCA to provide firms with an early indication of when they will be called for authorisation, so they can prepare accordingly.
Diane Forster is head of compliance at Shoosmiths’ recoveries services group