Consumer credit activities: transfer of responsibility
Have you applied for interim permission to carry on Consumer Credit Act ("CCA") activities past 1/4/2014?
From 1/4/2014 responsibility for consumer credit regulations will transfer from the OFT to the Financial Conduct Authority ("FCA").
Housing Associations which hold a CCA licence (e.g. for Homebuy, Mortgage Rescue or debt counselling) need to apply to the FCA between now and 31/3/2014 for an interim permission to continue to carry on these activities after 31/3/2014. Failure to do so will result in the Housing Association having to stop carrying on their consumer credit activities. It will be a criminal offence to carry on consumer credit activities without permission after 31/3/2014.
Applications are to be made online and are subject to a one-off fee of £350 which reduces by 30% for applications made before 30/11/2013.
All organisations with interim permissions will have to apply to the FCA by 1/4/2016 for full authorisation to continue to carry on Consumer Credit Act activities. The FCA will direct organisations that have an interim permission to apply for full authorisation in stages from 1 October 2014 (different organisations will be directed to apply by certain deadlines).
There will be a two-tier authorisation system:
Tier 1 (the core credit authorisation regime) will cover the majority of current consumer credit licence holders and all those whose activities are deemed to be high risk.
Tier 2 (the limited permission regime) will cover organisations that are deemed to be lower risk, including those for whom credit provision is secondary to their core (non-financial) activities. The ongoing FCA requirements to be met by Tier 2 organisations will be less onerous and tailored to the nature of their business and the risk level of their consumer credit activity, than for Tier 1 organisations.
The FCA will consult further on the authorisation system in Autumn 2013. It is likely that Housing Associations will require Tier 1, authorisation.
The bulk of the CCA 1974 and related secondary legislation will continue after 1/4/2014. Certain provisions which are inconsistent with regulation of organisations by the FCA (e.g. licensing) or which the FCA believes can be better dealt with by FCA rules and guidance (e.g. advertising and pre-contractual explanations) are to be repealed on 1/4/2014.
The FCA published its consultation paper on 3 October 2013 which included its draft detailed rulebook for consumer credit and the high-level principles and standards that organisations undertaking consumer credit activities must meet. These rules include consumer credit organisations making it clear to consumers who they are regulated by and whether they have an interim permission, are authorised or have limited permission. Housing Associations have to ensure that correspondence (including emails) from 1 April 2014 to consumers on consumer credit activities include the required statements and that pre-contract information and agreements entered into after 1 April 2014 properly describe the regulator. We are in the process of reviewing this consultation paper. The FCA’s final rules and guidance will be published in March 2014. Housing Associations will have a six month transitional period from 1 April 2014 in which to comply with the new rules.
We will continue to keep you updated on the CCA changes. If you have any queries please contact either Reshma Jogia, Associate (direct line: 029 2038 5451) or Meryl Morgan, Partner (direct line: 029 2038 5442).