In our last bulletin The Timetable for Implementation and Transitional Provisions, we introduced the concept of interim permissions as set out in the FSA consultation document CP13/7: CONSUMER CREDIT (“the Consultation”).
On 31 March 2014 consumer credit licences issued by the OFT will lapse. If consumer credit businesses want to continue their regulated activities after 31 March 2014, they must notify the FCA well in advance of this that they wish to obtain interim permission and they will have to pay a fee. Interim permissions will begin from 1 April 2014 and will cover the activities included in the existing OFT credit licence, provided that licence is valid and has not been suspended. Firms will not have to have key individuals approved by the FCA in order to obtain an interim permission.
If a firm wishes to carry on additional regulated activities, it should apply for authorisation or variation of permission for both the new regulated activities and existing credit activities.
Interim Variation of Permission
Some firms may already be regulated by the FCA or Prudential Regulation Authority (PRA) and have an existing OFT consumer credit licence. Those firms will have to notify the FCA and pay the required fee (see below), in order to obtain what will be called an “interim variation of permission”. This will allow those firms to continue the consumer credit activities covered by their existing OFT consumer credit licence.
The proposed fees for this are £150 for sole traders and £350 for others and this will cover the time for which the interim permission is held.
The names, contact details and categories of permissions of firms will be accessible from the FCA and PRA websites. Firms will not have to notify the FCA if they have permissions for numerous categories of consumer credit activity and wish to cease one of those activities. It will simply have to notify the FCA if it wishes to remove activities from its interim permission.
Firms will have to notify the FCA if they wish to cease carrying all activities covered by the interim permission or interim variation of permission. Firms will also be required to notify the FCA when their details change, so that the register is up to date for consumers.
Firms will not have to notify the FCA of any changes to controllers or key persons during the interim permissions regime.
Duration of interim permissions
Interim permissions and interim variations of permissions will last until:
(1) A firm applies to cancel it;
(2) A firm applies for full authorisation and this is approved or a decision notice is issued refusing the same;
(3) Where the future application date (the latest date on which a firm must apply for authorisation if it wants to continue with the regulated activities in its interim permission) specified by the FCA has passed; or
(4) 1 April 2016.
Interestingly, where a firm has interim permission for second charge lending and another form of consumer credit lending, if they gain full authorisation in respect of the latter, the proposed legislation allows the firm to continue with second charge lending.
During the interim permissions regime, firms will not be able to have appointed representatives, as they will not have been assessed by the FCA on their ability to take responsibility for the regulated activities of other firms. For those of you who are not so familiar with the regime of Appointed Representatives used under the current FSA regime, we will look at this aspect of the proposals in detail in our bulletin to be published on 11 April 2013.
Supervision during the Interim Permissions Regime
During the interim permissions regime, the FCA will supervise consumer credit firms through event driven, or issues-based. Firms will therefore not have to provide the FCA with regulatory information. During this time, the FCA will be investigating the market and will familiarise itself with some of the largest firms.
Firms must apply for interim permission well in advance of the 31 March 2014 deadline. Those that carry on consumer credit regulated activities on or after 1 April 2014 will commit an offence and will be at risk of enforcement action by the FCA.
In our next bulletin to be published on 9 April 2013, we’ll be looking at the Requirements for Authorisation under the new regime.