Consumer credit

www.fsa.gov.uk

Frequently asked questions:

The transfer of consumer credit to the FCA

We have published our rst consultation following the Government’s proposal that the Financial Conduct Authority

(FCA) takes responsibility for regulating consumer credit from April 2014.

Throughout the development of our consultation, we have been asked a number of questions. This document aims to

answer those.

1. WhyistheregulationofconsumercreditmovingfromtheOfceofFairTrading(OFT)totheFCA?

In January 2013 the Government announced that it would transfer responsibility for regulating consumer credit

from the OFT to the FCA by 1 April 2014.

2. WillregulationundertheFCAbedifferenttothatoftheOFT?

Yes, regulation will be different.

The new regime will be designed to focus on higher risk rms, such as payday lenders, pawnbrokers and debt

collection. Lower risk rms will not have to meet such onerous standards and will pay lower fees. These rms

include not-for-prot debt counselling, retailers introducing customers purchasing goods and services to a nance

provider, including motor dealers. The FCA will have different enforcement powers to the OFT.

We recommend that you read the chapter summaries to give you a avour of the proposed regime. If there are areas

of particular interest, please refer to the Consultation Paper.

3. WhatarekeyproposalsintheConsultationPaper?

This is a proposed new regime for consumer credit rms and the FCA. There are a number of proposals,

which include:

• An interim permission for licence holders to continue to carry on regulated consumer credit activities.

• An authorisation process for all licence holders.

• Different standards for rms that carry out specic activities.

• The supervision of credit advertising being subject to the FSMA nancial promotions regime.

• Prudential requirements for debt management rms.

• The supervision of – and reporting by – rms.

• How the regime will be funded.

• Greater enforcement powers.

We encourage you to read the Consultation Paper and respond.

Consumer credit

www.fsa.gov.uk

4. MyrmhasrecentlypaidtheOFTforaveyearlicence.WillitautomaticallybevalidundertheFCA

regimeinApril2014?

The Government, the FSA and the OFT are working together to determine precisely how the transfer will work in

practice for rms that already hold a licence. We will ensure that affected rms are informed in good time.

5. DoIneedtonotifytheFCAthatIwanttocarryonusingmyconsumercreditlicence?

At this point, no, you do not.

When consumer credit moves from the OFT to the FCA in April 2014, we want to make the transition as

straightforward and smooth as possible.

Licence holders that want to continue carrying on regulated activities will need to notify us before April 2014.

We expect licence holders will be able to apply for an interim permission well in advance of April 2014.

6. Howwillaconsumercreditrmbesupervised?

Firms will be categorised and the category a rm is placed in will determine the way it is supervised and the

intensity of that supervision. We set out in our paper the activities the FCA proposes to categorise as lower risk and

those that are higher risk, and how the FCA proposes to supervise them.

7. WhatwillbetheframeworkfortheFCA’sconsumercreditregulation?

The FCA’s regulatory framework for consumer credit activities will be a combination of:

• existing and new FCA rules;

• FSMA and its secondary legislation; and

• the retained provisions of the Consumer Credit Act and its retained secondary legislation.

There are a number of requirements and rights for consumers set out in the Consumer Credit Act (CCA) that will be

retained as part of the FCA regime. Some aspects of existing OFT guidance for credit rms will be transposed into

as FCA rules and/or guidance (subject to certain changes).

The CCA regime is currently supplemented by a number of industry codes. These are designed to establish best

practice standards within a sector. Some of the codes go beyond our requirements and we may want to include these

in the FCA regime. We will look further into the different codes and consult further in autumn/winter 2013.

Consumer credit

www.fsa.gov.uk

8. Whatotherpublicationscanweexpecttobepublishedtoprepareusforthenewregime?

As this is a major change, the FCA will be publishing consultations, guidance and communications all the way up to

the transfer. We expect to publish a more detailed consultation, covering, for example, rules replacing repealed CCA

provisions, prudential rules and, client asset rules.

We understand that rms might feel uncertain about implementing the necessary changes to their practices and

procedures, but we will update you on developments throughout and leading up to the transfer, so you should have

all the information you need.

9. Idon’tknowanythingabouttheFCA.Whatinformationisavailabletohelpme?

We understand that there could be a number of rms who may not of heard of or dealt with the FCA. We have

published a short introduction to the proposed regime. You may also want to read our recent document ‘Journey to

the FCA’ which sets out how we will regulate all rms

Further information

• Consumer credit consultation paper (CP13/7)

• Chapter summaries

• Introduction to the proposed FCA regime

• Journey to the FCA (sets out how the FCA will operate for all regulated rms)

• HMT’s consultation entitled “HMT’s Consultation Paper on the transfer of responsibility for regulating

consumer credit from the OFTto the FCA” with their proposed draft legislation