Navigating the maze of consumer credit regulation
I've heard financial advisers who have been authorised by the Financial Conduct Authority (FCA) for years....
I’ve heard financial advisers who have been authorised by the Financial Conduct Authority (FCA) for years, and by its predecessor the Financial Supervisory Authority before that, describe following the regulator’s guidance as being like trying to find their way through a maze. For those who are new to the FCA’s regime, I imagine it’s much like trying to navigate that maze whilst blindfolded after having been spun round in a circle for 10 minutes! Basically, it can be complex and disorientating and sometimes you don’t know if you’re on the right path until you reach its end.
The impending introduction of the Mortgage Credit Directive (MCD) on 21st of March has meant that anyone conducting second charge business will be herded into the maze, and left to their own devices to find their way to the other side.
There are many new practices for firms affected by the arrival of MCD to put in place in addition to adopting new documentation and, in some cases, an amended advice process. Fortunately, understanding the challenge that a change in regulator and rules could present to firms has been defined, and the FCA has issued an overview of the regulatory points that it considers to be of most importance:
1. Authorisation: I’ve discussed authorisation before in this column and, although the authorisation process itself can be both time-consuming and complicated, establishing the need is not. Firstly, find out whether or not your business actually need to be authorised by the FCA and, secondly, if it does, submit your application for the relevant permissions. If your application is already in the pipeline, the FCA will prioritise it and have it signed off as quickly as possible. If it’s not, I urge you to submit it as soon as it is humanly possible. You will still need to cease trading in the affected business areas until your application is approved, but that’s better than ceasing trading altogether, surely. If you’re still not sure whether or not MCD impacts your business, you can call our free helpline on 08081 240 010.
2. Responsible lending: An FCA rule that does just what it says on the tin: once trading, you need to make sure that you have processes in place to ensure a consumer is able to afford repaying a loan before it is granted. The lender or broker must take a holistic view of a client’s full financial situation before transacting business with them, to ensure that the repayments needed are managed without putting the customer in a position of financial hardship.
3. Advice and arrears: Similarly, a range of products and solutions must be considered before making a recommendation to the consumer. A range of factors including financial stability, the length of the loan period and the ability to make early payments should be considered before making a recommendation.
Points two and three both fall under the banner of Treating Customers Fairly; one of the FCA’s core principles which, again, is as simple as it sounds. In short, don’t lend anything to anyone without first checking that they are able to pay it back!
There is a solution to all of the issues surrounding the MCD that lets you meet your responsibilities and also allows you to get on with conducting business – and that is to engage a specialist provider to handle your application and ongoing compliance requirements for you. The Consumer Credit Centre, which is part of theSimplyBiz Group, has a 100% success rate in getting consumer credit applications and variation of permissions approved first time by the FCA – and the cost for this service is less than an average two day’s earnings. If you simply want to get on with doing business with your clients, then help navigating the maze of FCA regulation is a good solution. Please get in touch with us on 01484 443 424.
Attributed to Samantha Cameron-Carruthers, Head of Marketing, Consumer Credit Centre, SimplyBiz