Businesses must take action and register for a consumer credit licence with the Financial Conduct Authority (FCA), as the clock ticks towards a change in regulations over consumer credit, otherwise they face closing parts of their business for up to 12 months and face unlimited fines if they miss the deadline.
From April 1, the FCA will take over the regulation of consumer credit from the Office of Fair Trading (OFT) and, at this point, existing consumer credit licences issued by the OFT will lapse, leaving the firms that have failed to register with the FCA operating illegally.
Currently, some 60,000 organisations hold consumer credit licences and those affected are likely to be anyone who lends or hires goods to consumers, employees, sole traders or partnerships of fewer than four partners, as well as retailers offering finance at point of sale and service providers hiring out equipment as part of their offering.
New FCA conduct rules, as well as the FCA’s “Principles for Business”, will also apply, and organisations will need to demonstrate that they are compliant with both the letter and the spirit of these.
It is also important for affected companies to consider the impact that regulation by the FCA will have on their business, as this will be a major change with widespread implications.
This is because the FCA is a very different regulator to the OFT, being much more proactive and with much wider enforcement powers, including the power to levy unlimited fines.
Firms should therefore ensure that they check with the OFT to confirm whether they need to apply for new licence categories by March 31 2014 and that their organisation is appropriately structured for FCA regulation. To do this it must have a tailored conduct risk framework and must comply with FCA rules and principles.