Harper James advises businesses on FCA authorisation and financial services regulation under the laws of England and Wales. A business that lends to consumers, arranges consumer credit, manages credit agreements or provides debt advice generally requires permission from the Financial Conduct Authority (FCA).
Consumer credit activities are regulated under the Financial Services and Markets Act 2000 and the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Activities requiring permission include credit broking, consumer lending, debt administration, debt adjusting, debt counselling, credit information services and consumer hire. A business can require more than one permission if its operating model covers several regulated activities.
Some firms apply for limited permission. This is commonly relevant to businesses such as motor dealers, retailers and suppliers that introduce customers to finance as a secondary part of their activities. Firms whose main business is lending, broking or debt management generally require full permission. Exemptions and exclusions are narrowly defined, so the business model and customer journey need to be assessed before trading begins.
An applicant applies through the FCA’s online system and identifies the permissions required, the activities it will conduct, its controllers and its senior managers. The FCA assesses whether the business satisfies the threshold conditions, including appropriate resources, suitability, effective management and the ability to comply with regulatory requirements.
The application normally requires a detailed business plan, financial information, compliance policies, customer communications, complaints procedures, financial promotions and information about relevant individuals. The FCA also considers the firm’s systems for affordability assessments, customer outcomes, credit broking disclosures, vulnerable customers, record keeping and financial crime controls. An incomplete or inconsistent application can lead to requests for further information and delay the decision.
Authorisation is not a one-off approval. An authorised firm must comply with the FCA Handbook, the Consumer Credit Act 1974 and related rules on conduct, financial promotions, complaints, reporting and senior management. It must maintain suitable systems and controls, pay applicable fees, submit regulatory returns and notify the FCA of material changes to its business, ownership or management.
Businesses should define their regulated activities before launch, review whether each proposed product requires permission and allocate responsibility for compliance. Operating a regulated activity without the required permission is a criminal offence in some circumstances and can affect the enforceability of agreements. An FCA authorisation project therefore covers both the initial application and the operating framework needed after permission is granted.