In March 2013, HM Treasury published its consultation on transferring consumer credit regulation from the Office of Fair Trading to the Finance Conduct Authority on 1 April 2014 to create a "tougher and more pro-active" regulatory regime. When that happens authorisation, monitoring and supervision is likely to be more rigorous and costly for RSLs.
Fascinating. But what's it got to do with us?
Many RSLs (RSLs) and subsidiaries have consumer credit (CCA) licences - primarily through participation in the LIFT Scheme where they act as agents for Scottish Ministers involved in brokerage, debt recovery and debt administration. Some associations also have full CCA licences for the direct provision of credit.
What is less well known is that a licence may also be required:
(a) for many arrangements involving time to pay including the familiar case of recharging owners for works to flatted properties under repair or refurbishment schemes
(b) where an RSL (often with best intentions and without realising implications) offers tenants/residents advice on paying off debt including negotiating with their creditors
(c) where an RSL hires furniture or white goods to tenants
From 1 April 2014 any RSL carrying out such activities without authorisation from FCA will commit a criminal offence.
Does that mean we all have to apply for a new authorisation?
RSLs may apply (in terms to be finalised) for "interim permission" to continue the licensed activity until 1 April 2016 when they must have either:
(a) obtained full authorisation under the new regime
(b) discontinued the activity or
(c) re-structured to take advantage of alternatives to authorisation mentioned in the consultation
Otherwise the RSL will have to apply for full authorisation under the new regime.
Next Steps
RSLs with a consumer credit licence should apply for "interim permission" to continue the activities for which they are licenced in good time for the April 2014 deadline.
Those who carry out activities for which a licence may be required (e.g. common works with at least the option of time to pay arrangements) should consider applying now to the OFT for a licence or variation which can then transfer by interim permission, rather than having to apply for full authorisation under the new regime.
Conversely RSLs should also consider whether they need all their current categories of licence and whether they can take advantage of any of the alternatives to authorisation.
For more information on consumer credit regulation and licences, get in touch with our experienced team.
mage courtesy of Vichaya Kiatying Angsulee/FreeDigitalPhotos.net
