The Financial Conduct Authority (FCA) promised consumer credit firms a tougher regulatory regime than was the case when they held Consumer Credit Licences from the Office of Fair Trading (OFT).
Many firms are now subject to additional rules, which did not apply under the OFT regime. For example, there are new requirements regarding the handling of client money for debt managers and for payday lenders relating to rollovers, Continuous Payment Authority and risk warnings on promotional material.
Firms can now expect to be supervised more often. Smaller firms are subject to monitoring at least every four years, and larger firms are on a more frequent inspection cycle. All firms must be ready to be inspected more frequently, as this may occur as part of one of the FCA’s thematic reviews or in response to data provided by the firm in an FCA return. In many cases, the OFT only audited Consumer Credit Licence holders when complaints were received about a firm, or it came into possession of other evidence indicating issues of concern.
More Fines and Bans
The FCA has greater powers to impose fines and bans on those who break the rules. It can impose sanctions not just on the firm itself, but also on key individuals within a firm.
The FCA started supervising credit firms from the very first day it assumed responsibility for them. There is certainly no grace period being granted for firms to adjust to the new regime. Actions have already been taken against payday lenders Wonga, Dollar Financial and The Cheque Centre.
As of late October 2014, the FCA revealed that more than 30 debt management firms had been subject to actions (such as refusals of authorisation applications, freezing of bank accounts or being forced to carry out a Skilled Persons review) since the switch.