Embarking on the journey towards FCA authorisation can appear overwhelming. The latest instalment in our series on FCA compliance aims to assist firms in determining the appropriate type of permission they need to apply for.
Any firm engaging in a regulated activity must be authorised or registered with the FCA. Undertaking a credit-related regulated activity in the UK without the proper authorisation from the regulator constitutes a criminal offence. If you’re unsure whether your activities are regulated or if you need to apply for authorisation, it is strongly advised to seek expert advice. In short, if you’re a lender, broker, involved in debt counselling, debt collection, or debt administration, it’s likely you’ll need FCA authorisation.
Firms engaged in consumer credit activities can apply for one of two types of authorisation: limited permission or full permission. The FCA’s Perimeter Guidance (PERG) outlines the different permission types, and anyone applying for authorisation must have a clear understanding of the guidance. If uncertain, it’s advisable to contact an external expert. Applying for the wrong category of permission can delay your application by up to six months, making it crucial to select the correct type.
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Limited Permission
Whether a firm requires full or limited permission depends on several factors, including the nature of its activities:
- Consumer credit lending, where the primary business sells non-financial services or goods with no interest or charges (except for hire-purchase or conditional sale agreements)
- Credit broking, where the primary business sells non-financial services or goods, and broking is a secondary activity
- Not-for-profit debt counselling
- Not-for-profit debt adjusting
- Not-for-profit credit information services
- Consumer hire
Full Permission
Firms seeking full permission typically engage in:
- Consumer credit lending as the main business
- Credit broking as the main business, or where sales occur in the customer’s home
- Debt counselling
- Debt adjusting
- Debt collection
- Debt administration
- Peer-to-peer lending
- Providing credit reference agency services
What Do These Permissions Mean?
Firms applying for either permission type might assume ‘limited’ means a simpler process and ‘full’ involves more extensive requirements. While the application process for limited permission is typically shorter and less costly, firms should not assume this means fewer documents are needed or that they are exempt from parts of the regulations. Though the application may require fewer documents, it’s important to be prepared to demonstrate compliance with the regulatory framework within 12 months of approval.
For full permission, firms must submit a business plan, along with detailed information about their activities, history, financials, systems, controls, and approved persons.
What’s Next?
If you believe your firm requires permission, the next step is to review the information available on the FCA website.
Our FCA authorisation guide outlines the key audit areas you’ll need to consider when preparing for FCA regulation.