I have had a fair bit of feedback from firms about their CCL and a number of thoughts that I think would be useful to share.
As the rules currently stand I think that it would be extremely difficult for a firm to operate within the mortgage and indeed the insurance markets without a CCL. There are a few points here.
Although mortgages are outside the scope of the CCA, any discussion around mortgages will invariably result in a discussion around pre-existing loans whether consumer credit or not. Some of that discussion may well result in the client consolidating CCA loans within a mortgage. Given that almost all regulated mortgages will be advised, this means that de facto, a firm will have recommended a course of action that includes the repayment of CCA loans. This is highly likely to involve activity that falls within licence category D or E.
Any mortgage product that involves a credit card or unsecured credit as a factor or term of the mortgage conditions is probably going to result in the client taking out unsecured credit that falls under the scope of the CCA. This means that , given that most mortgage sales are advised, firms will invariably be recommending a course of action that involves a client taking CCA credit and thus falls within licence category C. Equally, monthly payment of insurance premiums involves CCA regulated credit and category C is probably required if you are going to recommend such action to a client ( and technically even if you are just selling the insurance to them - it is probably brokerage in the CCA definition of the term.
If you need to be able to discuss existing debts with a clients creditors - and I know that this certainly occurred in the past albeit perhaps now to a lesser extent - then you certainly need D and probably E.
If you want to be able to obtain credit details on behalf of a client or to advise them on action to take regarding credit entries with Credit Reference Agencies then you are going to need category H1.
With all these points, I would suggest that as a normal broker you are likely to need the C,D, E and H1 as a probably minimum under the current rules and projecting forward to the interim regime. Hopefully, with all credit under the FCA banner, there will be an opportunity to rationalise the whole matter but that is going to take a while.
I hope that helps a little, but please feel free to contact me directly on david.c.payne1@btinternet.com if you wish to discuss your own specific circumstacnes
Thursday 22 August 2013
Consumer Credit Update
This post is just to let you know that there has been more activity on the CCL front. Firstly, the FCA have confirmed that for Sole Traders the cost of interim registration for CCL activities is £150 and for other firms it is £350. This is a one-off payment due at the time that you apply for interim permission.
The second point is that you will be able to apply for interim permission from 1st September 2013. The FCA will write to you, according to their web site, when the interim permission system opens to explain what you have to do and how to remain compliant. In other words this system will be available from September but not necessarily from the 1st.
The third point is that if you have not already done so, you should check your Consumer Credit Entry on the CCL register.
You will need to check the following: -
If any of these details are incorrect you will need to change them before you apply for interim permissions with the FCA.
The second point is that you will be able to apply for interim permission from 1st September 2013. The FCA will write to you, according to their web site, when the interim permission system opens to explain what you have to do and how to remain compliant. In other words this system will be available from September but not necessarily from the 1st.
The third point is that if you have not already done so, you should check your Consumer Credit Entry on the CCL register.
You will need to check the following: -
- Name,
- Address,
- Company Details and
- that the licence covers the activities you want to continue after 1st April 2014.
If any of these details are incorrect you will need to change them before you apply for interim permissions with the FCA.
Tuesday 13 August 2013
That last post was too long
Ok, that last post was a bit long so here is a shorter version:-
You need to be checking your CCL records on the CCL site to make sure you are correctly registered before the transfer to the FCA on 1st April 2014.
As well as your basic detsails, you need to make sure that you have the correct licence categories.
If you are a 'normal' mortgage broker doing 'normal' mortgage business then you should check to see if you have the following categories:-
You don't necessarily need all these - it will depend on what you do and what you want to be able to do.
For category D & E you will need to submit a Credit Competence Form with your request and the fee (£80 to the OFT for any changes to the categories of licence , I believe).
A sample of the Credit Competence Form can be seen here :-
http://oft.gov.uk/shared_oft/business_leaflets/credit_licences/CCF.pdf
The next post will explain how to make any changes to your CCL.
You need to be checking your CCL records on the CCL site to make sure you are correctly registered before the transfer to the FCA on 1st April 2014.
As well as your basic detsails, you need to make sure that you have the correct licence categories.
If you are a 'normal' mortgage broker doing 'normal' mortgage business then you should check to see if you have the following categories:-
- Category C Credit brokerage
- Category D debt adjusting
- Category E debt counselling
- Category H Credit information services)
- Category H1 (Credit information services - including credit repair)
- Canvassing off trade premises
You don't necessarily need all these - it will depend on what you do and what you want to be able to do.
For category D & E you will need to submit a Credit Competence Form with your request and the fee (£80 to the OFT for any changes to the categories of licence , I believe).
A sample of the Credit Competence Form can be seen here :-
http://oft.gov.uk/shared_oft/business_leaflets/credit_licences/CCF.pdf
The next post will explain how to make any changes to your CCL.
So what categories of CCL does my firm need?
The time is fast approaching when firms will need to apply to the FCA for permission to undertake Consumer Credit Act (CCA) regulated activities after 1st April 2014. This will be done by way of an extension to permissions and no doubt we will hear more about this as soon as the FCA are ready for it. I understand that we should get more news pretty soon.
In the meantime, the FCA and the OFT have written to firms asking them to check that they are correctly registered and licensed under the current regime. Apart from the obvious static details - name address etc ( and making sure that your licence is current and not expired) the issue for many firms is to establish what exactly the correct licensing categories are for the business that they undertake.
The purpose of this blog is to give a bit of background to this and to help firms head in the right direction. before reading on, you might want to check this information yourself on the OFT web site here:
http://oft.gov.uk/OFTwork/credit-licensing/do-you-need/licence-categories/#.UgoOg5JONy0
However, if you would prefer to hear a point of view first, read on.
This blog lists out the categories and suggests the circumstances in which they would be needed. The next blog that I issue will explain what you have to do if you need to make any changes.
What are the Categories ?
There are 9 distinct categories of activity under the consumer credit licence and exactly which ones you need to have will depend upon exactly what you do. I am going to offer suggestions for those categories that would apply to a 'normal' mortgage brokerage and so whilst this may be useful for some firms, I would emphasise that you need to get verification before you can sit back a relax.
Category A Lending under the CCA
Before you offer to lend money from your own funds, for regulated consumer credit agreements you will need this category. Most brokers that I know and deal with do not offer their own funds to clients under consumer credit regulated agreements and so generally speaking will NOT NEED this Category.
Category B Hire Purchase Agreements
Again, most brokers that I know and deal with do not hire, rent out, or lease goods under any regulated agreements, where the arrangement is capable of lasting for more than three months. This category would NOT NORMALLY APPLY to mortgage brokers.
Category C Arranging credit
You will need this category if you will introduce any individual to a third party so they can obtain credit. The OFT site states the following (I have not updated the obsolete references to the FSA with FCA ):
Most financial advisors need this category and almost all appointed representatives need their own licence, for example, to use their own business premises or own trading style. You may also need to be authorised by the Financial Services Authority (FSA) before you can obtain a consumer credit licence. Introducing people to lenders or other credit brokers for the purposes of obtaining a first charge mortgage is now generally regulated by the FSA. Basically YOU SHOULD HAVE THIS CATEGORY.
Category D Debt Adjusting
This is the first of those categories that could be contentious.
The OFT states that :
You may need this category if you will:
You may simply offer to negotiate with creditors on someone's behalf - before you do, you may need this category. I would further make to observation that if you do not have this category of licence you could be precluded from discussing or arranging repayment of existing CCA regulated debts before a mortgage is advanced. Many firms that I have dealt with will at some time become involved in discussions with existing creditors on behalf of clients. It is RECOMMENDED that you have this category in place even though the OFT site says:-
Since 31 October 2004, it has not generally been debt adjusting to carry on any of the above activities solely for debts due under mortgages regulated by the FSA. Such activity is regulated by the FSA.
BUT, The pre-existing credit I am referring to is not the current mortgage but existing unsecured loans or credit cards.
Category E debt Counselling
The OFT states that :-
It would be unusual for any business to adjust a client's debts without having counselled or advised them about it first. It is expected that both Categories D and E are applied for together in such circumstances.
Although the usual statement is evident on the OFT site (Since 31 October 2004, it has not generally been debt counselling to carry on this activity solely for debts due under mortgages regulated by the FSA. Such activity is instead regulated by the FSA.) the point here is that in recommending a mortgage, you may recommend certain courses of action in relation to any existing consumer credit loans or cards. For example, the mortgage lender might require certain loans to be cleared before agreeing an advance. Suggesting this to a client falls under this category of licence.
It is RECOMMENDED that you have this category in place.
Category F Debt Collecting
You will need category F if you will take steps connected with the collecting of debts owed to others under any regulated consumer credit or hire agreements and you will simply be collecting those debts on the third party's behalf.
Most firms that I know and deal with do not routinely engage in this kind of activity and so I suggest that this is not required for most. You do not need this category if you collect debts owed to you or your own firm.
Category G Debt administration
You will only need this category of licence if you engage in the administration of consumer credit regulated debts on behalf of a consumer credit lender or other firm. Again , most firms that I know and deal with do not routinely engage in this kind of activity and so I suggest that this is not required for most.
Category H Credit Information Services
You will need this category if you will take steps to check the financial standing or credit ratings of individuals, such as contacting the credit reference agencies for information on your clients' behalf. If in addition you want to be able to contact credit reference agencies on behalf of a client to repair the credit record, you will also need category H1.
In the meantime, the FCA and the OFT have written to firms asking them to check that they are correctly registered and licensed under the current regime. Apart from the obvious static details - name address etc ( and making sure that your licence is current and not expired) the issue for many firms is to establish what exactly the correct licensing categories are for the business that they undertake.
The purpose of this blog is to give a bit of background to this and to help firms head in the right direction. before reading on, you might want to check this information yourself on the OFT web site here:
http://oft.gov.uk/OFTwork/credit-licensing/do-you-need/licence-categories/#.UgoOg5JONy0
However, if you would prefer to hear a point of view first, read on.
This blog lists out the categories and suggests the circumstances in which they would be needed. The next blog that I issue will explain what you have to do if you need to make any changes.
What are the Categories ?
There are 9 distinct categories of activity under the consumer credit licence and exactly which ones you need to have will depend upon exactly what you do. I am going to offer suggestions for those categories that would apply to a 'normal' mortgage brokerage and so whilst this may be useful for some firms, I would emphasise that you need to get verification before you can sit back a relax.
Category A Lending under the CCA
Before you offer to lend money from your own funds, for regulated consumer credit agreements you will need this category. Most brokers that I know and deal with do not offer their own funds to clients under consumer credit regulated agreements and so generally speaking will NOT NEED this Category.
Category B Hire Purchase Agreements
Again, most brokers that I know and deal with do not hire, rent out, or lease goods under any regulated agreements, where the arrangement is capable of lasting for more than three months. This category would NOT NORMALLY APPLY to mortgage brokers.
Category C Arranging credit
You will need this category if you will introduce any individual to a third party so they can obtain credit. The OFT site states the following (I have not updated the obsolete references to the FSA with FCA ):
Most financial advisors need this category and almost all appointed representatives need their own licence, for example, to use their own business premises or own trading style. You may also need to be authorised by the Financial Services Authority (FSA) before you can obtain a consumer credit licence. Introducing people to lenders or other credit brokers for the purposes of obtaining a first charge mortgage is now generally regulated by the FSA. Basically YOU SHOULD HAVE THIS CATEGORY.
Category D Debt Adjusting
This is the first of those categories that could be contentious.
The OFT states that :
You may need this category if you will:
- negotiate terms with the creditor on behalf of an individual for the discharge of a debt, or
- take over, in return for payments by the debtor, his obligation to discharge a debt, or
- engage in any similar activity concerned with the discharging of a debt.
This may leave firms to believe that category D is not required.
However, the OFT also makes the point that :-
However, the OFT also makes the point that :-
If a customer has existing debts, before you lend or broker additional funds you may undertake to adjust the existing debts owed by the customer. For example this covers the following: ...
- financial advisors who discharge existing debts as they lend additional funds.
You may simply offer to negotiate with creditors on someone's behalf - before you do, you may need this category. I would further make to observation that if you do not have this category of licence you could be precluded from discussing or arranging repayment of existing CCA regulated debts before a mortgage is advanced. Many firms that I have dealt with will at some time become involved in discussions with existing creditors on behalf of clients. It is RECOMMENDED that you have this category in place even though the OFT site says:-
Since 31 October 2004, it has not generally been debt adjusting to carry on any of the above activities solely for debts due under mortgages regulated by the FSA. Such activity is regulated by the FSA.
BUT, The pre-existing credit I am referring to is not the current mortgage but existing unsecured loans or credit cards.
Category E debt Counselling
The OFT states that :-
It would be unusual for any business to adjust a client's debts without having counselled or advised them about it first. It is expected that both Categories D and E are applied for together in such circumstances.
Although the usual statement is evident on the OFT site (Since 31 October 2004, it has not generally been debt counselling to carry on this activity solely for debts due under mortgages regulated by the FSA. Such activity is instead regulated by the FSA.) the point here is that in recommending a mortgage, you may recommend certain courses of action in relation to any existing consumer credit loans or cards. For example, the mortgage lender might require certain loans to be cleared before agreeing an advance. Suggesting this to a client falls under this category of licence.
It is RECOMMENDED that you have this category in place.
Category F Debt Collecting
You will need category F if you will take steps connected with the collecting of debts owed to others under any regulated consumer credit or hire agreements and you will simply be collecting those debts on the third party's behalf.
Most firms that I know and deal with do not routinely engage in this kind of activity and so I suggest that this is not required for most. You do not need this category if you collect debts owed to you or your own firm.
Category G Debt administration
You will only need this category of licence if you engage in the administration of consumer credit regulated debts on behalf of a consumer credit lender or other firm. Again , most firms that I know and deal with do not routinely engage in this kind of activity and so I suggest that this is not required for most.
Category H Credit Information Services
You will need this category if you will take steps to check the financial standing or credit ratings of individuals, such as contacting the credit reference agencies for information on your clients' behalf. If in addition you want to be able to contact credit reference agencies on behalf of a client to repair the credit record, you will also need category H1.
You will need category H1 if you want to:
- seek to obtain information on behalf of an individual about his financial standing (for example credit rating information), including asking a credit reference agency if it holds the information provide advice to individuals on:- how to seek to alter,
- or secure the omission of, the information- how to seek to restrict the availability of the information seek to alter,
- or secure the omission of, information about an individual's financial standing seek to restrict the availability of the information.
It is recommended that you have H and H1 as part of your licence.
Category I Credit reference agency
A normal brokerage will not require this category. it more or less applies to the big credit reference agencies like Experion.
Canvassing Off trade premises
Canvassing Off trade premises
Since the end of the Mortgage Code, this additional option has possibly not been required. However, there could be circumstances where you visit a client for a mortgage and end up offering unsecured or other consumer credit regulated loans to a client. To cover you in this event, you should hold this category.
I think that is enough for now. As I said above, I will be issuing a blog about how to update your CCL shortly but in the meantime if you have any queries, please feel free to contact me through the Blog comments or directly to david.c.payne1@btinternet.com
I think that is enough for now. As I said above, I will be issuing a blog about how to update your CCL shortly but in the meantime if you have any queries, please feel free to contact me through the Blog comments or directly to david.c.payne1@btinternet.com
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