Second Charge Lending

I am  hearing a number of things at the moment about second charge lending and so thought it might be  worth putting a few facts together.

Regulatory responsibility for second charge lending transfers to the FCA alongside other forms of consumer credit in April 2014, and that it will be treated initially in broadly the same manner as other forms of consumer credit lending (NOTE: Not first charge mortgage lending)

The initial transfer process and the requirements that will apply for second charge lending from April 2014 will be largely the same as those that will apply for other types of consumer credit lending. Existing firms with an OFT standard licence will need to notify the FCA of their desire to have an interim permission in order to continue second charge business from April 2014.  I am assuming that this is the interim permission that has recently been requested by most firms but I am not 100% confident of that point as I write this blog. I will get back on that point once I have established the details.

It is extremely likely that there will be further changes for second charge lending after the European Mortgage Credit Directive (MCD) is implemented and so this will invariably muddy the waters further.  The European Parliament approved the new rules on 10th December 2013 and so the impact of this must take effect in the UK by December 2015.

I have not yet looked at the MCD and I can feel another blog forming as I write - but not today! I think it is fair to say that it will have an impact on how second charge business is transacted but in reality it is not sensibly going to be  before December 2015, surely?

Consumer Credit Rebates

Many firms will already have received notification (and indeed cheques) in relation to rebates on OFT CCLs, given that the current regime is to cease after 31st March this year. however, some firms have not had these details ( or payments) and may be wondering what if anything they are entitled to.

The requirements are set out here in detail by the FCA but by way of a brief overview, please consider the following to see if you are likely to be  eligible or not. (Please note, this is just for guidance ... to be  certain read the requirements.)

• You must have paid an OFT licence fee for a licence issued or renewed on or after 1 April 2009 or you have paid a maintenance fee on or after that date.
• You must hold a standard licence or be the original applicant for a group licence that will still be in existence on 1 April 2014.
• Your licence would have expired or have terminated at least one month after 1 April 2014

There are a load of caveats included in the FCA / OFT rules for this but that is it in very broad terms.

The rebate you should get is based on the following rules:-

A x B / C where,

A = the amount paid to OFT in respect of the Consumer Credit Licensing Fee / Maintenance Charge
B=  the number of complete months remaining on the licence / charge
C= 60 (the number of months in five years)

NOTE: The figure in A will be  the amount that you paid less £140 (the Consumer Credit Jurisdiction (CCJ) levy to the Financial Ombudsman Service  - which is not refundable). There seems to be  a discrepancy on the FCA site about whether the CCJ is £140 or £150.

What if I have yet to pay a maintenance fee?

My reading of this is that you must ensure that if you are due to pay a fee to the OFT between now and 31st March, that you do so. if you do not, your CCL will lapse prior to 1st April and your extension to permissions with the FCA will not be  valid and you will have to make a fresh application ( with costs). If you do not make the payment you will fall foul of the rebate rules but then again if you are in this category you won't be  entitled to a rebate in any case and you won't have made a payment to be  rebated on. Obviously, this approach is only advisable if you are not planning to undertake CCL   activities after 31st March this year.

OF COURSE, YOU HAVE ALREADY APPLIED ONLINE FOR YOUR EXTENSION TO PERMISSION FOR CONSUMER CREDIT ACTIVITY AFTER 1ST APRIL...haven't you?

MMR Webcast

The FCA have just published some details about a Webcast on the MMR. This seems like a good thing to have a look at as it is based on the MMR Roadshows that were conducted a few weeks ago. Whether you went to the roadshows or not, it would be  worth having another look at what's coming in on 26th April, just to make sure that you are still comfortable with it all. You can log in here and ,I suggets, that given you are required to identify your firm in the access point, it would be  a sound and prudent thing both to do and to be seen to be doing.

Most firms should be receiving emails about this right now direct from the FCA, if not already received  but just in case you have not...