In light of the Financial Conduct Authority taking over responsibility for regulating consumer credit from the Office of Fair Trading in April, Tenet believes most advisory firms will carry out some kind of regulated activity that requires a consumer credit license from time to time and will therefore need the relevant license under the FCA.
Tenet welcomes the clarification obtained by the Association of Mortgage Intermediaries (AMI), confirming mortgage brokers will not require FCA authorisation for debt counselling, if their only consumer credit activity is advising clients to repay existing loans and debts out of the proceeds of a regulated mortgage contract. This guidance recognises the fact that advice to pay off debts is likely to be ‘debt counselling’ but the need for authorisation by the FCA is avoided due to an exemption in the 2013 (Regulated Activities) Order.
This exemption is, however, in Tenet’s opinion unlikely to extend to a debt counselling service that goes beyond mortgage services. Tenet also concurs with the AMI that the exemption does not apply when arranging loans, including secured loans which are not regulated mortgage contracts.
Mike O’Brien, managing director of TenetConnect and TenetSelect, said: “All of this illustrates just how complex the consumer credit regulations are and is why Tenet has issued detailed guidance to our membership. Whilst it may be possible for a financial adviser to be able to avoid debit counselling, the fact is that most advisers who deal with a broad range of clients will from time to time need authorisation for debt counselling. Given the potential adverse consequences of not being correctly authorised Tenet believes many firms will decide that payment of an additional fee (c. £200) is worth contemplating for peace of mind.”
As a network, Tenet has applied for Interim Permissions with the FCA and by the end of summer of 2014 it hopes to have obtained full permissions for credit mediation and related activities. At that time, Tenet intends to offer its network members the opportunity to extend their appointed representative agreement with the group, provided their credit mediation activities are ancillary to their main business activities.
Firms must apply to the FCA for Interim Permission before 31 March 2014 or stop any credit mediation activity.