Limited Permission - v - Full Permission Pat’s Chat Number 1

Outcomes Understand the risks throughout the product lifecycle for consumers using consumer credit Understand why we have 2 categories Be able to identify the types of firm that require limited permission Be able to identify the types of firm that require full permission

FCA Vision Consumers get financial services and products that meet their needs, from firms they can trust; Markets and financial systems are sound, stable and resilient, with transparent pricing information; and Firms compete effectively, with the interests of their consumers and the integrity of the market at the heart of how they run their businesses

Product/Service design Product/Service design inherently flawed Advertising/Sales Misleading/unclear advertising Inappropriate targeting/undue pressure Lending decision Inadequate assessment of affordability Customer falls into arrears Complex/unclear charges, arrears & penalties Exploitative charging & lack of forbearance Options reduced for credit Impaired consumers Exploitative cost increases. Credit-impaired consumers misled into paying upfront brokerage fee in belief it will secure a loan Consumer seeks help with debts Misleading advertising of debt advice/debt management solutions. Poor quality advice. Lack of transparency about risks of debt management solutions Consumers with no access To legal credit Very serious consequences for consumers who deal will illegal “loan sharks”

Limited Permission Lower risk of consumer detriment Limited scope of activities Limited authorisation process Reduced reporting requirements Limited scrutiny – mainly reactive supervision – responding to complaint levels

Full Permission Higher risk of consumer detriment Must demonstrate appropriate financial resources Must demonstrate competence and ability of management Must be capable of being effectively supervised by FCA Strategy for doing business must be suitable for its regulated activities (detailed business plan which is assessed against market norms)

Lower-risk activities Consumer credit lending Lending activities where their main business is selling goods and non-financial services and there is no interest or charges (and no hire purchase or conditional sale agreement). For example, a sports club that allows payment by instalment for membership, without any additional charges

Lower-risk activities Consumer hire Hiring goods to consumers, such as tool and car hire Secondary credit broking Broking where the firm’s main business is selling goods and non-financial services and broking is a secondary activity. For example a car dealership that introduces customers to lenders. The lower risk activity does not include broking carried on in the consumer’s home on more than an occasional basis

Lower-risk activities Not-for-profit debt counselling & debt adjusting Including advising people on discharging specific debts and helping people with their debt problems by taking over their debts, or negotiating on their behalf, where carried out by a not-for-profit body Not-for-profit credit information services Obtaining information about someone’s credit record or helping them change their credit record, where carried out by a not-for-profit body

Higher-risk activities Consumer credit lending Including personal loans, credit card lending, overdrafts, pawnbroking, hire purchase, conditional sale, logbook lending etc. But excluding lending by sellers of goods and non-financial services where there is no interest or charges Credit broking Including introducing consumers to lenders. But excluding broking by sellers of goods and non financial services as a secondary activity (unless the broking is carried on in a consumer’s home e.g. double-glazing sellers selling credit to the consumer in their home.)

Higher-risk activities Debt adjusting Helping people with their debt problems by taking over their debts or negotiating on their behalf. But excluding not-for-profit debt adjusting Debt counselling Including advising people on discharging specific debts. But excluding where carried out by a not-for-profit body

Advice provided on liquidation of consumer credit debt, including entering into a particular debt solution Advice provided on liquidation of consumer credit debt Debt advice likely to be provided as a main business activity Debt advice less likely to be provided as a main business activity Provider more likely to carry on debt adjusting in conjunction with debt counselling Provider less likely to carry on debt adjusting in conjunction with debt counselling Provider of debt advice identifies and/or recommends a particular debt solution to a borrower after assessing their financial circumstances and may manage the borrower’s participation in the debt solution Provider of debt advice does not identify or recommend a particular debt solution to a borrower

Higher-risk activities Debt Collection Collecting debts due to others under consumer credit or hire agreements Debt administration Carrying out activities relating to consumer credit agreements on behalf of a lender Credit information services Obtaining information about someone else’s credit record or helping them change their credit record. But excluding not-for-profit credit information services

Higher-risk activities Credit reference agency Collecting information about a consumer’s financial standing in order to inform the decisions of consumer credit firms Operating an electronic system in relation to lending The new regulated activity concerning peer-to- peer lending platforms

Summary Do we understand the risks throughout the product lifecycle for consumers using consumer credit? Do we understand why we have 2 categories? Are we able to identify the types of firm that require limited permission? Are we able to identify the types of firm that require full permission?