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Robert Sinclair: Beware Greeks bearing gifts on consumer credit

The sudden release by the FCA of amended proposals for fees and levies on consumer credit application fees says a lot about the newly air-brushed regulator.  

Having been out on the road listening to firms the FCA felt the need to address some of the concerns by significantly reducing the amounts proposed. 

This might well allow the FCA to argue that they have listened and dealt with the issues raised so meeting their own requirements set out in sections 1.9 and 1.10 of Consultation Paper 13/14 issued in October 2013. 

These state that fees should not influence firms’ behaviour nor interfere in the market or distort competition. 

The proposed fees risked many firms leaving this market and customers being left without advice. 

These changes are in keeping with FCA being a more listening and responsive regulator. 

However have they been listening to all the right people about the correct issues? 

Having run a trade body for over seven years, while members know issues that confront them very well it is the trade body who usually works out where the real fault lines lie and work to provide effective solutions. 

Prescribing painkillers for a headache is of no use if it is something more deeply sinister and we have not been invited in to talk yet.

What has become clear is that many firms had held OFT based consumer credit licences across a range of categories as they were simple and cheap to obtain, lasted for life and only recently had they been subject to a fee every five years. 

In the world of mortgages firms had these to meet their legal requirements and they had not worried about the technicalities as the FCA principles and Mortgage Conduct of Business rules governed their activity. 

Moving to the new regime brings steeply different cost for activity that is very marginally captured.

We have not had the opportunity to consult on what should sit in the limited permission. 

We have not had the opportunity to look at how we define intermediated advice, where no consumer credit income is generated, should sit in the new landscape versus those who undertake full debt servicing. 

We have yet to see FCA consult on what comprises debt administration, debt counselling or debt adjusting and how far a mortgage broker is involved in that activity in recommending consolidation into a mortgage or not.

So while the reductions offered are magnanimous and signs of FCA being better than FSA, we risk being deluded into seeing this as a panacea. 

It is an offer as part of a consultation, that is really only less than half of the job.

Until we can see who sits in which category, what they will have to pay to acquire a full authorisation and finally what the annual fees might be we are shooting in the dark. 

Of more concern to the industry should be that the first consultation paper did not get to its end before being amended.

I can’t help but be struck by the parallels between the changes made to consumer credit and the mythological story of the Trojan horse.

My concern is that there are many Greeks hiding in this horse that the Trojans of the advice industry would do well to guard against.


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