Consumer Credit

Consumer Credit Firms in the UK are authorised by the Financial Conduct Authority (FCA) to provide a variety of credit services, such as personal loans, hire purchase, credit cards, and consumer credit agreements. This licence allows businesses to offer flexible financing options tailored to consumer needs, establishing themselves as trusted providers within a highly regulated sector focused on consumer protection and ethical lending standards.

Overview

Services Provided

  • Personal Loans

  • Credit Card

  • Store Credit and Finance

  • Debt Collection

Capital Requirements

  • No specific

Transaction Limitations

  • Varies depending on the type of credit offered (e.g., personal loans, credit cards). However, responsible lending principles must be adhered to, ensuring consumers do not borrow beyond their means.

Jurisdictional Limitations

  • Restricted to operations within the UK unless otherwise specified. Firms must comply with the UK’s FCA regulations regarding cross-border credit activities.

Legal & Regulatory Framework

  • Consumer Credit Act 1974

  • The Financial Services and Markets Act 2000 (FSMA)

  • The FCA Handbook

  • The Data Protection Act 2018 and GDPR

  • The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

Key Restrictions

  • Responsible Lending: Firms must comply with responsible lending practices to protect consumers.

  • No Payment Services: Firms cannot provide Payment Initiation Services (PIS) or Account Information Services (AIS).

Regulatory authorisation process

  • The Financial Conduct Authority (FCA) usually assesses a complete application within 6 months.

  • Depending of the permissions required by the firm the Financial Conduct Authority (FCA) will require a fee ranging between £540 and £10,880.

Regulatory Updates

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Deep dive into Consumer Credit

Introduction

  • Expand your financial services by becoming a Consumer Credit Firm in the UK, regulated by the Financial Conduct Authority (FCA). This licence allows businesses to offer credit services such as loans, hire purchase, and consumer credit agreements while adhering to responsible lending practices. Consumer Credit Firms are essential for businesses looking to provide flexible financing options while ensuring compliance with the UK's Consumer Credit Act.

Definition

  • Consumer Credit Firms provide credit services, including personal loans, credit cards, and store credit, and must comply with specific consumer protection and responsible lending regulations.

Additional Information (Services)

  • Personal Loans: Offering loans to individuals for personal use, including interest rate terms and repayment schedules.

  • Credit Cards: Issuing credit cards that allow consumers to make purchases on credit, with interest charged on unpaid balances.

  • Hire Purchase Agreements: Enabling consumers to finance the purchase of goods through instalment payments, typically with interest.

  • Store Credit and Finance: Providing credit for purchases from specific retailers, often used for large purchases like furniture or electronics.

  • Debt Collection: Collecting overdue payments on behalf of creditors or purchasing debt portfolios to recover outstanding amounts.

Additional Information (Legal & Regulatory Framework)

  • Consumer Credit Act 1974: Governs the licensing and regulation of consumer credit businesses.

  • The Financial Services and Markets Act 2000 (FSMA): Provides the overarching legal framework for financial services in the UK, including consumer credit firms.

  • The FCA Handbook: Contains rules and guidelines for firms offering consumer credit, including responsible lending and customer protection.

  • The Data Protection Act 2018 and GDPR: Firms must ensure the protection of customer data, adhering to data privacy laws.

  • The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017: Firms must comply with AML/CTF regulations where applicable.

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Additional Information (Key Restrictions)

  • Responsible Lending: Firms must comply with responsible lending principles, ensuring that they do not extend credit to consumers who cannot afford to repay.

  • Creditworthiness Assessments: Firms must perform thorough credit checks to assess the creditworthiness of consumers before offering loans or credit cards.

  • Consumer Protection Regulations: Firms must adhere to regulations that protect consumers from unfair contract terms, misleading promotions, and predatory lending practices.

  • Interest Rate Caps: Certain types of high-cost short-term credit, such as payday loans, are subject to interest rate caps imposed by the FCA.