The City regulator has started writing to all authorised credit broking firms, including peer-to-peer lending platforms that hold these permissions, to check that they are using them.
The National Association of Commercial Finance Brokers (NACFB) said that as part of its ‘use it or lose it’ approach to regulation, the Financial Conduct Authority (FCA) is checking whether these companies have Part 4A permissions of Section 55J of the Financial Services & Markets Act 2000 (FSMA) which is required to legally carry out regulated activities.
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The NACFB said that where a firm has failed, for a period of at least 12 months, to carry out the regulated activities for which it has a Part 4A permission, the FCA will take action to cancel the permission.
The association said businesses are required to respond to regulator within two weeks of being notified, to say whether permissions are to be used or plan to be used within three months of the date of the letter.
“Cancellation by FCA enforcement may lead to a public notice being applied to the regulator’s website,” the NACFB said in an update to its members.
“Last week, the NACFB wrote about consumer credit reporting obligations and the association will be issuing further guidance for broker firms in the coming days.”
Gillian Roche-Saunders, partner at compliance consultancy Adempi, said it’s fairly common for P2P platforms to have credit broking permissions and she has seen these notices.
“Platforms would need that in case they wanted to refer on consumer lenders to other credit providers,” said Roche-Saunders.
“Equally, some platforms have loans which don’t quite meet the definition of Article 36H and if those loans are to a consumer, the credit broking permission would be needed.
“I have seen those notices. They are not specific to credit firms, so the FCA is probably rolling it out to one part of the industry at a time. It was corporate finance firms a few weeks ago, and now credit firms.
“The initiative is to clear up the books on who they should be regulating so they can better supervise. It has always been the case that firms not using their permissions could have them cancelled.
“This year the FCA is being more proactive and after a tough year, many firms may have low or no regulatory income reported in their returns, prompting these enquiries. However, if a firm plans to get started using the permission again in the next few months, the FCA will be understanding.”