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Financial Conduct Authority

Ref: 198

Date: Wed 11/Jun/2014, 09:00

Dealers will (or should) be aware, the consumer credit marketplace is now in the midst of vast and far reaching regulatory changes imposed by the Office of Fair Trading’s successor, the Financial Conduct Authority (FCA). These changes have significant implications for Dealers and the manner in which they conduct their business.

Fundamentally, most Dealers will now require to be “authorised” by the FCA when dealing with any aspects of their day-to-day business which involves consumer finance. This can include the provision of finance to purchase vehicles or equipment, but can also extend to dealing with part exchanging vehicles upon which outstanding finance exists.

We thought it useful to provide an informative note of some preparatory steps Dealers will need to take prior to submitting an application for authorisation.

Interim Permission

Dealers who previously operated under an OFT licence should by now have applied for, and receive, their Interim Permission from the FCA. The Interim Permission allows the Dealer to continue to conduct finance related business, providing a stopgap until such time as their authorisation application is either accepted or rejected by the FCA.

If a Dealer does not currently have an Interim Permission, they are not authorised to conduct consumer finance related business. An application should therefore be made to the FCA as soon as possible to avoid any sanctions being imposed.

When do I apply for Authorisation?

The FCA is in the process of contacting all Dealers who currently hold an Interim Permission. The FCA has indicated that all Dealers will have received details of how to apply for authorisation by 15th May 2014.

Correspondence from the FCA will advise the Dealer of their constituent “application period”, being the three month window they will have to submit their application for authorisation. If an application is not submitted within this three month window, a Dealer may lose its Interim Permission.

The majority of Dealers will have an application period between October 2014 and January 2016. However, some Dealers may have applied for “Principal” status, in which case their application window may open as early as June 2014.

If Dealers did not hear from the FCA by 15th May 2014, they should contact the FCA at application.period@fca.org.uk and include their Interim Permission number in the email. The FCA will then advise of the Dealer’s allocated application period.

How do I Apply?

An application form for authorisation can be completed on the FCA’s website here http://www.fca.org.uk/firms/firm-types/consumer-credit/authorisation/apply

This link also contains some useful guidance on the information to be compiled before a Dealer applies, together with a template application form which may be reviewed in advance of completing a submission.

Dealers should be mindful of the FCA’s comprehensive information requirements relative to the application form. A prudent Dealer should therefore begin to prepare well in advance of its application period opening.

Limited or Full Permission?

Dealers will have the ability to apply for either “Limited” or “Full” permission depending on the extent of the activities they conduct which involve finance. Full Permission status will require more stringent operational procedures to be implemented and more extensive conditions will have to be met, whilst Limited Permission will carry less onerous procedures, but will only cover some forms of credit broking and consumer hire.

The FCA has prepared guidelines on what activities will require either a “Limited” or “Full” permission. Guidance from the FCA suggests that the majority of Dealers will only require Limited Permission on the basis that income derived from consumer credit activities is likely to be secondary to its principal activities.

Dealers will also need to consider which activities they require to be authorised for. The list of potential activities is extensive; however it is likely that most Dealers will require to apply for:

  • Credit Broking
  • Debt adjusting
  • Debt Counselling

Notwithstanding this guidance, it is vital that Dealers decide which permission and activities to apply for based on their own individual circumstances.

How much does it cost?

The fee payable for authorisation varies on a number of factors, but is primarily split between fees for Limited Permission and Full Permission.

Limited Permission Fees

Dealer Consumer Credit Income

Application Fee

Up to £50,000

£100.00

Over £50,000

£500.00

Details of what constitutes Consumer Credit Income can be found here http://www.fca.org.uk/your-fca/documents/consumer-credit-definition-income

Full Permission Fees

The fees for Full Permission applications are calculated based on both the level of consumer credit income a Dealer receives and the complexity of the application:-

Categories

Value of Consumer Credit Income

 

Up to £50K

£50k-£100k

£100k - £250K

£250k-£1m

Over £1m

Straightforward

£600

£750

£1,000

£1,500

£5,000

Moderately Complex

£800

£1,000

£1,500

£5,000

£10,000

Complex

£1,000

£1,250

£2,000

£7,000

£15,000

The FCA will consider each application for full permission on a case-by-case basis, however broad guidance on what activities fall under each of the categories mentioned above can be found here http://www.fca.org.uk/your-fca/documents/consultation-papers/cp13-14-supplement

Next Steps

Once an application is submitted for consideration, the FCA will review and process the application in due course. The FCA have up to six months to consider applications, however they have indicated that they are hopeful of issuing decisions well in advance of this six month period.

 

SKM Asset Finance Ltd is here to help navigate through the complex course to obtaining FCA authorisation. Should you be unclear on any aspect of the new regime, please do not hesitate to contact us at info@skmassetfinance.co.uk or 01202 855080



     
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