SPECIAL FEATURE: Brokers and consumer credit permissions
Since it was very first announced that consumer credit was to come under the jurisdiction of the Financial Conduct Authority, brokers have been somewhat in the dark about the next step to take.
Some thought there was no need to do anything, others relied on their networks for advice and those with a clear intent to get involved in the buoyant secured loans market went ahead and began the process of applying for permissions.
As most advisers are aware, the paper work involved in such a process is substantial and the admin task should not be underestimated.
Those brokers who have yet to start therefore will be pleased to hear that the FCA has recently issued a release stating firms who already have first charge permissions may not need to apply for extra permissions after all.
In a document issued shortly before Christmas, the regulator said: “Firms with first charge mortgage permissions and doing 2C business in the same legal entity will not need to apply for additional permissions as the existing mortgage definitions will be extended to include second charge.
“BUT, for firms registered for consumer credit interim permission and whose only consumer credit business related to second charge business should email firstname.lastname@example.org to request to move their application period to March 2016 to avoid having to make a consumer credit application. This way firms will keep interim permission until the MCD and legislation comes into force.”
Those brokers who have already engaged external consultants to help them apply for permissions should know there are other options available. However, there were still some grey areas, particularly surrounding unregulated buy-to-let mortgages which brokers may still need credit permissions for.
Following some excellent lobbying by Robert Sinclair at AMI, this week Treasury has made its intentions clearer to capture consumer buy-to-let business within the mortgage regime whilst commercial buy-to-let (portfolios etc) will fall outside of consumer credit due to its commercial nature. This still needs to pass through FCA consultation and be made law but it is a very positive step.
In principle this should mean that mortgage brokers will be able to continue offering buy to let mortgages and secured loans under their existing mortgage permissions from March 2016.
It should therefore follow that they don’t need to apply for consumer credit permissions unless they want to engage in unsecured loans and other consumer credit. However, whilst it makes sense that interim permissions for consumer credit should survive until the new regime comes in, there is still ambiguity around Buy to Lets. This leaves brokers with imminent landing slots the choice of either applying for permissions they might not need or taking the chance on not applying in the hope that common sense will prevail.
However you look at it, this is great news for mortgage brokers but given the significant cost and admin burden of applying for extra permissions, this is an area where the industry definitely needs some greater clarity. Getting it wrong is not really an option for most brokers.