Dec 17 – Debt activity

Back in March the FCA communicated six new permission categories relating to debt activity.  Regulatory work has since moved forward with the release of the first draft of how the Senior Managers & Certification Regime (SMCR) will be applied to the rest of the industry, and a more polished version of how the Financial Services Compensation Scheme will be structured from 2018/19.

Whilst these will result in significant changes for firms, it is worth revisiting the impact on consumer credit permissions, despite the fact mortgage brokers should be exempt as such activity is really part of their intermediation.

If firms decided that they carry out debt management activities then they will have had to allocate the compliance oversight function (CF10) to an individual, as well as meeting minimum capital requirements.  Under SMCR, if a firm is already required to nominate a CF10 then they will need to apply the equivalent Senior Management Function.  So with this individual captured under the regime, they will have personal responsibility and accountability for the firm’s compliance.

One of the proposed changes to the FSCS is the extension of its coverage so that claims relating to debt management activities will be eligible. The firms that will contribute to these claims include those with a debt adjusting or debt counselling permission, with the levy based on a firm’s annual debts under management.  This should therefore exclude mortgage intermediaries from contributing to this class.

Firms will need to review the activity they carry out and decide what permissions they should hold.  AMI has issued guidance to member firms which outlines the permissions we believe the majority of mortgage advisers require.  Firms should also consider whether they should be reporting any income relating to consumer credit permissions, as in many cases of consolidating debt into a mortgage contract it is likely to be more appropriate to attribute the income to the mortgage business.

Aileen Lees
Senior Policy Adviser