Retailers looking to offer customers an alternative way to pay must obtain relevant authorisation from the Financial Conduct Authority (FCA).
If you’re just starting to research offering consumer finance to your customers, now’s the time to think about applying for an FCA permission.
In this guide, we’re looking at why it’s never too soon to start applying for authorisation…
Determining the most appropriate FCA authorisation level for your business
There are two categories of authorisation for retailers looking to offer consumer finance to their customers: limited permission and full permission.
- Retailers can sell finance only in their place of work or online. They must not discuss finance while in a customer’s home, including sharing a link to an online application
- Most suitable if credit broking is secondary to your main business activity (i.e. you’re offering finance to help customers find alternative, more flexible ways to pay)
- Generally a simpler application process, with permission usually granted within three to four months
- Costs £500 to apply for limited permission authorisation, plus annual FCA administrative fees
- Retailers are authorised to sell finance products to a customer online, in the retailer’s premises and in the customer’s own home
- Suitable for businesses that operate in the customer’s home (for example, gas boiler installers or window fitters)
- Due to the complexity of the application process, expect a longer timescale for approval
- Costs £1,000 to apply for full permission authorisation, plus annual FCA administrative fees
Why do I need FCA authorisation to offer finance?
Offering retail finance, even via a third-party like Novuna Consumer Finance, is considered an FCA regulated activity. Therefore, most retailers offering finance options to their customers must have the relevant permissions. The only exception to this is retailers offering interest free finance repayable in monthly instalments over 12 months or less.
Compliance expert and Director at Clear Compliance, Ciara Cremin, stresses the importance of having the relevant permissions in place: “You simply won’t be able to partner with a retail finance provider if you do not have the relevant FCA authorisation. This could prevent you from being able to offer alternative payment options such as interest free (over twelve months), interest bearing and buy now pay later.”
What is a ‘consumer credit licence’ and do I need one?
Consumer credit licences no longer exist. Retailers are now required to apply for full or limited permission authorisation from the FCA.
“The Office of Fair Trading (OFT) used to be responsible for regulating consumer credit, which involved applying for a specific consumer credit licence,” says Ciara. “This responsibility was passed to the FCA in 2014 and, as such, the need to apply for a licence was replaced with limited or full permission authorisation. Both serve the same purpose – to allow retailers to offer finance options to customers.”
How to apply for an FCA permission
Applying for FCA authorisation can be a challenging process, particularly if you’re not familiar with dealing with the FCA. Retailers must be “ready, willing and organised” before applying for authorisation. The process requires significant transparency and clarity. It takes experience to know what type of information must be put forward – and to what level of detail – as part of the application.
Ciara and the team at Clear Compliance have detailed knowledge of the process, which gives their clients reassurance. Ciara explains:
“You will need to apply for permission via the FCA website. As part of the application process, you’ll need to provide information about:
- Basic business details (place of business, Companies House registration etc)
- The history and background of your business
- Your business activities
- Future plans and strategies
- Your financial details and forecasts
- Compliance procedures
- Individuals who will become your business’s ‘Approved Person’
You will also be required to submit reports to the FCA on a regular basis (at least annually) to ensure ongoing authorisation.
The application process can be challenging to navigate. You may spend hours working on your application, only to find you have missed a crucial piece of information and must start all over again. Why invest time and effort into this when you can work with experts with significant knowledge of the process? Get back to doing what you do best – running your business.”
The benefits of speaking to an expert
We always recommend working with a third-party expert, such as Clear Compliance. Retailers will be given a clear idea of the likelihood of success from the get-go. And, should you choose to apply for FCA authorisation, compliance experts will be there to support at every step of the journey to maximise the chances of acceptance.
There are several benefits of working with a third party:
- Allow experts to assist at every stage of the process, from completing the application to supporting with any follow-up queries
- Get a second pair of eyes on your documentation, policies and processes before submitting an application
- Save your team’s valuable time by getting support with the process
- With one less thing to worry about, get your retail finance provision set up ready to hit the ground running as soon as your credit broking permission is authorised
- Receive ongoing expert support as you begin offering consumer finance, ensuring compliance is maintained
Get ready to start offering new ways to pay
Are you considering offering retail finance? Take the first step by applying for limited permission authorisation.