Since the Financial Conduct Authority (FCA) inherited responsibility as the regulator of all things relating to Consumer Credit (in April 2014) we’ve regularly been asked this question.
It must first be said that, other than the change in regulator, very little else has been changed in terms of what is and isn’t regulated. However, all areas of regulation have come under the microscope. The subject of Credit Broking and, more specifically, the effecting of an introduction for credit has come under a great deal of focus and is sometimes a sensitive subject. We provide our thoughts and response to the above question below in the sense of a business transaction:
An asset finance agreement is considered to be regulated if it involves a customer who is either an individual or a partnership consisting of three or fewer people; the equipment is not to be used (wholly or predominantly) in the course of their business and the total payable or sum advanced (depending on whether the contract is for credit or hire) does not exceed £25,000.
However, the introduction to finance of such a client is regarded as a separate regulated activity under the Regulated Activities Order regardless of the regulatory status of the contract and this is where the confusion lies.
It is not unusual to have a scenario where the contract between the funder and a regulated client may be exempt from regulation (if the use of the asset is entirely for business purposes e.g. a frying range) and the total advanced exceeds £25k.
Nevertheless, the actual introduction to that lender by a third party operating in the course of their business is considered to be a separate regulated activity and is therefore recorded as an aspect of Credit Broking for which permission is needed.
Clear as mud.
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