Guide
FCA consumer credit authorisation
How to get FCA authorisation to offer consumer credit, including lending, credit broking, and debt collection. Covers application process, fees, responsible lending requirements, and high-cost credit rules.
If your business offers credit to consumers, you need authorisation from the Financial Conduct Authority (FCA). This includes lending money, arranging credit, collecting debts, and offering buy now pay later services.
Operating without FCA authorisation is a criminal offence. Agreements made by unauthorised firms may be unenforceable.
Understanding FCA consumer credit authorisation
Do you need authorisation?
Yes, if you:
- Lend money to consumers (personal loans, credit cards, hire purchase)
- Arrange credit for consumers (credit broking, introductions)
- Collect debts owed by consumers
- Purchase consumer debts
- Offer buy now pay later services
- Provide consumer hire (rental) services
Exemptions exist for:
- Credit where the customer pays no more than they would for cash (12-month interest-free, 12 or fewer payments)
- Business-to-business lending only
- Credit unions and some friendly societies
Types of consumer credit permissions
Full permission vs limited permission
| Full Permission | Limited Permission |
|---|---|
| Higher-risk activities | Lower-risk activities |
| Lending, primary credit broking, debt collection | Consumer hire, secondary broking |
| More extensive application | Simplified application |
| Higher fees | Lower fees |
Application process
Preparing your application
- Business model: Clear description of your credit activities
- Governance: Directors, controllers, and compliance arrangements
- Policies: Responsible lending, complaints, vulnerable customers
- Financial resources: Projections showing viability
- Consumer Duty: How you'll deliver good customer outcomes
Tip: The most common cause of application delays is inadequate policies. Ensure your responsible lending policy is detailed and evidence-based.
Fees and costs
Budget for ongoing costs
- Annual fees: Based on your income from regulated activities
- FOS levy: Financial Ombudsman Service case fees
- FSCS levy: Financial Services Compensation Scheme contributions
- Compliance costs: Staff training, systems, reporting
High-cost short-term credit (HCSTC)
If you offer payday loans or similar high-cost credit, additional rules apply.
What counts as HCSTC? Credit where the APR is 100% or more and designed to be repaid (or substantially repaid) within 12 months.
The price cap means many HCSTC business models are no longer viable. Consider carefully before entering this market.
Responsible lending requirements
All consumer credit firms must assess affordability before lending.
What "affordability" means
You must assess whether the borrower can:
- Make repayments as they fall due
- Do so without significant adverse impact on their financial situation
- Meet other financial commitments as well as the loan
This goes beyond credit scoring. A customer may have a good credit score but still not be able to afford a particular loan.
Financial promotions
Getting promotions right
- Representative APR: If you quote any rate, you must show the representative APR
- Social media: Each post must be standalone compliant - can't rely on links to small print
- Triggered information: Certain claims require additional disclosures
- Real-time approval: All promotions need pre-approval before use
Buy Now Pay Later under new regulation
Previously unregulated Buy Now Pay Later (BNPL) products are being brought into FCA regulation. If you offer BNPL:
- Prepare for FCA authorisation requirements
- Implement affordability assessments
- Meet financial promotions rules
- Register with FCA when regulations take effect
Check FCA guidance for current implementation timeline.
Next steps
- Confirm you need authorisation: Check if exemptions apply
- Determine permission type: Full or limited permission
- Prepare documentation: Business plan, policies, financial projections
- Apply via FCA Connect: Submit application and fee
- Respond to FCA queries: Promptly address any questions
- Implement systems: Ensure all systems ready before authorisation
- Maintain compliance: Ongoing reporting and regulatory requirements