FCA consumer credit authorisation

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
• Buy consumer debts
• Offer buy now pay later services
• Hire goods to consumers under agreements that can last more than three months
• Give debt counselling or negotiate with lenders for borrowers (debt adjusting)
• Help consumers check or correct their credit files (credit information services)

For these rules a consumer is an individual, which includes a sole trader, a partnership of two or three partners who are not all companies, and an unincorporated association. Credit for business use can still be regulated.

Credit broking catches many businesses that do not think of themselves as lenders. If you introduce your customers to a finance provider, for example when a retailer or motor dealer offers finance at the point of sale, you are credit broking and need permission.

Exemptions exist for:

• Credit for your own goods or services repaid in no more than 12 instalments within 12 months, for a fixed amount, with no interest or charges of any kind. It must not be hire purchase, conditional sale, a pawn agreement or finance for buying land. If the agreement finances goods or services that someone else supplies, it is likely to be regulated deferred payment credit.
• Lending only to limited companies, LLPs and partnerships of four or more partners
• Credit over £25,000 to an individual wholly or mainly for their business
• Credit unions and some friendly societies

The exemptions are narrower than many businesses assume. Check the conditions in the FCA Perimeter Guidance (PERG) and keep a written record of why an exemption applies to you. If you rely on one wrongly, you are carrying on an unauthorised activity, which is a criminal offence.

Types of consumer credit permissions

Full permission vs limited permission

Application process

Preparing your application

1. Business model - clear description of your credit activities
2. Governance - directors, controllers, and compliance arrangements
3. Policies - responsible lending, complaints, vulnerable customers
4. Financial resources - projections showing viability
5. 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 - you cannot rely on links to small print
• Triggered information - certain claims require additional disclosures
• Real-time approval - all promotions need pre-approval before use

Next steps

1. Confirm you need authorisation - check if exemptions apply
2. Determine permission type - full or limited permission
3. Prepare documentation - business plan, policies, financial projections
4. Apply via FCA Connect - submit application and fee
5. Respond to FCA queries - promptly address any questions
6. Implement systems - ensure all systems ready before authorisation
7. Maintain compliance - ongoing reporting and regulatory requirements