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How recent rule changes could affect the way you do business

Following changes to the Consumer Credit Act (CCA) last year, it is now a criminal offence to carry out any credit-related activity without the necessary authorisation by the Financial Conduct Authority (FCA).

How is this affecting brokers? Well, given that only 28 of more than 1,300 brokers that are part of the National Association of Commercial Finance Brokers (NACFB) are unregulated, it’s probable that most are already covered.

However, a small number of brokers have taken the decision not to be regulated by the FCA. For these brokers, it is important that they guard against any of their activities being classified as regulated credit activity.

For clarification, credit broking is defined as the effecting of introductions of individuals desiring to obtain credit or who desire to obtain goods on hire, to persons carrying on a consumer credit/hire business. For these purposes, “individuals” also means partnerships of two or three people, and incorporated bodies.

Steering clear of regulated activity

There’s little room for interpretation. The moment a client is introduced to another broker with the aim of ensuring they get the funding they need, it’s deemed as credit broking. And it counts as regulated activity whether or not the eventual commercial loan falls outside regulation.

Credit broking also includes introducing individuals looking for credit to finance property acquisitions that will be secured on land, even though that would include facilities provided under agreements exempt from the CCA.

In fact, in order for unregulated brokers to remain outside the scope of these FCA rules. They must only accept business and effect introductions from customers who are limited companies or public limited companies.

Authorised brokers and the FCA

The rules mean that it’s actually very difficult to be helpful to small businesses without being regulated by the FCA – which is one reason why so many have sought authorisation. But even for these brokers, there are other considerations to pay attention to.

For example, those brokers that have appointed introducer appointed representatives (IARs) or appointed representatives (ARs) also need to make sure they fall on the right side of the guidelines.

IARs are only able to make introductions and publicise financial promotions. So for brokers appointing one of these to help in marketing, it’s important to be aware of the FCA’s rules on what is and isn’t allowed in advertising.

ARs, however, are able to engage in regulated activity, including debt adjusting and debt counselling, despite not being directly regulated by the FCA. Instead, the broker, known as the principal in this relationship, is liable for their actions and must show a higher level of due diligence than IARs.

What we’re finding at the NACFB is that although most of our members hold interim, limited or full permission from the FCA, some are still perplexed over what they can and cannot do. That’s why we’re continuing to send regular guidance and enter into one-to-one correspondence with our members – to try to eliminate all confusion.

Written by Robin Skuse, press and marketing officer, NACFB.


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This article is proprietary to Barclays Bank PLC. Every attempt has been made to try to ensure that the information contained in this article is accurate at the time of publication. However, any articles written by any third party are the views of the authors alone, and do not necessarily reflect the views of the Barclays Bank PLC Group ('Barclays') nor should they be taken as statements of policy or intent of Barclays. Barclays takes no responsibility for the veracity of information contained in any third party articles and no warranties or undertakings of any kind, whether express or implied, regarding the accuracy or completeness of the information is given. Barclays accepts no liability for the impact of, or any loss, however arising, from, any decisions made based on information contained and views expressed by any third parties or in their articles.