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The Credit Services Association (CSA)
SRA proposes law firms carrying on consumer credit activities seek FCA authorisation
On 14 October 2014, the Solicitors Regulation Authority (SRA) published a consultation paper on withdrawing from the FCA's designated professional bodies (DPB) regime under Part 20 of the Financial Services and Markets Act 2000 (FSMA) for the purposes of consumer credit activities.
Under the OFT consumer credit regime, solicitors carrying on consumer credit business were regulated under a group licence issued to the Law Society and managed by the SRA. The FCA consumer credit regime, which came into force on 1 April 2014, did not continue the group licence system and firms carry out consumer credit activities under transitional arrangements that continue until 1 April 2015.
After this date, firms could continue consumer credit work under an exemption that allows them to carry on regulated financial activities, provided they are overseen by a DPB (in this case, the SRA). However, for the SRA to fulfil regulatory requirements, it would need to adopt either all, or substantial parts of, the FCA's Consumer Credit sourcebook (CONC). Among other things, the following points are made in the consultation paper:
- The rules in CONC do not fit in with the SRA's regime.
- The rules would add an extra regulatory burden to firms.
- The SRA does not have the resources or expertise in place to supervise firms in accordance with the FCA's requirements.
In the light of the above, the SRA proposes that the Part 20 regime should not be available to firms in relation to consumer credit activities. This would mean that firms wishing to carry on regulated consumer credit activities would need to be authorised by the FCA if they wished to continue to do so after the transitional arrangements end.
In the consultation paper, the SRA advises firms that are concerned about the possibility of any gap between 1 April 2015 and the date on which they are able to obtain FCA authorisation, to apply to the FCA as soon as possible rather than waiting for the outcome of the consultation.
The deadline for responses to the consultation is 15 December 2014.
For an overview of the DPB regime and the FCA authorisation regime for consumer credit firms, see Practice notes, Designated professional bodies and FCA authorisation regime for consumer credit firms.