The government founded the Financial Conduct Authority (FCA) on 1st April 2013. The FCA is the regulatory body for financial services, with a specific interest in the regulation of financial conduct. The Financial Conduct Authority is responsible for overseeing the operations of financial institutions including lenders and loan brokers.
Prior to the creation of the FCA, the Financial Services Authority (FSA) and the Office of Fair Trading (OFT) carried out regulation of the financial industry. The latter covered the regulation of consumer credit specifically. They existed to promote and encourage competition in the marketplace. In 2012, the Office of Fair Trading launched an investigation into the payday loans industry. As a result, over 50 companies received warnings about their conduct. The regulators revoked the licences of many lenders for good.
When the government disbanded the organisation in 2014, various other organisations including the FCA shared its responsibilities.
The FSA was in operation for more than a decade, from 1997 until 2013. The regulations restricted its authority and what it could investigate. Many felt that as a result that many financial institutions were not adequately regulated. The FCA now regulates the loan market.
The role of the Financial Conduct Authority is to protect consumers, enhance the integrity of the UK financial industry and also promote competition within financial industries. The FCA can control the marketing of financial products by setting standards that companies must adhere to. Loans come under such a bracket. Their regulations also dictate how companies advertise products and the clarity of information that lenders must communiate to consumers. The FCA also controls industry regulations and restrictions, and manages the register of authorised financial firms.
Throughout the period when the Financial Services Authority regulated the financial industry, payday loan companies grew at an unprecedented rate. Many lenders were found to be using unfair and irresponsible practices. Practices that included providing loans to consumers that couldn’t afford them. Some invented debt recovery companies to chase down missed payments.
In addition to the payday loan scandals, the Financial Services Authority oversaw the PPI scandal and the UK banking crisis.
The government formed the Financial Conduct Authority in order to work for consumer protection, covering specifically business and organisation conduct. What’s more, the FCA works closely with consumer groups, to represent their needs and opinions.
Most lenders take repayments using a Continuous Payment Authority, which provides access to a borrower’s bank account. Lenders take the money borrowers owe without a separate agreement for each individual repayment. Borrowers can cancel a CPA at any time, but should offer an alternative form of payment. The FCA now ensures that if money is not available, only two unsuccessful attempts to claim the repayment can be made. This protects consumers from having money taken from their accounts when they are really struggling financially, and might otherwise be unable to afford essential bills.
Since 1st July 2014, rollover restrictions have ensured that borrowers cannot roll over loans, or extended more than twice. Lenders need to provide information to consumers, helping them to access free debt advice, before rolling over the loan.
Default charges are now capped at £15.
Lenders must cap daily interest rates at 0.8%.
Lenders must cap total loan costs at double the amount that was originally borrowed
As well as the responsibilities mentioned above, the Financial Conduct Authority also operates and maintains the Financial Services Register. This register lists all companies and individuals that the FCA regulates. After the government looked into the finance industry and announced its findings ,the FCA forced all payday lenders to reapply for authorisation. This was the case even if they had previously been authorised by the Office of Fair Trading. In the meantime, they ran an interim register.
Enforced re-authorisation gave the Financial Conduct Authority a chance to sift through existing firms and check they met minimum standards.
Many companies that previously provided short-term loans ceased trading after the FCA took the reins.
The regulators refused many authorisation, having not met the FCA standards, whilst many others chose to leave their sector of the financial markets following the imposition of stiffer caps and regulations.
All registered and authorised lenders can be found on the Financial Services Register, with details that include contact information and trading names.Unauthorised lenders also feature on the Financial Services Register, if the FCA has been made aware of their existence. The register lists firms that have been providing regulated products or services without authorisation or have deliberately been running scams.
Consumers should check the Financial Services Register before taking out any regulated financial product, including short-term and payday loans.
Any individuals that are unhappy with the service that they have received from a registered and authorised lender, can contact the Financial Ombudsman for advice, information and support. Consumers can also contact the Ombudsman if concerned that they have been dealing with an unauthorised lender.
The FCA casts its remit over 50,000 companies. The authorities will continue to closely regulate the loan industry. Borrowers can commit to using financial products safe on the knowledge that regulators oversee products tightly. The regulators created standards stronger than almost anywhere else globally. The Financial Conduct Authority will continue to adapt to meet the needs of consumers. Naturally Moolr is a keen member of the FCA and follows its remits to the letter. Borrow from Moolr with full confidence.