This consultation paper sets out FCA’s proposed policy changes to the way that FCA fees will be raised for 2018/19. However, this is not their main fees CP, which will be published in March/April next year (refer below).
Each chapter in this CP deals with a self-contained area of policy. Those chapters of interest to FLA members are likely to be:
Chapter 4 (pages 17-23) – This is likely to be the one of most interest to FLA members in Asset and Motor. In this chapter FCA invite views on whether and how they might refine the definition of credit-related income to take account of the specific circumstances of consumer hire agreements.
A number of firms that undertake consumer hire agreements (leasing companies regulated by the FCA) have argued that the FCA’s definition of income for fee purposes requires them to report total hire charges as income. Whereas lenders of ‘unsecured’ loans are able to deduct payments of principal, only reporting the interest and other financial charges they levy. The FCA consider the features of leasing products such as depreciation, implicit interest and indefinite agreements. They consider calls for the introduction of a ‘proxy value for interest’ which lenders would apply to their rental income and report to the regulator.
On page 23 the FCA are asking for input on:
- their definition of income for consumer hire leases;
- comments on the options they set out for defining consumer hire income and;
- any other ways of refining the definition of consumer hire income.
The FCA are not consulting on any rule changes at this stage. However, the FCA do say any methodology for reporting consumer hire income must be fair, clear and verifiable so that they are confident that firms are reporting their data consistently and on a comparable basis with the wider population of fee-payers.
Chapter 6 (page 26) – Mandatory online invoicing from 2019/20 – for discussion (likely to be of limited interest to FLA members). In this chapter FCA seek views on whether they should require all fee-payers to receive their fees invoice via their online invoicing system from 2019/20 and charge an administrative fee to any firms that continue with paper invoices. Subject to feedback they would expect to consult on any new rules here next year.
Chapter 7 (pages 27-31) – Money Advice Service – debt advice levy for consultation. This chapter consults on a revised methodology for calculating the levy which funds the debt advice work of the Money Advice Service (MAS). This is likely to be of interest to all FLA full members. The proposal is to align the levy more closely with firms’ lending activities and the amount they lend. This will mean some firms e.g. credit card providers, will pay a larger levy than they do now. For full details of the estimated impact of the proposals on your firm please relate to table 7.2 page 29. Question13 on page 31 also addresses these proposed changes.
Next Steps –
The CP is open till 15 January and FCA propose feedback on the responses received to this CP in the February/March Handbook notice. Failing this, they say they will feedback in their March/April CP which looks at FCA periodic fee rates and any proposed changes to application fees or other fees, including the FOS general levy, MAS and the illegal money-lending levies for the next financial year.