An Overview to Becoming an FCA Authorised Debt Management Company

Debt management companies must adhere to Financial Conduct Authority (FCA) regulations in order to manage debt on behalf of clients.

In 2014, consumer credit regulation transferred from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA). The FCA introduced new regulations for all businesses working in the credit and debt sector.

The new regulations meant many companies ceased to operate. However, those that went out of business were often not working in the best interests of consumers.

Those that remain in business work hard on behalf of clients to help them resolve their debt. This means being transparent about its role and the fees involved. All authorised debt management companies are listed on the Financial Services Regulator website.

Those needing help with their debt can arrange a debt management plan with the creditors themselves, meaning they don’t have to use a firm to act on their behalf. As part of the regulations, all debt firms must tell individuals this.

But some people choose to use a debt management company to help them with their monthly repayments because they find it too stressful or need somebody to help them get organised and contact creditors.

If you are interested in starting a debt management company, you have to be authorised by the FCA. The process of doing this can be time-consuming. Below, we outline all of the essential information you will be required to submit for authorisation.

What Are the Regulations Imposed by the FCA?

The Guide for Consumer Credit Firms goes into significant detail about what businesses will need to become authorised. The FCA refers to the ‘Principles for Business’ for all credit related firms. These are:

  • Integrity
  • Skill, care, and diligence
  • Management and control
  • Financial prudence
  • Market conduct
  • Customers’ interests
  • Communications with clients
  • Conflicts of interest
  • Customers: relationships of trust
  • Clients’ assets
  • Relations with regulators

If these principles are not upheld, the FCA can take action. Alongside the Business Principles, firms will need to show how they meet the ‘threshold conditions.’ These are:

  • Legal status
  • Location of offices
  • Effective supervision
  • Appropriate resources
  • Suitability
  • Business model

The comprehensive guide expands on what these mean and should be referred to as a point of guidance throughout the application process.

How Do Debt Management Companies Become Authorised?

Those starting a debt management company and wanting to gain authorisation will need to demonstrate how they adhere to the FCA regulations. The Guide for Consumer Credit Firms details more about what each principle means and how businesses can meet the threshold conditions.

Once you believe that you have everything to meet the requirements, you can then start the process of applying for authorisation. There are a number of documents you will need to submit. These range from legal documents such as National Insurance documents and your Passport number, to practical documents such as your business plan and promotional material.

You must have all of this information before submitting your application. Not having all of the correct and relevant information will delay the process.

The application itself can be done online. There are various sections of the online form which require completing and evidence will need to be included about how the company is matching all of the appropriate criteria.

The FCA has a checklist of everything you need before applying. If you believe that you have the right skills and attributes to start a debt management company, follow the guidelines and you should be able to become authorised.

Logican’s debt management software is the perfect solution for debt management firms. Request a free demo to find out more about how it can benefit your business.