When the Office of Fair Trading (OFT) closed its doors on 31st March, the Financial Conduct Authority (FCA) took over responsibility for consumer credit regulation and compliance. At the same time consumer credit licences also expired and installers have had to apply for interim permission to continue offering finance. The old licensing scheme has been replaced and over the next two years the FCA will be processing thousands of applications from companies seeking full authorisation.
Installers that wish to continue to offering finance should have already received an invitation to apply along with a date period during which they must submit their online application. It’s expected to take up to six months for applications to be approved once received by the FCA.
The introduction of the FCA as an industry regulator, along with its new rules and regulations has caused concern among some installers. Andy Wallace, Managing Partner of Consumer Credit Solutions, has been speaking to many leading businesses in the sector and believes that some of the anxiety is being fuelled by a fear of the unknown and a time-consuming application process. ‘Installers are unsure about what compliance will mean for their businesses, as to whether it will be a drain on resources and, of course, what penalties there will be for getting it wrong. It’s my personal belief that if you have business that puts the interests of the customer first and plays by the rules then you should have little to fear from the FCA.’
As part of the authorisation application process, companies have to provide a business plan, cash flow forecasts, profit and loss forecasts, as well as information about specific credit products and promotional materials. Companies also need to conduct a ‘treating customers fairly’ audit, introduce complaints handling procedures and maintain training records for sales staff. Andy added, ‘I know smaller installers in particular are concerned about the amount of work involved, but the benefits of being able to offer credit, in my opinion, far outweigh the negatives.’
David Smith, Finance Director of Edison House Ltd, agrees, ‘We see the changeover to the FCA as a positive. It puts the onus on businesses to have robust processes in place and to ensure the customer is always treated fairly. By putting the necessary processes in place, I believe it actually sets our business apart.’
Andy Wallace added, ‘Availability of finance for consumers has been a real game changer for the renewables sector. In the early days of solar customers typically used their savings to invest in panels, with the understanding that attractive feed-in tariffs would generate an income. It’s fair to say, that all of this “low hanging fruit” has gone to a large extent. It’s become virtually a business imperative for installers to be able to offer customers competitive, monthly finance options to help facilitate purchases. It gives people the ability to invest in renewable energy products that would otherwise not have the opportunity.’
David Smith also believes offering credit is important for the sector, ‘It’s become an integral part of our business, and given us access to parts of the market that we otherwise wouldn’t have had. Not all householders have the necessary funds, so having a high street lending partner is essential.’