What Is FCA Compliance?

The Financial Conduct Authority, or FCA, regulates firms that provide financial services in the UK, including lenders, debt collectors, claims management companies, and firms offering credit. If your business falls within its scope, you generally need FCA authorisation before you can legally carry out regulated activities, and you must continue to meet its rules once authorised, not just at the point of application.

This guide gives directors and business owners a practical overview of what FCA compliance involves. It is not a substitute for advice from a compliance specialist, particularly given how detailed and firm-specific the rules can be.

Who Needs FCA Authorisation

You likely need FCA authorisation if your business:

  • Lends money to consumers, including short-term or instalment credit.
  • Collects consumer debts on behalf of others.
  • Arranges or advises on regulated credit agreements, such as car finance or retail credit.
  • Provides claims management services, including debt-related claims.
  • Offers consumer hire agreements, such as certain leasing arrangements.

Carrying out regulated activities without proper authorisation is a criminal offence in some circumstances, and any agreements made unlawfully may become unenforceable, which can be financially serious for the business itself.

The Consumer Credit Sourcebook (CONC)

If your business deals in consumer credit, the FCA’s Consumer Credit Sourcebook, known as CONC, sets out detailed rules you must follow. Key areas include:

  • Financial promotions: advertising must be clear, fair, and not misleading, with specific requirements for representative APR disclosures.
  • Creditworthiness assessments: you must properly assess whether a customer can afford credit before lending, not just whether they are likely to repay.
  • Arrears and default handling: firms must treat customers in financial difficulty fairly, including signposting free debt advice rather than only pursuing recovery.
  • Commission disclosure: where commission influences the product or rate offered, this generally needs proper disclosure to the customer, an area that has drawn significant regulatory attention following the car finance commission issue covered in our guide to mis-sold car finance.

The Consumer Duty

The FCA’s Consumer Duty requires firms to act to deliver good outcomes for retail customers, going beyond simply avoiding harm. In practice, this means firms need to show they have genuinely considered customer outcomes across products, communications, customer service, and price and value, not just ticked compliance boxes. Regulators expect ongoing monitoring and evidence that firms are actually achieving good outcomes, not just designing policies that look good on paper.

Consequences of Non-Compliance

  • Enforcement action from the FCA, ranging from formal warnings to significant fines.
  • Loss of authorisation, which can end the firm’s ability to trade legally in regulated activities altogether.
  • Unenforceable agreements, where credit agreements entered into unlawfully may not be enforceable against customers.
  • Director liability, since serious or persistent compliance failures can, in some circumstances, lead to individual accountability for the directors responsible, alongside the usual director duties covered in our guide to wrongful trading.

Building a Practical Compliance Framework

  • Appoint a clear person or team responsible for compliance, even in a small business.
  • Keep policies and procedures up to date with current FCA rules, since these change periodically.
  • Train staff who deal directly with customers on the specific rules relevant to their role.
  • Monitor and record customer outcomes, not just process compliance, in line with the Consumer Duty.
  • Get a compliance audit from a specialist periodically, rather than assuming your existing framework remains adequate as rules evolve.

Frequently Asked Questions

Do I need FCA authorisation if I only lend to businesses, not consumers?

Generally, lending purely to businesses falls outside FCA consumer credit regulation, though other rules may still apply depending on the nature of your business. Get specific advice, since the boundary between business and consumer lending is not always straightforward.

How long does FCA authorisation take?

Timeframes vary considerably depending on the complexity of your application and the FCA’s current workload. Straightforward applications can take a few months, while more complex ones can take considerably longer.

What is the difference between FCA registration and full authorisation?

Some lower-risk activities only require registration rather than full authorisation, with a lighter regulatory burden. Which category applies depends on the specific activities your business carries out.

Can I lose my FCA authorisation?

Yes. The FCA can vary, restrict, or withdraw authorisation if a firm fails to meet its ongoing obligations, not just at the initial application stage.

Getting Advice

FCA compliance is a specialist area, and the consequences of getting it wrong can be severe for both the business and its directors. Our wider guide to financial law covers the broader legal framework businesses operate within, alongside FCA-specific requirements.

This article gives general information only. It does not constitute legal or regulatory advice. Always speak to a qualified compliance specialist or solicitor about your firm’s specific FCA obligations.