On 23 July 2019 new regulations came into force amending the Regulated Activities Order, which broadens the scope of exemptions available for consumer credit related activities carried out by Housing Associations.
Many Housing Associations, in the course of providing their services, will often assist tenants in accessing alternatives to high-cost credit. Such assistance may take a number of forms, many of which do not fall within the scope of financial regulation. However, where a Housing Association’s activities amount to the regulated activity of “credit broking”, it will require authorisation by the Financial Conduct Authority (the FCA).
What is Credit Broking?
“Credit broking” (defined in the Regulated Activities Order) includes the following activities:
- effecting an introduction of an individual who wishes to enter into a credit agreement to another person;
- effecting an introduction of an individual who wishes to enter into a credit agreement to another credit broker (secondary broking);
- presenting or offering a potential credit agreement, assisting an individual with preparatory work with a view to that person entering into a credit agreement, or entering into a credit agreement on behalf of a lender where, in each case, a fee is received for doing so.
The new regulations provide exceptions for Housing Associations effecting introductions in relation to credit agreements. This allows Housing Associations to effect introductions (with no commission or fee) to the following credit providers without needing authorisation:
- a credit union;
- a community benefit society;
- a community interest company limited by guarantee;
- a registered charity, or a subsidiary of a registered charity;
- a subsidiary of a registered housing association.
This exception applies to either a profit-making or a non-profit registered provider in England (not including local authorities, who have their own exemption), Welsh and Scottish registered social landlords and Northern Ireland housing associations. The individual who is introduced to these credit providers does not need to be a tenant.
Do you require authorisation?
The FCA has provided useful guidelines to assist Housing Associations in determining whether their activities require authorisation (although, at the date of this briefing note, this has not been updated to include the recent changes to the regulations). The guidance is clear that determining whether an activity involves credit broking will depend upon the specific set of facts and provides a number of helpful examples to assist Housing Associations in making such a determination. If a Housing Association is unclear as to the status of a particular activity, the FCA also has a dedicated team which can be contacted directly.