Navigating the regulatory landscape of the Financial Conduct Authority (“FCA”) is critical for motor finance firms looking to operate within the UK regulated market. One of the key considerations for these firms is whether to apply for Limited Scope or Full Scope permissions under the FCA’s authorisation framework. Motor finance firms must carefully consider the key differences between these two permission types before submitting an FCA authorisation application.
Limited Scope or Full Scope Permissions?
Motor finance firms with Limited Scope Permissions are restricted to certain credit-related functions. These include activities such as facilitating consumer hire agreements, providing credit solely for the sale of motor vehicles or brokering motor finance deals. However, Limited Scope firms cannot add interest or impose other charges, such as late payment fees, to credit agreements. They are also prohibited from engaging in activities like debt collection or debt counselling as their primary business function.
To meet regulatory requirements, Limited Scope motor finance firms must appoint an individual as the Senior Management Function SMF29 (“Limited Scope Function”). This person is responsible for overseeing the firm’s compliance with the FCA’s rules, particularly concerning systems and controls to prevent money laundering and financial crime.
In contrast, motor finance firms with Full Scope Permissions are authorised to carry out a wider range of activities. These permissions allow firms to:
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- add interest or charges (e.g., late fees) to credit agreements;
- provide credit that is not directly tied to the sale of motor vehicles; and
- engage in debt-related activities, such as debt collection or debt counselling.
In order to ensure these motor finance firms operate in compliance with the FCA’s rules and maintain appropriate oversight of their broader activities, there are some additional Senior Management requirements in place. These include obligations to appoint:
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- Two Executive Directors (“SMF3”) – responsible for overseeing the day-to-day management of the business, its operations and employees.
- A Compliance Oversight Officer (“SMF16”) – responsible for monitoring and managing the firm’s compliance with FCA regulations.
- A Money Laundering Reporting Officer (“SMF17”) – responsible for implementing and overseeing the firm’s anti-money laundering (AML) policies and controls.
Key Considerations for Motor Finance Firms Wanting to Apply to the FCA
Choosing between Limited and Full Scope permissions requires balancing regulatory obligations with business objectives. For firms with a simpler structure or a narrow range of services, Limited Scope permissions may be appropriate. This is particularly suitable for those acting as intermediaries in transactions or offering consumer credit services with certain restrictions defined by the FCA. On the other hand, firms providing diversified services or seeking greater flexibility may benefit from the broader opportunities offered by Full Scope permissions.
Regardless of the chosen permission type, firms must prepare robust documentation to support their application. Amongst the number of key documents that firms must prepare for their FCA application, emphasis should be placed on the Regulatory Business Plan which should outline the firm’s strategy, target market and operational approach, as well as the relevant policies and procedures that demonstrate compliance with the FCA’s Consumer Duty requirements.
By understanding the FCA’s authorisation requirements and tailoring their approach accordingly to meet regulatory demands, motor finance firms can ensure compliance while optimising their operational strategy.
How Can Complyport Help?
As experienced regulatory consultants, Complyport can support firms in successfully obtaining their Motor Finance FCA Authorisation, whether that falls within the FCA Limited or Full Scope Regime. We offer tailored support to ensure firms navigate the complexities of the regulatory environment.
