It is a common assumption that compliance with financial regulation is not something which is relevant to the housing sector.
An increasing number of housing associations and local authorities, however, are authorised by the Financial Conduct Authority (FCA) for consumer credit activities. Whilst it is true that many of the activities being carried out in the housing sector remain on the periphery of what the FCA regulates, it is vital that authorised firms comply in full with the relevant FCA Handbook requirements and legislative obligations.
This is particularly pertinent in the context of shared equity products. Many housing associations and local authorities currently offer, or historically offered, shared equity loan products to assist individuals access home ownership. These products involve the grant of an equity loan and, in many situations, the equity loan is a consumer credit regulated agreement, requiring the lender association or authority to be FCA authorised and, therefore, comply with the relevant obligations.
The FCA has recently updated its requirements in relation to default notices, so we are taking this opportunity to remind anybody operating within the housing sector who is FCA authorised for consumer credit purposes, of the importance of compliance issues.
The compliance requirements are complex and detailed, but they include:
- Sending FCA published information sheets to individuals where regulated consumer credit agreements are being enforced. It is these information sheets which have been recently updated. From 18 January 2018, all arrears and default notices relating to regulated agreements must include the new updated information sheets or the notices will be invalid.
- Sending individual borrowers under regulated agreements annual interest statements in a prescribed form. Failure to do so may mean the authorised firm is unable to recover payments due to them under regulated agreements.
- Complying with the FCA reporting requirements, which includes uploading accounts, complaints data and customer default data.
- Incorporating prescribed wording into authorised firm's letterheads as well as ensuring that all regulated documentation includes the necessary prescribed wording.
It is important that regulated firms meet all the ongoing compliance requirements or there is a risk of FCA fines, reputational damage and inability to enforce the regulated documents. Organisations may wish to obtain professional advice as to their ongoing regulatory obligations and in drafting compliant annual interest statements. It would also be prudent to take advice in relation to the enforcement of regulated loans.
An increasing number of housing associations and local authorities, however, are authorised by the Financial Conduct Authority (FCA) for consumer credit activities. Whilst it is true that many of the activities being carried out in the housing sector remain on the periphery of what the FCA regulates, it is vital that authorised firms comply in full with the relevant FCA Handbook requirements and legislative obligations.
