How to become a finance lender

All firms carrying out lending activities must be authorised by the Financial Conduct Authority. Becoming a finance lender means submitting an application supported by documentation covering how the firm will operate, how it will treat customers, and how it will manage risk - alongside individual authorisation for the people running it.

What the FCA asks for

An application to lend requires the following:

• A regulatory business plan
• A risk management strategy
• Compliance procedures - sales process, complaints, data protection, rule breaches, forbearance and vulnerable customers
• Evidence of how the firm will ensure it treats customers fairly
• Evidence that systems are in place to combat financial crime, including money laundering
• Marketing strategies to be used, and how clients will be sourced
• Details of the firm’s organisational structure
• Projected financial statements
• Details of any previous convictions, disciplinary action or insolvency events
• Details of the affordability assessments the firm will carry out
• Additional information requested during the approval process, including bespoke documents

The requirements for consumer credit lending sit in CONC (opens handbook.fca.org.uk in a new tab), with the scope of regulated lending activity set out in the FCA’s Perimeter Guidance (opens handbook.fca.org.uk in a new tab).

Individual authorisation

Individual authorisation is also required for key personnel - directors, chief executives, heads of compliance and anti-money laundering officers. These individuals are subject to assessment on honesty and integrity as part of the application.

What this means in practice

The volume of documentation is the part firms tend to underestimate. Most of it describes how the business will operate rather than what it intends to sell, which means the application is difficult to complete convincingly before those operational decisions have actually been made.