FCA: Unauthorised credit providers put consumers at risk

By Angela Coyle

The dramatic change in the economic climate in recent years has narrowed the number of credit options for UK consumers. With big banks tightening credit, borrowers are turning to the Internet to find new lenders. But the Financial Conduct Authority (FCA) is urging consumers to beware of the growing number of firms acting without its consent.

The FCA must authorise almost all firms and individuals carrying out consumer credit activities in the UK. The agency is warning that some companies are acting without authorisation or knowingly scamming consumers. fca-warning

Think twice before approaching unfamiliar financial services companies. "Even if you're desperate for money, don't be tempted to use the services of a credit provider that isn't authorised -- you could end up in a far bigger financial mess," says Andrew Hagger, personal finance expert at Moneycomms.

If an authorised firm is acting irresponsibly, it can be punished. Customers have rights with the Financial Ombudsman Service (FOS) and, often, the Financial Services Compensation Scheme (FSCS), says David Cross, press officer at the FCA. You won't enjoy those same protections if you deal with an unregulated firm.

How to find authorised and unauthorised firms
Carrying out a series of checks to ensure you are dealing with authorised operators can save you. Cross suggests using the FCA's 10-step guide.

One of the most important steps in the guide is to check the Financial Services Register. The register lists any firms authorised to carry out consumer credit activities, says Hagger. It is a public record of all the firms, individuals and other bodies regulated by the FCA.

For firms that specifically deal with consumer credit, you can also check the Interim Permission Consumer Credit Register. Companies on the consumer credit register have not yet been fully authorised by the FCA, but are trading under "interim permission"; a company can continue offering consumer credit services while the FCA actively puts it through a full authorisation process, with the riskiest types of firms prioritised.

"You simply need to enter the name of the company concerned or its postcode to check whether it is legitimate," Hagger says. "If the company you're proposing to borrow from isn't listed and offers excuses as to why it doesn't appear, this should set alarm bells ringing."

Also important: Check the FCA list of unauthorised firms. This is a list of unauthorised operators that consumers have complained about. Loans 4 u, Cash Buddy and BBC Debts are just a selection of unauthorised firms that the FCA has flagged on its website in 2014.

If you do find you're dealing with an unauthorised firm, call the FCA Consumer Helpline on 0800 111 67680800 111 6768.

"We encourage the public to report such firms to us," says Cross.

See related: Don't let nontraditional loans lure you to debt, FCA takes over consumer credit regulation

Published: 14 July 2014