Helping tenants find alternatives to high-cost credit

The Financial Conduct Authority (FCA) has published guidance for housing associations to provide greater clarity about which types of activities are likely to be credit broking when advising tenants.

The FCA recognises that local authorities and housing associations can play an important role in helping tenants access essential household goods and cheaper forms of credit. It is keen to support and encourage referrals of tenants to lower cost credit providers like credit unions, and to providers of goods on hire. This could help to reduce social housing tenants’ use of high-cost credit and to increase their awareness of the options available to them.

There are many things housing associations can do to help their tenants. These can range from providing general information about the services typically available from credit unions to setting up a meeting with a specific credit union on a tenant’s behalf. Some activities will not meet the statutory definition of credit broking while others are likely to be credit broking and require the social landlord to have FCA authorisation.

So where is the line and how can a housing association know whether its activities need FCA authorisation? The FCA’s guidance helps to clarify for social landlords some of the issues they should bear in mind when helping their tenants find alternatives to high-cost credit. It cannot change which activities require authorisation and which do not, as these are defined in law. But it does provide practical examples of ways social landlords might help their tenants which, as a general indication, are likely or not likely to be credit broking.

Whether a particular activity is or is not credit broking still depends on the individual facts and circumstances. It must be assessed on a case-by-case basis. The FCA acknowledges that this can be difficult, and that needing to be authorised for some activities can be off-putting.

To address this, the FCA has a dedicated team to support and assist social landlords with these tricky issues. This includes helping to assess whether particular activities are likely to be credit broking as well as help navigating the authorisations process for those who need it. Housing associations that already have other FCA permissions, for example to provide debt advice, can apply for credit broking as an additional permission. This is often a straightforward process which can be completed within a short timeframe.

Housing associations can email any questions directly to the dedicated team.

The guidance forms part of the FCA’s ongoing programme of work to promote the availability and consumers’ awareness of alternatives to high-cost credit such as payday loans, doorstep lenders and rent-to-own. You can find out more about the FCA’s approach to alternatives to high-cost credit in Chapter 6 of Consultation Paper 18/35. An overview of the approach is presented in an FCA infographic.

Changes to Government regulation

The Government is simplifying regulation to make it easier for social landlords to direct tenants to alternatives to high cost credit.

Further to the guidance issued above by the FCA, on 2 July 2019 the Government introduced a statutory instrument to change the regulatory boundary of credit broking. This will allow registered providers to effect fee free introductions to social and community lenders without FCA authorisation. The statutory instrument will come in to force 21 days after it has been laid.

You can access the instrument and supporting documents on the Government website.