The UK’s Financial Conduct Authority is set to approve key changes to fees for regulated hire agreements that could save asset finance providers millions of pounds.
In a recent update on its consultation on regulated fees for the next year, the FCA has proposed making changes that would see fees for regulated hire agreements treated in a similar way to regulated credit agreements.
Currently, the FCA ‘levy’ on a £20,000 hire agreement might be £20 per year compared to £5 per year for a similar credit arrangement.
Under consumer credit law, lease agreements with purchase options, provided to individuals or unincorporated small businesses, are classified as credit agreements. The level of FCA fees paid by regulated firms depends on the firm’s regulated income, and for credit agreements the regulated income is the interest income. Lease agreements with no purchase options are classified as hire. For hire, the regulated income is the total rental charge (just excluding any extra services such as maintenance).
A panel of industry experts had argued for the change and encouraged the industry to make their views heard in the recent consultation on the fees.
The panel included Jason Davies, project manager Henry Howard Finance, who began the campaign while at one pm, Kerry Howells, managing director, Tower Leasing, Anne Williams, chief operating officer, Henry Howard, Tim Tainty, managing director, Kennet Leasing and Julian Rose, founder of Asset Finance Policy.
Davies said: “The effect of this will be to significantly reduce the FCA fees paid by many companies across the equipment and vehicle leasing industries, and ensure that other consumer credit firms pay a fairer share of the regulatory system.
“This will benefit all lessors in these sectors and should be seen as a major achievement.”
The FCA is funded entirely by the fees and levies recovered from the firms it regulates, with no subsidies from other sources.
The proposals in its paper cover funding for the FCA, in addition to the Financial Ombudsman Service, Money Advice Service, Pension Wise service, Single Financial Guidance Body and illegal money lending (IML) expenses of HM Treasury.
The details are in the FCA's 2018/19 regulatory fees proposals, which were published last week. The final consultation will close on June 1, with a policy statement expected in July.