The initial proposals for CONC (published in October 2013) were met with industry concern and were followed by intensive lobbying (see News brief "The FCA's consumer credit regime: taking shape"). The concern arose mostly because CONC translates statutory requirements contained in the Consumer Credit Act 1974 (CCA) and OFT guidance on the CCA (OFT guidance) into FCA rules and guidance.

To date, firms have been able to comply with the CCA without following the OFT guidance to the letter since the ultimate arbiter of compliance is the court, not the OFT; a fact that the OFT always made clear when issuing guidance at an industry or individual level. In contrast, in the future, the FCA will be the sole arbiter of compliance, and firms will have a very limited ability to challenge the position that the FCA takes on its rules and guidance.

The problems for firms fall into four broad categories:

The FCA has rejected accusations of gold-plating, especially in relation to the new requirements for assessing creditworthiness, but has responded to some of the concerns expressed by the industry by reclassifying some rules as guidance and including a stronger emphasis on proportionality. However, firms still need to look carefully at their current processes to ensure that they comply with CONC. There is a danger that what a firm considers to be proportionate will not match the expectations of the FCA.

The application of PRIN from 1 April 2014 will be viewed with some concern by firms. The FCA has stated that it expects well-run firms will not have any issues. However, the fitness test applied by the OFT when monitoring licences was operated on a very reactive basis. Although the OFT has been more proactive recently, as can be seen through its reviews of the debt collection and payday lending sectors, it never had the powers or resources to supervise firms in the same way as the FCA will have.

The FCA is committed to being a proactive regulator that will anticipate potential consumer detriment and deal swiftly with firms when it identifies detriment. With the high-level principles putting the interests of the consumer at the heart of policy making, firms should expect to see an active regulator. The much broader range of enforcement actions open to the FCA, which will continue to sit alongside many of the existing consumer remedies under the CCA, should also focus the attention of the industry.

1 April 2014 marks the beginning of an ongoing process of raising standards in the industry. From that date, firms will be operating under interim permissions that will need to be converted to full permissions by 2016. Firms that are not currently authorised under the Financial Services and Markets Act 2000 (FSMA) are likely to find the authorisation process challenging.

The threshold conditions, which form the gateway to FSMA authorisation, are more stringent than the existing fitness test for a CCA licence and, perhaps more importantly, are tested in a much more robust way when the firm's application is being reviewed. The resources of firms (both financial and non-financial), its business model and its people will be the subject of higher levels of scrutiny.

The FCA is expected to publish its consultation on interest rate caps in summer 2014. This will be highly anticipated by the payday lending sector and will be the subject of considerable attention from the media. Many doubt the effectiveness of interest rate caps in raising consumer protection standards, but in the current political climate, with a general election scheduled for May 2015, the FCA seems to be under political pressure to set a cap that will be seen to address the perceived excesses of this sector.

The FCA will also be reviewing the retained provisions of the CCA. This is a significant task and is likely to be the subject of scrutiny by different interest groups. While the FCA may be confident in its range of enforcement tools, it may have difficulty in convincing consumer organisations, such as Which?, that it can maintain consumer protection levels without, for example, criminal sanctions. Although the task may be made easier if the first few years of FCA regulation show a strong enforcer in practice.

From 1 April 2014, firms can expect a hands-on regulator that is ready to tackle any firm that fails to meet the higher standards expected of regulated firms in a complex sector where the FCA is still building industry knowledge.