CCR007 Consumer Credit data: Key data FAQs

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General queries

Q: Should my figures be gross or net?

A: Gross. Firms should not net off business costs in this report.

 

Q: Should VAT be included?

A: This will depend on the firm. Firms should complete questions 1 and 2 on the same basis as their Annual Report and Accounts. In some cases VAT will have been included and not separated from their general income. For other firms, VAT is separated from their general income in their Annual Report and Accounts so this figure should be reported without VAT.

However, you should never include VAT in question 6, or your fees will be higher than they should be.

 

Q: Are question 1 and question 6 asking for the same thing and will my answer be the same?

A: In many cases the answers will be the same. Both questions ask for income generated from regulated credit activities but question 6 is used to calculate your fees for the next financial year. The definition of ‘income’ for question 6 is specific and designed to minimise any risks of inconsistency or unfairness in the calculation of firms’ fees so it may differ from your accounts. This is why we direct firms to the relevant rules in FEES 4 Annex 11B.

If you report no income in question 1, you may need to provide a proxy measure of income in question 6. If this is your first return and it does not cover a full twelve months, you will need to ‘annualise’ the figure for question 6 to represent a twelve-month period.

There are some more differences which are explained further on in these FAQs.

 

Q: If my firm hasn’t traded or I haven’t used my FCA permissions, what should I report in question 1 and 6?

A: In this situation £0 can be reported.

 

Q. Should I include income from my unregulated business in questions 1 and 6?

A: Firms should only report income from credit-related regulated activities. Please ensure you understand what activities are regulated. You can find the full definition of all our regulated activities in PERG 2.7.

 

Question 1: Revenue from credit-related regulated activities

Q: What should I include in my income from credit-related regulated activities?

A: You should include any income that you have received from the activities that you hold permission for.

For example, an item is sold for £1,200. The customer pays a deposit of £200 but chooses to pay the rest of the balance on credit. The firm holds the permission of 'credit broking' so is able to introduce the customer to a finance company. The firm receives £1,000 from the lender plus a £50 commission for making the introduction.

The income from a credit-related activity is £50. Neither the deposit of £200 nor the loan for £1,000 should be reported.

 

Q: What if I don’t receive any income from my credit-related regulated activities?

A: £0 can be reported in question 1 if no income is derived from the permissions that the firm holds.

For example, if a retail firm holds the permission of 'credit broking' only and receives no commission or incentives from the finance companies they refer to, nor do they charge for the referral, they can report £0. In this scenario, the retail firm will get paid for the item in full, but for the specific activity of broking, no income was received. Selling of goods in itself is not a regulated activity.

Please note that you may need to report a ‘fair value’ or ‘proxy’ measure of income for Question 6 and you can find more information below.

 

Q. What income should I report for my consumer hire activities?

A: You should report any income that you receive that relates to or results from the consumer hire agreement even if these costs are not specified within the hire contract (i.e delivery and charges for damages).

For example, a firm hires out tractors and charges are broken down as follows:

a) Hire of tractor - payable each month.
b) Any losses/damage to the tractor sustained whilst on hire.
c) Annual servicing of the tractor whilst on hire.
d) Delivery and pick up of tractor.

All of these payments are income generated by the regulated consumer hire agreement. The firm’s business might for example include servicing tractors which are not on hire – but this particular tractor is serviced during the contract period because it is on hire.

Firms must review the definition of a consumer hire agreement (PERG 2.7.19K) to ensure they are only reporting on payments received for regulated hire contracts.

 

Q.  I am a not for profit debt advice body and I don’t receive any income. How should I report this? 

A: If no income is received for the debt advice, £0 can be reported in question 1. Any income received via grants/project funding/donations should not be included here.

 

Question 2: Total revenue (including from activities other than credit-related regulated activities)

Q: For my total income, what figures should be inputted?

A: You should record all income received by the firm, regardless of whether it’s from credit-related activities or not.

For example, a firm sells a car for £10,000. The customer also buys a spare tyre and some cleaning goods for £100 which are added to the total. The customer pays £3,000 as a deposit and pays the balance through a loan for £7,100 arranged by the car dealer. The firm receives £50 commission from the finance company for introducing the customer. The consumer credit income would be the £50 and the non-consumer credit income would be the total of £10,100 received for the sale. The total income for this example would be £10,150.

-The firm sells a second car for £10,000 and the customer pays the full amount in cash without seeking credit. The entire sale is non-consumer credit income.

-The total income for the two sales would be £20,150, and therefore must all be reported.

 

Question 3: Number of transactions involving credit-related regulated activities in reporting period

Q: My customer was refused finance by the lender I introduced them to - is this still a transaction?

A: Referring the customer on to a finance company should be recorded as a transaction, whether or not the customer is granted that credit by the finance company.

For example, a firm refers a customer to a finance company (Company A) but the customer is declined by that company, so the firm then refer them to a second finance company (Company B). However the customer isn’t happy with the terms of the agreement, so the firm then refer the customer a third time to a final finance company (Company C) and this time the agreement is taken up by the customer. This would be recorded as 3 transactions, irrespective of whether it was for the same sale.

 

Q: What should I include as a transaction for my consumer hire activities?

A: The number of new contracts entered into during the reporting period, not the number of old contracts being managed or the payments received.

 

Question 4: Number of complaints related to credit-related regulated activities received in period

Q: Should I include complaints about the product/service I am providing?

A: You should only include complaints that relate to the credit-related regulated activity that was undertaken.

For example, a dental practice holds the permission of 'credit broking' so they can refer patients to finance companies when they cannot afford the cost of the dental treatment upfront. Two of the patients who took out loans arranged by the practice complain that the credit repayments are too high:

Patient 1 says the repayments are too high because the treatment was too expensive. This is a complaint about the dentist’s charges, not about the credit agreement.

Patient 2 says the dentist pressured them into taking out the loan, denying them the opportunity to find a better deal on the open market. This is a credit-related complaint about the dentist’s conduct as a credit broker.

 

Question 5: Credit-related regulated activity which generated the highest amount of turnover in the reporting period

Q: How do I answer this if I have not used my permission/s or done any business?

A:  In both these instances, 'other' should be selected from the drop down.

 

Q: How do I answer this if none of my regulated activities generate me any turnover or if I receive the same turnover for all of my regulated activities?

A:  In both these instances, 'other' should be selected from the drop down.

 

Question 6: Total annual income as defined in FEES 4, Annex 11BR for the purposes of FCA Fees reporting

Q: What income should I include in question 6?

A: In many cases it will be the same as question 1, but there are some important exceptions in Question 6 which are intended to ensure all firms’ fees are calculated consistently. Some examples are set out below and on our website we have a definition of consumer credit income. However, please also review FEES 4 Annex 11B for detailed information on what to include.

 

Q: What is an example of annual income as defined in FEES 4, Annex 11B?

A: A golf club introduces customers who prefer to pay their fees monthly to a finance company (the club holds the permission of 'credit broking'), and for each referral they receive £50.

The club refers 10 customers during the reporting year, so the firm would report an annual income of £500.

 

Q: I carry out regulated credit activities but receive no income from them. What should I report?

A: If you carry out regulated activities you can’t normally report £0.  You may need to calculate a ‘fair value’ or use a proxy measure. Please see FAQs below to ensure that you report correctly based on the regulated credit activities that you are carrying out.

 

Q: I have not carried out any regulated credit activities. Can I report £0 in question 6?

A: Yes. If you haven’t carried out any credit related regulated activities during the reporting period, you should report £0.

 

Q: What is fair value?

A: This is an estimate of the amount the firm would have received for a regulated activity had it not made a business decision to waive or discount its charges. You can see a definition in FEES 4 Annex 11B (1)(C).

 

Q: When should I use fair value and how can it be calculated?

A: You should use a fair value if regulated credit activities and transactions have been conducted but income has not been received for every transaction.

For example, a firm acts as a credit broker and refers customers to a finance company, but they do not get commission for all deals. They have introduced 10 people a year to a finance company and out of the 10 introductions commission is only received for 5. For these 5 deals they get £50 in total (variable amounts for each referral). The other 5 transactions earn the firm no commission.

They would submit consumer credit income of £100 rather than the £50 received as income to take into account fair value. Another way to think about this is to work out the average earned for each paid referral (i.e £50 divided into 5, or £10), and multiply this by the total number of transactions (i.e £10 x 10, or £100).

 

Q: When should I use the proxy measure of income?

A: This would generally apply if your main business is to supply goods or services, and you receive no additional income from your credit broking or lending activities.

For example, a bicycle retailer earns no commission, fees or incentives from referring customers to a finance company, and so their income from credit broking is £0. If they broker credit of £100,000 and the Bank of England base rate is 0.25%, they should report £100,000 x 5.25% = £5,250 as the answer to question 6.

The full rules about the proxy measure can be found at FEES 4 Annex 11B (2).

 

Q: What is an example calculation for the proxy measure of income?

A: A firm earns no commission, fees or incentives from any of the lenders to whom it refers its customers. However, it arranges loans which amount to the value of £10m.

This firm would fall within the definition in FEES 4 Annex 11B (2) (a) (i) and (2) (a) (ii) (aa) and would therefore need to report a proxy measure of income using the calculation in FEES 4 Annex 11B (2) (b).

The proxy calculation would be:

  • Gross loan amount (ie total loan amount) brokered by the firm: £10m
  • £10m multiplied by 5.25%: £525,000
  • Proxy income= £525,000

If the firm had reported consumer credit income of £0 in question 6, other firms would have been paying its share of our regulatory costs.

 

Q: Where does the 5.25% figure come from?

A: We have set the proxy at 5% plus the Bank of England base rate, which is currently 0.25% (as at August 2016). It should be noted that your calculation should use the bank of England base rate as on the final day of your accounting reference date.

When we consulted on introducing the proxy calculation in October 2015 (CP 15/14 - paragraph 12.37, page 76), we explained that current broker charges ranged from 5%-17% so we chose 5% as the lower end of the range.

 

Q: As a credit broker, I provide leaflets and posters to promote various credit options and providers. I do not know which customers will use these options to facilitate payment. How do I apply the proxy measure of income?

A: Since you are not in a position to know who, if anyone, took out finance as a result of the leaflets or posters you have no basis for calculating the gross loan amount. Although the proxy measure of income does apply in this instance, the proxy measure calculation would not be possible. For any credit broking that occurred in this manner, you would record £0.

Firms using multiple methods of credit broking would need to review each method to ensure they are applying the proxy measure of income correctly. For example, for any direct referrals made, there would be a basis for calculating the gross loan amount.

 

I am a not for profit debt advice body. What do I report under question 6?

A: Not for profit debt advice bodies will not be charged any annual fees.   Therefore, £0 can be reported. Please check the definition of a not for profit debt advice body to ensure that the correct figure is reported.