FCA - Regulated Fees and Levies 2017/18 – Credit Union Debt Advice Levy Refund
Response to consultation – credit union debt advice levy concession
In 2013, the FCA proposed a number of concessions for credit unions societies as firms with social objectives, recognising their value for low income and financially excluded consumers. In CP 13/14 the FCA said that it would make “appropriate concessions for credit union in respect of the debt advice levy”. This was later confirmed in CP 14/07 which stated:
“In CP13/14 we said we would make appropriate concessions for credit unions in respect of the debt advice levy. What we propose is that credit unions will operate on a tiered system so that smaller firms whose unsecured debt is less than £250,000 will not have to contribute while those with unsecured debt of over £250,000 will pay on the value of unsecured debt above this threshold. This will be at the same rate as all other firms in that fee-block.”
ABCUL supported minimising the debt advice levies on credit unions due to their work in actively providing support to those in financial difficutly and who become over-indebted and expressed the view that the levy should take into account the impact firms had on debt advice funding with credit unions representing a negligible proportion of debt advice cases. The FCA’s policy statement 14/11 confirmed that it would proceed with the debt advice levy as proposed, however, this policy intention was not pulled through into the rules resulting in credit unions not receiving the benefits of the agreed concession. This was despite subsequent annual fees consultations making reference to the concession such as CP 17/12 which states:
“We will continue to make appropriate concessions for credit unions regarding the debt advice levy by operating a tiered system so that smaller firms with unsecured debt less than £250,000 will not have to contribute. Those with unsecured debt of over £250,000 will pay on the value of unsecured debt above this threshold. This will be the same rate as paid by all other firms in that fee-block.”
We are pleased that in response to ABCUL spotting a discrepancy the FCA has quickly investigated and recognised its error in not implementing its policy intention in respect of the debt advice levy concession. We support the FCA’s proposal to refund the amount that credit unions have been overcharged as a result of not benefitting from the concession since 14/15 and to apply this concession going forward. However, we take issue with the proposed wording and effect of the draft rule which states:
“If the size of the tariff base for a credit union is calculated in accordance with Part 3 A and B of this Annex is less than £250,000 no fee is payable”
Whilst ABCUL agrees that the 2014 policy means that those credit unions with less than £250,000 unsecured debt would not contribute to the debt advice levy it also clearly applies a concession to credit unions with over £250,000 unsecured debt in stating that “those with unsecured debt of over £250,000 will pay on the value of unsecured debt above this threshold”. The rule as currently worded does not apply a discount to credit unions with over £250,000 unsecured debt and only goes part-way to implementing the concession contained in CP 14/11 which has been repeated in several subsequent policy papers.
ABCUL proposes that the rule is amended to exempt credit unions from paying levies on the first £250,000 of secured debt, and where a credit union has more than £250,000 of unsecured debt it should only pay on the value of unsecured debt above this threshold at the same rate as other firms in the same fee-block. In addition, we feel that any amount refunded to credit unions in respect of previous fees paid should be calculated on the same basis.
We would be happy to provide any further information should you require it.