It's a serious matter — and worth understanding plainly rather than ignoring. Arranging customer finance without the right FCA authorisation isn't a grey area or a paperwork technicality; it breaches the law, and the consequences reach your customers, your lenders and you personally. It also catches businesses that don't think of themselves as lenders at all — a gym spreading membership fees over the year can be arranging credit just as surely as a car dealer.
It can be a criminal offence
Carrying on a regulated activity such as credit broking without the right authorisation breaches the "general prohibition" in the Financial Services and Markets Act 2000. Doing so can be a criminal offence, punishable by up to two years' imprisonment and/or a fine. The law puts the onus on the business to be authorised before it starts — not to apply afterwards if someone notices.
Your finance agreements may be unenforceable
Agreements made through unauthorised credit broking can be unenforceable against the customer unless the FCA agrees they can be enforced. In practice that can mean finance you arranged is left in limbo, customers may be entitled to unwind agreements or recover what they paid, and the lenders you work with are exposed too. For a business that relies on finance to close sales, that's a real commercial risk, not a theoretical one.
The FCA can take action
The FCA has a range of powers: it can investigate, impose financial penalties, seek court injunctions and restitution, and publish details of the firms it takes action against. Even where the outcome stops short of prosecution, the disruption and reputational damage can be significant.
Your lenders will require it
Reputable lenders will only work with authorised firms. Operating without authorisation puts those relationships at risk — and losing your finance facility can quietly cost far more in lost sales than authorisation ever would.
None of this is meant to alarm — it's to make the case plainly. The fix is straightforward and far cheaper than the exposure: get authorised, then offer finance with confidence.
What to do if you think you're affected
If you're not sure whether you need authorisation, start with the free eligibility checker or read do I need an FCA licence to offer finance?. If it looks like you do need it, the sensible step is to take advice and get your application in. Our guide to getting authorised walks through the whole process, and we can prepare the application pack for you.
Frequently asked questions
- Is it really a criminal offence?
Yes. Carrying on a regulated activity without authorisation breaches the general prohibition in the Financial Services and Markets Act 2000 and can be a criminal offence, punishable by up to two years' imprisonment and/or a fine.
- What about finance agreements I've already arranged?
Agreements arranged through unauthorised credit broking can be unenforceable against the customer unless the FCA agrees otherwise, and customers may have a right to redress. If this might affect you, take advice promptly.
- Can I keep trading while I apply for authorisation?
Generally no — a new firm is expected to be authorised before it starts carrying on the regulated activity, rather than applying and continuing in the meantime. If you're already offering finance and realise you need authorisation, get advice quickly.
- Would the FCA really act against a small business?
The FCA regulates firms of all sizes and has acted against small businesses. The point isn't the likelihood of being caught — it's that the exposure (criminal liability, unenforceable agreements, lost lender relationships) is far larger than the cost of getting authorised.
This article is general information to help you understand the process, and is not legal or regulatory advice. CreditLicence is a regulatory consultancy; it is not authorised or regulated by the Financial Conduct Authority, nothing it provides is regulated advice, and it is not affiliated with, endorsed by, or acting on behalf of the FCA. FCA rules can change; always check the FCA's website for the current position.