Limited vs Full Permission Consumer Credit: Which One Do You Need?

The two-tier system in plain terms

The FCA divides consumer credit firms into two groups. As the regulator puts it, limited permission firms only carry out certain credit-related activities, so are subject to fewer threshold conditions, the FCA's minimum standards, than other firms. Every firm that does not qualify for limited permission is a full permission firm.

The logic behind the split is the level of potential harm to consumers. Where credit is offered as a sideline to a firm's real trade, or where no interest or charge is made, the FCA sees less scope for detriment and applies a lighter regime. Where lending, broking, or debt work is the main event, the risk is higher and the full set of rules applies.

This matters because the tier you hold shapes your application, your fees, and the ongoing obligations you sign up to. Getting it right at the outset saves time and money and avoids a variation of permission later.

It is worth stressing that the tier is not something you choose freely. It follows from the activities you carry on. Two firms of similar size can end up in different tiers because one charges interest and the other does not, or because one collects debts while the other only introduces customers to a lender. The FCA looks at the substance of what you do, so the honest starting point is a full and accurate list of your credit activities rather than the outcome you would prefer.

What limited permission covers

Limited permission is designed for lower-risk consumer credit activity. According to the FCA, consumer lending falls into limited permission only in narrow cases, for example when the lender is a local authority, or a supplier where no charge by way of interest or otherwise is payable by the borrower and the agreement is not hire purchase or conditional sale.

Consumer hire is another core limited permission activity. Firms that only ever enter into consumer hire agreements, and exercise the owners' rights and duties under those agreements, are limited permission firms. Car hire and equipment or tool hire businesses are typical examples.

The other main strand is secondary credit broking. This is where a retailer or service provider introduces a customer to a lender so the customer can finance a purchase, and where selling goods or non-financial services is the firm's main business. Debt counselling, debt adjusting, and providing credit information services can also sit in limited permission when carried on by a not-for-profit body or as a secondary activity to lending, broking, or hiring.

What full permission covers

Full permission is the default for higher-risk consumer credit activity and for firms where credit is the main business rather than a sideline. The FCA is explicit that if you add interest or any other charges, including late payment fees or default charges, to your agreements, you need full permission rather than limited permission.

Debt administration and collection require full permission, as do debt counselling and debt adjusting when carried on as a main business rather than by a not-for-profit body or as a secondary activity. Providing credit references, and providing credit information services that are not connected to a limited permission activity, also sit in the full permission tier. Operating a peer-to-peer lending platform is a full permission activity too.

There is one further catch. Firms already authorised for other regulated activities, such as insurance or mortgages, are treated as full permission firms for their consumer credit work regardless of how minor that credit activity might be.

The common thread running through the full permission tier is that the firm either profits directly from the cost of credit, or handles money and debt in ways that carry real potential for consumer harm. That is why charging interest, however modest, is enough on its own to move a supplier out of the interest-free limited permission category and into full permission. The presence of a single full permission activity is decisive: you cannot mix and match tiers within one authorisation, so if any part of your work is a full permission activity, the whole firm needs full permission.

Retailers and secondary credit broking

The most common source of confusion is the retailer or service provider who offers finance at the point of sale. If a car dealer, furniture shop, jeweller, or double glazing firm introduces a customer to a lender to help pay for a purchase, that introduction is credit broking and needs authorisation, even though selling the product is the firm's real trade.

In many of these cases the firm can hold limited permission, because broking is ancillary to the sale of goods or non-financial services. The FCA has confirmed that some firms authorised as full permission credit brokers may be eligible to switch to limited permission depending on the activities they undertake, and that a firm changing tier this way may be entitled to a refund on a proportion of past regulatory fees.

There are exceptions. Domestic premises suppliers, meaning firms that sell goods or services to customers in the customer's home, generally need full permission credit broking rather than limited permission. If in doubt, the deciding test the FCA points to is whether the firm would still be credit broking if it stopped supplying its non-financial service.

The difference in requirements and fees

The clearest practical difference is cost. The FCA sets application fees by pricing category. Consumer credit limited permission sits in pricing category 2, which carries an application fee of £560. Full permission applications fall into higher categories depending on the specific permissions sought, with category 5 at £5,640 and category 6 at £11,260. In every case the application fee is non-refundable, so a withdrawn or refused application does not get a refund.

Beyond fees, limited permission firms face fewer of the FCA's threshold conditions, its minimum standards for authorisation, because their activities are viewed as lower risk. Both tiers must still submit an application form, a regulatory business plan, financial forecasts, and policies covering matters such as credit risk, affordability, arrears, and forbearance where relevant to what they do. The lighter regime does not mean no regime, and the FCA cautions firms not to assume that a shorter application means fewer documents or exemption from parts of the rules.

After authorisation, both tiers pay ongoing periodic fees and must keep meeting the conditions of their permission. The scope of continuing obligations tracks the activity, so a limited permission retailer has a narrower compliance footprint than a full permission lender.

It is a mistake to read the lower fee as the whole story. The application fee is a one-off cost, whereas the real difference over the life of a firm is the breadth of the rules you must follow and the level of supervision the FCA applies. A full permission lender charging interest carries a heavier and more continuous set of responsibilities than a retailer whose only regulated activity is introducing customers to a finance provider. When you compare the two routes, weigh that ongoing burden alongside the headline application fee rather than treating cost as the deciding factor on its own.

How to decide which permission you need

Start with the activity, not the label. Write down exactly what your firm does with credit, then match each activity against the FCA's classifications. The key questions are whether you charge interest or fees, whether credit is your main business or a sideline, and whether any activity such as debt collection automatically pushes you into full permission.

If every activity you carry on falls within the limited permission list, and none of the full permission triggers apply, limited permission is likely to be the right and cheaper route. If any activity is a full permission activity, or if you already hold other regulated permissions, you will need full permission. When your facts sit on the boundary, it is safer to seek advice than to guess, because holding the wrong permission can mean carrying on a regulated activity without the right authorisation.

Conclusion

Limited and full permission are not a simple matter of size or preference. They map directly onto the activities you carry on and the level of risk the FCA associates with them. Retailers offering finance as a sideline, consumer hire firms, and not-for-profit debt advisers will often qualify for limited permission, with its lower application fee and fewer threshold conditions. Lenders that charge interest, debt collectors, debt managers, and firms broking credit as their main business need full permission.

The safest approach is to map each of your activities against the FCA's classifications before you apply, rather than choosing a tier and working backwards. If your situation sits on the boundary, or you already hold other regulated permissions, take advice early. Getting the permission right first time avoids paying for a variation later and keeps you clearly on the right side of the rules. To scope your route to authorisation, explore our FCA authorisation support or book a demo to see how we can help.

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