As the cost of sending children to private and independent schools has risen, many parents have found that paying fees in instalments, rather than paying a lump sum at the beginning of term, makes the cost more manageable and fits into the usual way we pay our monthly bills. Being able to offer payment by instalments has therefore become a popular choice for schools, but school fees funding specialist SFP, is urging school bursars to review any current financing options offered to parents to ensure they don’t fall foul of the new FCA regulator.
As of 1 April this year, the government has transferred responsibility for regulating consumer credit from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA), who want consumers to be “confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture”. But as Roger Brown, Head of SFP, advises, this transfer of responsibility is not only limited to finance companies. It may also affect schools that run in-house schemes for parents to pay fees in instalments, especially where the school makes a charge as part of the process.
“When schools allow parents to spread the payment of tuition fees, they could fall under the category of lenders – particularly if they apply any charges in connection with the process,” he says. “If so, they will need to obtain authorisation from the FCA for their regulated consumer credit-related activities, and obtaining authorisation will require schools to undergo a rigorous application process.
“We know that a number of independent and private schools try to manage the provision of funding for fees in-house. But this could put them at serious risk of coming under the regulator’s spotlight. With the new regulator which came into effect on 1 April, schools must have been granted interim permission by the FCA and comply with the FCA conduct rules in relation to their regulated consumer credit activities if they wish to allow parents to pay fees in instalments. Unless they have the relevant permission and they comply with the rules they will not be able to carry out any regulated consumer credit activities. A more practical solution would be to involve a provider of school fee finance, like SFP. This would simplify the fee payment system and schools would not need to go through the lengthy process of applying for authorisation if the activities of the school in the finance context are structured properly.
“Of course, there are other regulations that you will still have to comply with, such as the Consumer Credit Act and relevant parts of the Consumer Credit Directive, which apply to all lenders. The second largest provider of fee funding, Close Brothers, recently notified the market of its withdrawal from the marketplace – a move SFP sees as further evidencing the need for any provider in this market to have critical mass to enable them to stay ahead of the regulatory and compliance regimes that are becoming an increasing cost to the sector.”
By using SFP, part of Premium Credit and the market-leading provider of school fee finance in the UK, parents can pay their child’s school fees by monthly direct debit while the school receives the full fees – and any extras – direct. SFP’s extensive knowledge and experience gained by working with and supporting parents and independent schools for over 20 years makes it the natural choice for school fee finance among schools and parents alike.