Plenty of businesses are inside the consumer credit perimeter without realising it. They do not lend, they do not describe themselves as financial services firms, and nothing about their proposition looks like credit. Yet consumer hire, white-label arrangements and appointed representative models can all bring a business within the regime, depending on how it operates in practice. The key question is not what your business calls itself – it is what it actually does.
This is the first of two articles on where firms get the consumer credit perimeter wrong. Here, we look at three routes businesses often overlook: consumer hire, white-label lending and appointed representative models. Part 2 turns to direct lending and credit broking. Both follow a change that moved a large group of firms inside the perimeter almost overnight: from 15 July 2026, third-party–lender deferred payment credit, commonly known as Buy Now Pay Later, became regulated.
The perimeter is fact-specific, so these are useful indicators rather than a substitute for assessing the particular arrangement.
Why do these routes matter?
In our experience, firms rarely set out to breach the regulatory perimeter. More often, products evolve, customer journeys change or commercial partnerships develop without anyone stepping back to ask whether the regulatory position has changed too.
That is why perimeter analysis should not be a one-off exercise undertaken at launch or authorisation. As the operating model changes, firms should reassess whether their activities, permissions and governance arrangements still align.
Route 1: Consumer hire
Consumer hire can be a regulated activity in its own right. It is not lending, credit broking or credit provision, but its own distinct regulated category.
Broadly, a regulated consumer hire agreement is an agreement to hire goods to an individual (or other relevant recipient), which is not a hire purchase agreement but is capable of running for more than three months.
- “We’re not lending, so we’re not regulated”
One of the most common misconceptions is that businesses outside financial services fall outside the consumer credit regime because they are not making loans.
In reality, the regulatory perimeter extends beyond lending. Certain hire arrangements may themselves constitute regulated activity.
- “We’re just a subscription or leasing business”
Many organisations focus on how they describe their business rather than how their arrangements operate in practice.
Whether a consumer hire agreement is regulated depends on operational factors, including whether it is capable of lasting longer than three months for an individual customer—not whether the business markets itself as a subscription, leasing or hire provider.
This frequently arises in sectors such as mobility, equipment rental and subscription businesses offering goods on longer-term arrangements. Many of these organisations would not consider themselves financial services firms, yet may still fall within the consumer credit perimeter.
What should consumer hire firms consider?
Two operational questions matter:
- Who is the customer?
- Is the agreement capable of running for more than three months?
Where firms fall within consumer hire, documentation, governance, customer journeys and financial promotions should all reflect the regulatory framework for consumer hire—not lending or credit broking.
In one recent project, a firm’s FCA application repeatedly referred to lending terminology throughout its documentation. Rather than viewing this as a drafting issue, the FCA treated it as evidence that the firm did not fully understand the regulated activity it was carrying on.
What does Consumer Duty mean for consumer hire?
Where Consumer Duty applies, firms should consider the outcomes created by the consumer hire journey, not simply whether the underlying agreement and permissions are correctly structured.
Firms should be able to demonstrate that customers receive clear information, understand the nature and cost of the arrangement, and are supported to make informed decisions. Where a business influences how a customer enters into a hire arrangement, the design of that journey and the outcomes it creates should form part of the firm’s Consumer Duty assessment.
Consumer hire can also sit alongside limited permission credit broking where the broking activity is secondary to another commercial activity. While limited permission may bring lighter prudential and reporting requirements, it does not remove Consumer Duty obligations where the Duty applies.
The key point is that having the correct regulatory structure is only part of the picture. Firms should also be able to evidence that the customer journey delivers good outcomes in practice.
Route 2: White-label lending
White-label lending typically involves two firms and one customer-facing brand.
A regulated lender provides the credit, while another business presents the product under its own brand. Customers interact primarily with the front-end business, although the regulated lender remains the legal counterparty to the agreement.
Where do firms get white-label lending wrong?
In our experience, white-label arrangements are one of the easiest structures for firms to misunderstand.
Contracts may allocate responsibilities clearly on paper, but day-to-day operations often evolve over time. When reviewing these arrangements, the FCA looks beyond contractual wording to understand what each party is actually doing in practice.
Common issues include:
- Front-end businesses making lending decisions beyond the scope of their permissions
- Customer journeys that fail to make it clear who the regulated lender is
- Contractual arrangements that no longer reflect operational reality
A familiar example is point-of-sale finance offered through retailers. Although the lender holds the relevant permissions, the operational model must ensure customers understand who they are dealing with and that responsibilities remain appropriately allocated.
What does Consumer Duty mean for white-label arrangements?
The regulated lender cannot delegate accountability for Consumer Duty simply because another organisation manages the customer relationship.
Who is the manufacturer and who is the distributor depends on what each party actually does. Where the front-end firm has a hand in designing the product or the customer journey, it may be a manufacturer or co-manufacturer in its own right. Each firm remains responsible for the outcomes it can determine or materially influence.
That requires meaningful oversight supported by management information and monitoring – not reliance on contractual wording alone.
Route 3: Appointed representatives
An appointed representative (AR) carries on certain regulated activities under the responsibility of an authorised principal firm.
The principal remains accountable to the FCA for the AR’s conduct and can only appoint an AR to undertake activities that fall within the scope of both the principal’s permissions and the agreement between them.
Where do firms get AR arrangements wrong?
Across appointed representative reviews, two issues appear repeatedly.
- Activity creep
ARs often expand into new products, customer groups or distribution channels that were never envisaged when the arrangement was established.
This evolution is frequently gradual and unintentional, but can result in activities falling outside both the AR agreement and the principal’s permissions.
- Process without outcomes
A principal may have robust onboarding processes, training records and documented procedures, but these do not demonstrate on their own that the AR is delivering good outcomes.
However, Consumer Duty requires more than documented compliance.
Principals should be able to evidence that appointed representatives are delivering good customer outcomes in practice through effective monitoring, oversight and management information – not simply through policies.
What happens when the consumer credit perimeter is breached?
Perimeter breaches are not always identified through firms’ own compliance monitoring. They may instead come to light through customer complaints, FCA enquiries, due diligence exercises, funding transactions or changes to products and business models that were not accompanied by a permissions review.
The consequences can be significant and include:
- carrying on regulated activities without the appropriate permissions
- potential enforceability issues
- remediation programmes
- restrictions on future business
- enforcement action
- increased regulatory scrutiny
- contractual disputes between commercial partners
- litigation and customer claims
For many firms, the operational and reputational impact is more significant than the initial permissions issue itself.
Consumer credit perimeter readiness check
Whether you’re launching a new proposition or reviewing an existing one, ask yourself:
- What activities are we actually carrying on?
- Do our permissions still reflect how the business operates today?
- Can we evidence good customer outcomes, not just compliant policies?
- Is accountability clearly understood across every party involved?
- When did we last test our operating model against the regulatory perimeter and current FCA expectations?
These questions often identify issues long before they become regulatory problems.
Key takeaway
Across consumer hire, white-label lending and appointed representative models, the regulatory position ultimately depends on how the business operates in practice. As products, partnerships and customer journeys evolve, firms should periodically reassess whether their permissions and governance arrangements still reflect their operating model.
Coming next
Part 2 turns to direct lending and credit broking: the overseas lending trap, sole traders, and why “we only introduce customers” is rarely the end of the analysis.
How fscom can help
Whether you’re launching a new consumer credit proposition, changing an existing distribution model or questioning whether your current permissions still reflect what your business does in practice, fscom can help.
Our specialists support firms with regulatory perimeter assessments, permissions reviews, AR oversight, Consumer Duty and FCA authorisation. Get in touch to discuss your firm’s position.
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.
