Are YouLend regulated by the Financial Conduct Authority (FCA) ?
Before this experience my understanding was that there were some protections, for me as a customer, due to the fact that YouLend were regulated by the Financial Conduct Authority (FCA). However, and they were very quick to point this out to me, they are not regulated on the very elements you'd want them to be when taking out a loan, let alone a personal guarantee.
This is what S from their Complaints Department had to say ( emphasis his ) as soon as I mentioned the FCA :
Please note that you will only be able to refer complaints to the Financial Ombudsman Service about payment services - this means the settlement accounts for merchants that are operated and controlled by YouLend where funds can be sent by sales processors or card processors to repay the merchant financing.
Merchant financing is not regulated by the Financial Conduct Authority and so the Financial Ombudsman Service will be unable to consider any complaints related to your merchant financing agreement or subsequent contact between yourself and our Collections and Recoveries Team.
The YouLend Website ( https://youlend.com/company/regulatoryinformation ) explicitly states :
YouLend’s merchant financing agreements in the UK are not regulated by the FCA for the purpose of providing business financing. Nevertheless, YouLend is committed to providing a clear, fair and transparent service across all of its products, and will still apply best practices to its merchant financing to deliver good customer outcomes.
I wish I had known that YouLend are not actually regulated for the product they sold to me and that I had no protections under that regulation. YouLend have not applied best practice in my case ( they don't even have a Vulnerable Customer Policy ) and they have failed to deliver good customer outcomes.
YouLend do not issue you a loan but use a product called a Merchant Cash Advance - another warning !
What's a Merchant Cash Advance and why is it not covered by the FCA ?
In the UK, a merchant cash advance (MCA) is not regulated by the Financial Conduct Authority (FCA) because it is not classified as a loan or a form of credit under the legal framework that the FCA oversees. Instead, it’s structured as a business-to-business transaction—specifically, a purchase of future receivables. Here’s a straightforward explanation of why this is the case:
Under UK law, the FCA regulates consumer credit and certain financial services under the Consumer Credit Act 1974 and the Financial Services and Markets Act 2000 (FSMA). These laws focus on lending activities like loans, credit cards, and overdrafts, where there’s a clear debtor-creditor relationship with an obligation to repay a fixed amount plus interest. For an activity to fall under FCA regulation, it typically needs to involve providing credit to individuals or small partnerships (with fewer than four partners) or meet specific criteria for regulated financial products.
A merchant cash advance, however, works differently. It’s an agreement where a provider gives a business a lump sum upfront in exchange for a percentage of its future card sales until the agreed amount (the advance plus a fee) is repaid. Legally, this is treated as a sale of future income rather than a loan. There’s no fixed repayment schedule, no interest rate, and crucially, no absolute obligation to repay if the business doesn’t generate the expected sales—repayment depends on the business’s revenue. This contingency shifts it outside the definition of "credit" under the Consumer Credit Act, which requires a repayable debt with set terms.
Additionally, MCAs are typically offered to businesses (like limited companies or larger partnerships), not individual consumers, placing them outside the FCA’s consumer protection remit. The FSMA also doesn’t cover MCAs because they aren’t listed as a "regulated activity" (like deposit-taking or mortgage lending), and MCA providers don’t need to hold FCA authorisation unless they’re engaging in other regulated services alongside the advance.
That said, the lack of regulation doesn’t mean MCAs are entirely free from oversight. If an MCA provider misrepresents the product (e.g., markets it as a loan with hidden terms), it could face scrutiny under general business laws, like the Consumer Protection from Unfair Trading Regulations 2008, enforced by bodies like Trading Standards. But as a product, the MCA’s structure—buying future sales rather than lending—keeps it outside the FCA’s direct jurisdiction.
This unregulated status is why some call MCAs a "wild west" of finance: businesses get flexibility and speed, but they miss out on FCA safeguards like mandatory transparency or caps on costs. It’s a trade-off rooted in how UK law defines credit versus commercial transactions.
What's a Vulnerable Customer Policy ?
A Vulnerable Customer Policy is a critical requirement for FCA-registered firms in the UK. This policy focuses on identifying and supporting customers in vulnerable circumstances, aligning with the FCA’s consumer protection objectives. Here’s why an FCA-registered company needs one and what it entails, based on regulatory expectations as of March 31, 2025.
Why an FCA-Registered Company Needs a Vulnerable Customer Policy
1. FCA Regulatory Requirements
- Principle 6: Treating Customers Fairly (TCF): The FCA expects firms to ensure fair treatment of all customers, with extra care for those in vulnerable circumstances. A policy formalizes how the firm identifies and supports these customers, embedding TCF into operations.
- Consumer Duty (FCA Handbook, PRIN 2A): Introduced in July 2023 and fully enforced by July 31, 2024, the Consumer Duty raises the bar, requiring firms to deliver good outcomes for all customers, especially vulnerable ones. It mandates proactive steps to avoid foreseeable harm and support customer needs— a policy is the practical framework for compliance.
- FCA Guidance (FG21/1): The FCA’s 2021 guidance, “Fair Treatment of Vulnerable Customers,” explicitly states firms must understand vulnerability, train staff, and adapt processes. Without a policy, a firm risks non-compliance with this expectation.
2. Protecting Consumers
- Vulnerability Definition: The FCA defines a vulnerable customer as someone who, due to personal circumstances (e.g., health, financial hardship, age, or life events), is especially susceptible to harm—particularly if a firm doesn’t act with care. A policy ensures these customers aren’t disadvantaged (e.g., mis-sold products or denied access).
- Good Outcomes: Under Consumer Duty, firms must ensure vulnerable customers achieve outcomes as good as others (e.g., understanding products, accessing support). A policy outlines how this happens—via tailored communication or payment flexibility, for instance.
3. Legal and Reputational Risks
- Fines and Enforcement: The FCA has penalized firms for failing vulnerable customers (e.g., £1.5m fine to a lender in 2020 for poor debt collection practices). A policy demonstrates due diligence, reducing enforcement risk.
- Reputation: Financial services thrive on trust. Public backlash from mistreating vulnerable customers (e.g., denying a widow loan forbearance) can damage a firm’s brand. A policy signals commitment to fairness.
4. Operational Necessity
- Consistency: With no policy, staff might handle vulnerable customers inconsistently, leading to unfair outcomes or complaints. A policy standardizes identification and support.
- Monitoring and Reporting: The FCA expects firms to track vulnerability data and outcomes (per Consumer Duty). A policy ensures this is systematic, not ad hoc.
What Does a Vulnerable Customer Policy Cover?
Based on FCA guidance (FG21/1) and Consumer Duty:
- Identification: Recognizing signs of vulnerability—e.g., mental health issues, bereavement, low financial literacy—via staff training and data flags (e.g., missed payments).
- Assessment: Evaluating how vulnerability impacts a customer’s ability to engage (e.g., understanding terms, making decisions).
- Support Measures: Practical steps like clear communication (plain English), flexible payment plans, or referrals to debt advice (e.g., StepChange).
- Staff Training: Ensuring employees can spot and handle vulnerability empathetically, per FCA expectations.
- Monitoring: Tracking vulnerable customer interactions and outcomes, with regular reviews to improve processes.
- Governance: Assigning responsibility (e.g., to a Senior Manager under SMCR) to oversee policy implementation.
Practical Example
Consider an FCA-registered mortgage provider. A customer, recently unemployed, struggles to pay. Without a policy, staff might aggressively pursue repayment, breaching Consumer Duty by causing harm. With a policy, they’d identify the vulnerability (financial hardship), offer a payment holiday, and communicate options clearly—meeting FCA standards and protecting the customer.
Why It’s Non-Negotiable in 2025
- Rising Vulnerability: Economic pressures (e.g., cost-of-living crisis) and an aging population mean more UK customers are vulnerable. The FCA noted in 2021 that 50% of adults show potential vulnerability traits—likely higher now.
- Scrutiny: The FCA’s 2024/25 Business Plan emphasizes consumer protection, with vulnerable customers a priority. Firms without policies risk audits or sanctions.
- Competitive Edge: A strong policy can differentiate a firm, appealing to ethical investors and customers.
Conclusion
For an FCA-registered company in the UK, a Vulnerable Customer Policy is essential to comply with Principle 6, Consumer Duty, and FG21/1, ensuring fair treatment and good outcomes for consumers in vulnerable circumstances. It’s not just a regulatory checkbox—it mitigates legal, reputational, and operational risks while aligning with the FCA’s mission to protect consumers. In 2025, with heightened FCA focus and societal need, it’s a must-have to operate responsibly and competitively in the financial sector.