Validation orders

If a firm has entered into a regulated credit agreement when it did not hold the appropriate permission, the agreement may not be legally enforceable unless we allow it to be. If the firm wishes to enforce the agreement it must first obtain a validation order.

Validation of existing agreements

A validation order is a written notice from the FCA where we decide to use our power to allow an otherwise unenforceable agreement to be enforced.

It is required where a firm wishes to enforce a consumer credit agreement which is otherwise unenforceable due to:

• the lender was not authorised by the FCA or licensed by the Office of Fair Trading (OFT) at the relevant time​​​​
• the lender was authorised by the FCA but was acting outside the scope of its permission
• the credit broker who arranged the transaction was not authorised by the FCA or licensed by the OFT

We can only grant a validation order where we are satisfied that it is 'just and equitable in the circumstances of the case' according to Financial Services and Markets Act 2000.

We took on regulation of consumer credit firms on 1 April 2014. Before this, the Consumer Credit Act 1974 (CCA) enabled firms to apply to the OFT for an order to validate consumer credit (or consumer hire) agreements that were entered into by an unlicensed creditor or owner, or as a result of an introduction made by an unlicensed credit broker.

Agreements entered into before 1 April 2014

For agreements entered into before 1 April 2014, a modified regime applies. The regime is not limited to credit agreements but also includes consumer hire agreements and ancillary service contracts. Under this regime, an agreement may be unenforceable if the credit broker was licensed but not for credit broking.

For agreements that were entered into before this date and which are unenforceable against the borrower, the borrower has no right to recover any money paid or other property transferred under the agreement, or compensation for loss.

If you entered into a consumer credit, consumer hire or ancillary service agreement and you or the credit broker was not licensed by the OFT, then you should consider submitting an application for a validation order.

Agreements entered into on or after 1 April 2014

If you entered into a consumer credit agreement on or after 1 April 2014 a different regime applies for the purposes of 'validating' agreements. The regime applies only to regulated credit agreements and not consumer hire or ancillary service contracts.

For agreements that were entered into on or after this date and which are unenforceable against the borrower, the borrower is entitled to recover any money paid or other property transferred under the agreement and compensation for any loss sustained as a result of having parted with it.

If you were not authorised by the FCA, acting outside the scope of your permission or the third party eg the credit broker who made the introduction to you was unauthorised at the time of entering into an agreement and you knew before the agreement was made that the third party had some involvement in the making of the agreement or matters preparatory to its making, then you should consider submitting an application for a validation order.

Consider submitting an application for a Validation Order if you:

• were not authorised by the FCA
• were acting outside the scope of your permission or the third party, eg the credit broker, who made the introduction to you was unauthorised at the time of entering into an agreement
• knew before the agreement was made that the third party had some involvement in the making of the agreement or matters preparatory to its making

Who can apply for a validation order

Only a 'relevant' firm can apply to validate an agreement. 

For agreements entered into before 1 April 2014, this means the lender, owner or other person who would be entitled to enforce the agreement.

For agreements entered into on or after 1 April 2014, this means the lender or owner is entitled to enforce the agreement or other person to whom the rights to enforce under the agreement have been assigned.

There are separate application forms depending on whether the agreement is pre- or post- 1 April 2014.

If you have agreements which are unenforceable, some of which were entered into before 1 April 2014, and some on or after that date, both application forms will need to be submitted.

Refer to our guidance notes[1] for more detailed information and whether this may affect you. If you are unsure whether this guidance applies to you, you may wish to seek independent legal advice.

When to apply to a Court directly

There may be circumstances where you may need to apply to a Court rather than to the FCA to allow the agreement to be enforced. For example, where the agreement is a non-credit related agreement or where the agreement is exempt after 1 April 2014, ie consumer hire agreement.

Refer to our guidance notes[1] if you are unsure whether you are required to apply to the court directly. You may also wish to seek independent legal advice.

Our assessment of applications for a validation order

We aim to make a decision within 12 months of receiving your initial application fee. 
Factors we take account of when considering your application include:

• Consumer detriment: we will consider whether consumers have suffered any detriment as part of our assessment in determining whether it is just and equitable to make a validation order.
• Potential breaches of the CCA: we will consider whether there has been any breaches of the CCA which may have disadvantaged consumers.

Application process

You should:

• Send us your completed validation order application form(s) and appropriate fee.
• Provide your case officer with the information, clarification and/or evidence they require. You may be required to meet with your case officer.

We will:

• Assess your application in line with our commitments to you, such as letting you know when a case officer has been assigned and keeping you up to date.
• Check your application against various databases and information held by other regulatory agencies in the UK or overseas.
• Make a decision on granting your application based on the statutory test of whether it would be 'just and equitable' to do so.

Please note that updated versions of our validation order forms have been published, as of 25 October 2024. Any validation order applications made from this date onwards need to be made using the new forms. We will not accept validation order applications using the old forms from 25 October 2024 onwards. Any applications submitted using the old forms will not be valid and will be rejected.  

Under the new application process, firms are expected to provide a greater level of detail in support of why the validation order should be granted. This includes, as part of the second stage, carrying out a consumer contact exercise to assess the extent of any consumer harm. There is more information about this in our guidance notes on the consumer harm exercise[2]. 

Firms should carefully consider the application form guidance notes[2] before submitting an application. 

Firms should consider reaching out to the FCA before submitting an application for a validation order. This will enable the firm to understand what is involved and what is required of the firm. You can contact us to discuss this further on 0300 500 0597. 

Application fees

Applications for validation orders are charged in 2 stages. Find out what the costs are for each stage[2].