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Consumer Credit Licensing. Jessica Lockley Solicitor Trowers & Hamlins. Introduction. Consumer Credit Act 1974 as amended Note current consultation by Government. Consumer Credit Licensing. Why Is it Relevant? . Regulates credit agreements Wide meaning of credit Ancillary activities.

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consumer credit licensing

Consumer Credit Licensing

Jessica Lockley

Solicitor

Trowers & Hamlins

introduction
Introduction
  • Consumer Credit Act 1974 as amended
  • Note current consultation by Government
consumer credit licensing1
Consumer Credit Licensing

Why Is it Relevant?

  • Regulates credit agreements
  • Wide meaning of credit
  • Ancillary activities
consumer credit licensing2
Consumer Credit Licensing

Why Is it Relevant?

  • Common RP regulated activities
    • Equity loans
    • Service charge loans
    • Employee loans
    • Brokering loans (including between group entities)
    • Debt advice
    • Collecting debt
consumer credit licensing how it affects you
Consumer Credit Licensing – How it affects you

What category of Licence do we need?

  • A – Consumer Credit Business
  • B – Consumer Hire Business
  • C – Credit Brokerage
  • D – Debt Adjusting
  • E – Debt Counselling
consumer credit licensing how it affects you1
Consumer Credit Licensing – How it affects you

What category of Licence do we need?

  • F – Debt Collecting
  • G – Debt Administering
  • H – Credit Information Services
  • I – Credit Reference Agency
  • Canvassing
consumer credit licensing how it affects you2
Consumer Credit Licensing – How it affects you

Equity Mortgages - Help to Buy

  • One Equity loan 20% equity value (not two as per FirstBuy)
  • 1.75% interest from 5th anniversary
  • Partial repayment provisions
consumer credit licensing how it affects you3
Consumer Credit Licensing – How it affects you

Equity Mortgages

  • Compliance with certain parts of the Act
      • Total Charge to Credit
      • Signature Box
  • Section 60(3) Direction
  • Ongoing Compliance with the Direction
consumer credit licensing how it affects you4
Consumer Credit Licensing – How it affects you

Equity Mortgages

  • Further advances risk
  • No restriction on redemption
  • Consider commercial terms, such as
      • a minimum repayment figure
      • monthly interest payments
      • part redemptions
consumer credit licensing how it affects you5
Consumer Credit Licensing – How it affects you

Equity Mortgages

  • Second Charge
    • FSA exemption (subject to current proposals)
    • Mortgage Sales Guidance
  • Identity of lender and seller within the group
  • Current consultation on changes
consumer credit licensing how it affects you6
Consumer Credit Licensing – How it affects you

Service Charge and Employee Loans

  • Exemption
    • Specific class of individuals
    • Interest less than 1% plus base
    • Either a registered charge or a loan to an employee
  • Otherwise, compliance with the Act
consumer credit licensing how it affects you7
Consumer Credit Licensing – How it affects you

What does compliance mean?

  • Licence
  • Section 60(3) Direction if relevant
  • Advertising
  • Pre-contract information
consumer credit licensing how it affects you8
Consumer Credit Licensing – How it affects you

What does compliance mean?

  • Documentation to be compliant
    • Total charge to credit
    • APR
    • Example repayment figures
    • Prescribed statements
    • Both parties to sign
consumer credit licensing how it affects you9
Consumer Credit Licensing – How it affects you

What does compliance mean?

  • Copy original documents
  • Ongoing information
    • Annual statements
    • Notification of changes
  • Variations to be documented correctly
  • Default
consumer credit licensing how it affects you10
Consumer Credit Licensing – How it affects you

Applying for a Licence

  • Identify categories required
  • Complete online form
    • Details of the relevant company
    • Details of controllers including
      • Name changes
      • Previous licences held
      • Previous convictions
consumer credit licensing how it affects you11
Consumer Credit Licensing – How it affects you

Applying for a Licence

  • Credit Competence Plan
    • Debt collection
    • Debt counselling
    • Debt adjustment
    • Credit repair
consumer credit licensing how it affects you12
Consumer Credit Licensing – How it affects you

Applying for a Licence

  • Credit Risk Profile
    • Consumer credit
    • Credit brokerage
    • Debt administration

AND

    • Subprime
    • Home lending
consumer credit licensing how it affects you13
Consumer Credit Licensing – How it affects you

Subprime

  • What is subprime lending?
  • Are LCHO applicants considered subprime?
  • Consequences of participating in this market
  • Duty to notify
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Consumer Credit Licensing – How it affects you

Commercial/Non-Commercial

  • Categories D (debt adjusting), E (debt counselling) and H (credit repair)
  • Whether or not profit is made is irrelevant
  • Global assessment of remuneration received for credit activity
consumer credit licensing how it affects you15
Consumer Credit Licensing – How it affects you

What do I need to do?

  • NHF guidance
  • Internal audit of activity
  • Speak to OFT or seek legal advice if unsure
  • Ensure that the correct licence categories are held by all group entities
  • Ongoing monitoring of activities