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Practice Compliance analysis: Some two weeks after the new consumer credit regime came into force, the Solicitors Regulation Authority (SRA) has issued guidance for law firms. What does your firm need to do now?
Guidance: Regulation of consumer credit activities
Firms previously included under the Law Society’s group license for consumer credit work will need to check the licensing requirements used by the Financial Conduct Authority (FCA) to receive the correct authorisation, the SRA has said. The SRA has published this guidance to help firms identify how FCA authorisation will affect the way they work.
Why is consumer credit an issue for law firms?
Consumer credit activities were historically regulated by the Office of Fair Trading (OFT). Although firms may not have been aware of it, the OFT granted a group consumer credit licence to SRA, which covered any consumer credit activities law firm engaged in.
The OFT was scrapped on 1 April 2014 and the FCA became the new regulator for consumer credit.
The FCA has abandoned the group licence regime and the SRA's group licence has disappeared. This means firms that engage in consumer credit activities may (not must) need an individual consumer credit licence from the FCA.
This begs the obvious question—do law firms engage in consumer credit?
Why has it taken the SRA so long to issue guidance?
The SRA issued interim guidance before the new regime came into force although this raised more questions than it answered.
In approving recent consumer credit changes to the SRA Handbook, the Legal Services Board commented that there was a lot of confusion in the profession around consumer credit and said it expected the SRA to implement a robust communication strategy. This is what the SRA has now done, albeit nearly two weeks after the new regime came into force. To be fair to the SRA, there are inconsistencies in the primary legislation that have made it difficult to issue guidance, although this is still largely unresolved.
Do law firms engage in consumer credit?
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