Consumer credit and client fee arrangements
Consumer credit and client fee arrangements

The following Practice Compliance guidance note provides comprehensive and up to date legal information covering:

  • Consumer credit and client fee arrangements
  • Why has consumer credit become an issue?
  • Do you need a licence?
  • What is a consumer credit agreement?
  • Key ingredients of credit
  • Contractual deferment of the debt
  • Exempt agreements
  • Payment by instalments
  • Sample fee arrangements
  • Information and transparency

There are two ways in which law firms might be caught by the consumer credit regime:

  1. by entering into a fee arrangement with a client that constitutes a consumer credit agreement

  2. by engaging in ancillary consumer credit activities such as debt adjusting

This Practice Note deals with the first scenario and you may also wish to refer to Fee arrangement and consumer credit—decision tree, Instalment payment of an outstanding bill and Can I accept payment of an outstanding bill by instalments: before or after 1 April 2016?

For more guidance on ancillary consumer credit activities, see Practice Note: Law firms and ancillary consumer credit business.

Why has consumer credit become an issue?

Competition, the economic climate and commercial pressures have caused many firms to become more adventurous in the fee arrangements they offer clients. Some of these arrangements might implicitly or explicitly involve the firm advancing credit to the client. This raises two problems: enforceability and criminal sanctions.


Any client fee arrangement that meets the statutory definition of consumer credit agreement will be unenforceable unless:

  1. it is exempt from the requirements of the Consumer Credit Act 1974 (CCA 1974), or

  2. the agreement complies with the CCA 1974 regarding form, content and execution—see Practice Note: Drafting and varying consumer credit agreements, and the firm is licensed under CCA 1974, s 21 to provide