Do I need a consumer credit licence for...?

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Published on LexisPSL on 06/07/2015

The following Practice Compliance Q&A provides comprehensive and up to date legal information covering:

  • Do I need a consumer credit licence for...?
  • Fee arrangements
  • Debt collecting, credit broking etc

Do I need a consumer credit licence for...?

There are two ways 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 or debt collecting

Fee arrangements

There are two issues you should consider:

  1. does your fee arrangement constitute a regulated credit agreement, meaning it must comply with the Consumer Credit Act 1974 (CCA 1974) and ancillary regulations regarding form, content and execution—the definition of consumer credit agreement requires the creditor (in this case your firm) to provide the debtor (the client) with credit. If there is no credit, there is no consumer credit agreement for the purpose of CCA 1974.

  2. if the fee arrangement constitutes a consumer credit agreement, do you need a consumer credit licence from the FCA to enter into the agreement or can you rely on the SRA's Exempt Professional Firms (EPF) regime?

The example below are based on our interpretation of the ingredients of credit set out in Dimond v Lovell [1999] 3 All ER 1 at 10 and as discussed in 'Goode: Consumer Credit Law and Practice' together with SRA guidance on the application of the EPF regime. For more information, see Practice Note: Consumer credit and client fee arrangements—Key ingredients of credit.

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