Instalment payment of an outstanding bill

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

  • Instalment payment of an outstanding bill
  • SRA requirements
  • What does the SRA say?
  • What does the law say?
  • Case law
  • Goode on consumer credit
  • What do we think?
  • What about exemptions?
  • Can you charge interest under the original retainer?
  • Where does this leave you?
  • More...

Instalment payment of an outstanding bill

This Practice Note addresses the common necessity for law firms of accepting payment by instalments of an outstanding bill. The SRA has issued a case study expressing the view that this constitutes entering into a regulated credit agreement as a lender, meaning you would need to enter into a formal consumer credit agreement. This Practice Note explains why we differ from the SRA on this issue, based on established case law and the leading specialist consumer credit text.

You should also remember that the consumer credit regime affects only clients who are individuals and very small partnerships, as the Consumer Credit Act 1974 (CCA 1974) does not apply to agreements with larger partnerships or corporate entities. See Practice Note: Consumer credit and client fee arrangements—What is a consumer credit agreement?

SRA requirements

The SRA Financial Services (Scope) Rules set out the scope of the regulated consumer credit activities that may be undertaken by a firm authorised by the SRA, but not regulated by the FCA. See Practice Note: Consumer credit and law firms: from 1 April 2016.

The SRA rules explicitly permit you to enter into a regulated consumer credit agreement with a client for disbursements and/or professional fees due to the firm.

The question is not therefore whether you can enter into a consumer credit agreement with a client for instalment payment

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