Instalment payment of an outstanding bill
Instalment payment of an outstanding bill

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

  • Instalment payment of an outstanding bill
  • SRA changes
  • What does the SRA say?
  • What does the law say?
  • What do we think?
  • What about exemptions?
  • Can you charge interest under the original retainer?
  • Where does this leave you?
  • What about other funding arrangements?

This Practice Note addresses the common necessity 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.

The first thing to say is that this issue is unaffected by the 1 April 2016 changes to the SRA Financial Services (Scope) Rules—see below: SRA changes.

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 changes

On 1 April 2016, the SRA Financial Services (Scope) Rules were be amended to provide greater clarity on the sort of consumer credit activities law firms can engage in without having to be regulated by the Financial Conduct Authority (FCA). See Practice Note: Changes to SRA rules on consumer credit: April 2016.

The amended rules will explicitly permit you to enter into a regulated consumer credit agreement