Law firms and ancillary consumer credit business
Law firms and ancillary consumer credit business

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

  • Law firms and ancillary consumer credit business
  • What are ancillary consumer credit activities?
  • Litigation and advocacy exception
  • Exempt Professional Firms regime
  • Where does this leave you?
  • Information and transparency

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

This Practice Note deals with the second scenario. For the first scenario, see Practice Note: Consumer credit and client fee arrangements. See also Practice Note: Law firms and consumer credit licensing.

It is an offence to engage in certain types of ancillary consumer credit activities without a licence. You will need a licence if:

  1. you engage in one of the following activities as defined by section 145 of the Consumer Credit Act 1974 (CCA 1974):

    1. credit brokerage

    2. debt-adjusting

    3. debt-counselling

    4. debt-collecting

    5. debt administration

    6. the provision of credit information services, or

    7. the operation of a credit reference agency

  2. in the course of a business, and

  3. the activity

    1. is not an occasional transaction

    2. does not fall within the litigation exception

    3. cannot be conducted under the Exempt Professional Firms regime because it is not incidental to your professional services

See also: Ancillary consumer credit—decision tree.

What are ancillary consumer credit activities?

CCA 1974, Pt X regulates seven specific types of ancillary credit business:

  1. credit brokerage

  2. debt-adjusting

  3. debt-counselling

  4. debt-collecting

  5. debt administration

  6. the provision of credit information services, and

  7. the operation of a credit reference agency

Definition of each