The following Practice Compliance guidance note provides comprehensive and up to date legal information covering:
There are two ways in which law firms might be caught by the consumer credit regime:
by entering into a fee arrangement with a client that constitutes a consumer credit agreement—see Practice Note: Consumer credit and client fee arrangements
by engaging in ancillary consumer credit activities such as debt adjusting—see Practice Note: Law firms and ancillary consumer credit business
This Practice Note explains whether you need a consumer credit licence and, if so, how to apply.
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 it is exempt from the requirements of the Consumer Credit Act 1974 (CCA 1974), or:
the agreement complies with CCA 1974 and ancillary regulations regarding form, content and execution—see Practice Note: Drafting and varying consumer credit agreements, and
the firm is licensed (authorised) under CCA 1974, s 21 to provide consumer credit agreements
The first question is therefore whether your fee arrangement is exempt. An exempt agreement does not need to comply with CCA 1974 regarding form, content and execution,
**excludes LexisPSL Practice Compliance, Practice Management and Risk and Compliance. To discuss trialling these LexisPSL services please email customer service via our online form. Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.
To view the latest version of this document and thousands of others like it, sign-in to LexisPSL or register for a free trial.
Existing user? Sign-in
Take a free trial
Take a free trial
0330 161 1234