Law firms and consumer credit licensing—before 1 April 2016 [Archived]
Law firms and consumer credit licensing—before 1 April 2016 [Archived]

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

  • Law firms and consumer credit licensing—before 1 April 2016 [Archived]
  • Client fee arrangements
  • Ancillary credit activities
  • Exempt Professional Firms regime and ancillary consumer credit activities
  • Obtaining a licence
  • Advantages of applying for an individual consumer credit licence
  • Disadvantages of applying for your own consumer credit licence
  • Where does this leave you?
  • SRA's interim regulatory requirements and draft rules

There are two ways in which 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—see Practice Note: Consumer credit and client fee arrangements

  2. 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.

Client fee arrangements

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.

Enforceability

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:

  1. the agreement complies with CCA 1974 and ancillary regulations regarding form, content and execution—see Practice Note: Drafting and varying consumer credit agreements, and

  2. 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,