Q&As

Would taking second charges from client directors (as an alternative to those directors providing personal guarantees) fall within the scope of the consumer credit regime and/or the Mortgage Credit Directive?

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Published on LexisPSL on 20/04/2017

The following Financial Services Q&A provides comprehensive and up to date legal information covering:

  • Would taking second charges from client directors (as an alternative to those directors providing personal guarantees) fall within the scope of the consumer credit regime and/or the Mortgage Credit Directive?

Would taking second charges from client directors (as an alternative to those directors providing personal guarantees) fall within the scope of the consumer credit regime and/or the Mortgage Credit Directive?

In answering this Q&A, we have assumed that the proposed second charges mentioned are against the directors’ own residential property.

Under section 19 of the Financial Services and Markets Act 2000 (FSMA 2000) a person cannot carry out a regulated activity, or purport to do so, in the UK unless they are either an authorised person (ie authorised by the Prudential Regulation Authority and/or the Financial Conduct Authority (FCA)), or an exempt person (eg by being an appointed representative). For an overview of the regulated activities regime in the UK, see Practice Note: What are regulated activities?

As you can see in this Practice Note, activities are regulated if they are of a ‘specified kind’ (ie specified by the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544 (RAO 2001)) which is carried on by way of business. For more information about what it means to carry on a regulated activity by way of business in the UK, see Practice Notes: What does 'by way of business' mean? and Territorial scope of the general prohibition.

The regulated activities contained in the RAO include activities relating to consumer credit and regulated mortgage contracts (RMCs), including entering into

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