Consumer Credit Licensing

Consumer Credit Licensing Jessica Lockley Solicitor Trowers & Hamlins

Introduction • Consumer Credit Act 1974 as amended • Note current consultation by Government

Consumer Credit Licensing Why Is it Relevant? • Regulates credit agreements • Wide meaning of credit • Ancillary activities

Consumer Credit Licensing Why Is it Relevant? • Common RP regulated activities • Equity loans • Service charge loans • Employee loans • Brokering loans (including between group entities) • Debt advice • Collecting debt

Consumer Credit Licensing – How it affects you What category of Licence do we need? • A – Consumer Credit Business • B – Consumer Hire Business • C – Credit Brokerage • D – Debt Adjusting • E – Debt Counselling

Consumer Credit Licensing – How it affects you What category of Licence do we need? • F – Debt Collecting • G – Debt Administering • H – Credit Information Services • I – Credit Reference Agency • Canvassing

Consumer Credit Licensing – How it affects you Equity Mortgages - Help to Buy • One Equity loan 20% equity value (not two as per FirstBuy) • 1.75% interest from 5th anniversary • Partial repayment provisions

Consumer Credit Licensing – How it affects you Equity Mortgages • Compliance with certain parts of the Act • Total Charge to Credit • Signature Box • Section 60(3) Direction • Ongoing Compliance with the Direction

Consumer Credit Licensing – How it affects you Equity Mortgages • Further advances risk • No restriction on redemption • Consider commercial terms, such as • a minimum repayment figure • monthly interest payments • part redemptions

Consumer Credit Licensing – How it affects you Equity Mortgages • Second Charge • FSA exemption (subject to current proposals) • Mortgage Sales Guidance • Identity of lender and seller within the group • Current consultation on changes

Consumer Credit Licensing – How it affects you Service Charge and Employee Loans • Exemption • Specific class of individuals • Interest less than 1% plus base • Either a registered charge or a loan to an employee • Otherwise, compliance with the Act

Consumer Credit Licensing – How it affects you What does compliance mean? • Licence • Section 60(3) Direction if relevant • Advertising • Pre-contract information

Consumer Credit Licensing – How it affects you What does compliance mean? • Documentation to be compliant • Total charge to credit • APR • Example repayment figures • Prescribed statements • Both parties to sign

Consumer Credit Licensing – How it affects you What does compliance mean? • Copy original documents • Ongoing information • Annual statements • Notification of changes • Variations to be documented correctly • Default

Consumer Credit Licensing – How it affects you Applying for a Licence • Identify categories required • Complete online form • Details of the relevant company • Details of controllers including • Name changes • Previous licences held • Previous convictions

Consumer Credit Licensing – How it affects you Applying for a Licence • Credit Competence Plan • Debt collection • Debt counselling • Debt adjustment • Credit repair

Consumer Credit Licensing – How it affects you Applying for a Licence • Credit Risk Profile • Consumer credit • Credit brokerage • Debt administration AND • Subprime • Home lending

Consumer Credit Licensing – How it affects you Subprime • What is subprime lending? • Are LCHO applicants considered subprime? • Consequences of participating in this market • Duty to notify

Consumer Credit Licensing – How it affects you Commercial/Non-Commercial • Categories D (debt adjusting), E (debt counselling) and H (credit repair) • Whether or not profit is made is irrelevant • Global assessment of remuneration received for credit activity

Consumer Credit Licensing – How it affects you What do I need to do? • NHF guidance • Internal audit of activity • Speak to OFT or seek legal advice if unsure • Ensure that the correct licence categories are held by all group entities • Ongoing monitoring of activities

Consumer Credit Licensing