Consumer Credit Licensing Jessica Lockley Solicitor Trowers & Hamlins.

Consumer Credit Licensing

Jessica LockleySolicitor

Trowers & Hamlins

Introduction

■ Consumer Credit Act 1974 as amended■ Note current consultation by Government


■ Regulates credit agreements■ Wide meaning of credit■ Ancillary activities

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

Why Is it Relevant?

Consumer Credit Licensing – How it affects you

■ A – Consumer Credit Business■ B – Consumer Hire Business■ C – Credit Brokerage■ D – Debt Adjusting■ E – Debt Counselling

What category of Licence do we need?


■ F – Debt Collecting■ G – Debt Administering■ H – Credit Information Services■ I – Credit Reference Agency■ Canvassing

What category of Licence do we need?


■ One Equity loan 20% equity value (not two as per FirstBuy)

■ 1.75% interest from 5th anniversary■ Partial repayment provisions

Equity Mortgages - Help to Buy


■ Compliance with certain parts of the Act- Total Charge to Credit- Signature Box

■ Section 60(3) Direction■ Ongoing Compliance with the Direction

Equity Mortgages


■ Further advances risk■ No restriction on redemption■ Consider commercial terms, such as

- a minimum repayment figure- monthly interest payments- part redemptions

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

Equity Mortgages


■ 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

Service Charge and Employee Loans


■ Licence■ Section 60(3) Direction if relevant■ Advertising■ Pre-contract information

What does compliance mean?


■ Documentation to be compliant■ Total charge to credit■ APR■ Example repayment figures■ Prescribed statements■ Both parties to sign



■ Copy original documents■ Ongoing information

■ Annual statements■ Notification of changes

■ Variations to be documented correctly■ Default



■ Identify categories required■ Complete online form

■ Details of the relevant company■ Details of controllers including

- Name changes- Previous licences held- Previous convictions

Applying for a Licence


■ Credit Competence Plan■ Debt collection■ Debt counselling■ Debt adjustment■ Credit repair



■ Credit Risk Profile■ Consumer credit■ Credit brokerage■ Debt administration

AND■ Subprime ■ Home lending



■ What is subprime lending?■ Are LCHO applicants considered

subprime?■ Consequences of participating in this

market■ Duty to notify

Subprime


■ 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

Commercial/Non-Commercial


■ 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

What do I need to do?

Consumer Credit Licensing Jessica Lockley Solicitor Trowers & Hamlins.

Documents

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