On 1 April 2014 the Financial Conduct Authority took over regulation of consumer credit from the OFT (Office of Fair Trading).
From that date, all businesses who hold a Consumer Credit Licence under the old system will not be able to trade unless they have registered with the FCA. If a business had a credit licence from the OFT, but has not registered with the FCA, its licence expired on 31 March 2014.
Some activities obviously require a licence from the OFT, such as selling goods or services on credit, or offering goods for hire under a regulated agreement. However, there are other business activities which are less obvious, such as businesses providing counselling or debt adjusting services to consumers. There are a wide range of different licenses which cover many different types of activities and the business must have the right type of licence otherwise an offence is committed.
Unlicensed trading is punishable by a fine and/or imprisonment. Perhaps more significant is the fact that you cannot usually enforce a regulated credit agreement if you were not licensed when it was entered into. This would mean that if the customer defaulted on the agreement you would not be able to legally enforce this.
Common areas where businesses mistakenly think they do not need a licence include:
- where they have stopped offering regulated credit agreements (but there are agreements that are still in force with consumers); and
- Where they do not actually offer to lend money from their own funds, but introduce the customer to a third party so they can obtain credit. A common example of this would be a car purchase, or where a home improvement company recommends a particular credit provider.
The law is complex, and you will need to obtain legal advice if you are in any doubt about how the Consumer Credit Act affects you, and what you need to do to ensure you are compliant.
Put simply, this is one regulatory change that those businesses affected cannot afford to ignore.
By Julie Goulbourne, Solicitor, Regulatory Department.