consumer credit licensing jessica lockley solicitor trowers & hamlins
TRANSCRIPT
Consumer Credit Licensing
Jessica LockleySolicitor
Trowers & Hamlins
Introduction
■ Consumer Credit Act 1974 as amended■ Note current consultation by Government
Consumer Credit Licensing
■ Regulates credit agreements■ Wide meaning of credit■ Ancillary activities
Why Is it Relevant?
Consumer Credit Licensing
■ 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?
Consumer Credit Licensing – How it affects you
■ F – Debt Collecting■ G – Debt Administering■ H – Credit Information Services■ I – Credit Reference Agency■ Canvassing
What category of Licence do we need?
Consumer Credit Licensing – How it affects you
■ 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
Consumer Credit Licensing – How it affects you
■ Compliance with certain parts of the Act- Total Charge to Credit- Signature Box
■ Section 60(3) Direction■ Ongoing Compliance with the Direction
Equity Mortgages
Consumer Credit Licensing – How it affects you
■ Further advances risk■ No restriction on redemption■ Consider commercial terms, such as
- a minimum repayment figure- monthly interest payments- part redemptions
Equity Mortgages
Consumer Credit Licensing – How it affects you
■ 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
Consumer Credit Licensing – How it affects you
■ 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
Consumer Credit Licensing – How it affects you
■ Licence■ Section 60(3) Direction if relevant■ Advertising■ Pre-contract information
What does compliance mean?
Consumer Credit Licensing – How it affects you
■ Documentation to be compliant■ Total charge to credit■ APR■ Example repayment figures■ Prescribed statements■ Both parties to sign
What does compliance mean?
Consumer Credit Licensing – How it affects you
■ Copy original documents■ Ongoing information
■ Annual statements■ Notification of changes
■ Variations to be documented correctly■ Default
What does compliance mean?
Consumer Credit Licensing – How it affects you
■ 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
Consumer Credit Licensing – How it affects you
■ Credit Competence Plan■ Debt collection■ Debt counselling■ Debt adjustment■ Credit repair
Applying for a Licence
Consumer Credit Licensing – How it affects you
■ Credit Risk Profile■ Consumer credit■ Credit brokerage■ Debt administration
AND■ Subprime ■ Home lending
Applying for a Licence
Consumer Credit Licensing – How it affects you
■ What is subprime lending?■ Are LCHO applicants considered
subprime?■ Consequences of participating in this
market■ Duty to notify
Subprime
Consumer Credit Licensing – How it affects you
■ 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
Consumer Credit Licensing – How it affects you
■ 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?