Consumer Credit Licensing Jessica Lockley Solicitor 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 5 th 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?