Taken on credit

The Society holds a group consumer credit licence covering the activities of all its members. Members currently have the benefit of the licence by default and no specific application is required by any member.

With effect from 1 October

2008 the licence was further extended and now includes a right to give advice to the public on consumer credit matters within the following categories (see panel for more detail):

A Consumer credit

C Credit brokerage

D Debt adjusting and debt counselling

E Debt collecting

G Debt administration

H1 Provision of credit information services (including credit repair)

It is important to note that this group licence is limited to activities arising in the course of practice as a solicitor. It is valid until 2 February 2010.

In October the Society wrote to cashroom partners seeking information on the consumer credit functions undertaken by firms.

As part of its review of the activities of those operating under group licences the Office of Fair Trading is looking to the Society to put in place an improved fitness and compliance plan relating to those members who depend on the licence.

There are various features which are expected of such a plan, including tracking and monitoring the profession’s exercise of its rights under the licence and ensuring appropriate levels of competence and knowledge.

As the Society further develops its fitness and compliance plan you will hear more from us in relation to what is expected of firms, but in the meantime consideration should be given to:

(1) Who in the firm might take on the responsibilities of managing group consumer credit licence compliance when these are formalised in due course? (If you hold an incidental financial business certificate, the partner responsible for that area might be an obvious choice.)

(2) Who in the firm might attend training in the area? (The Society is developing a range of training opportunities over the next few months.)

(3) Reviewing the firm’s operation and practice in terms of consumer credit advice to ensure the competence and knowledge base of those delivering the same.

If you have any queries in relation to this issue, please contact the Society’s Professional Practice team on 0131 476 81641

Annex

A – Consumer credit

Allows you to lend money or provide other types of credit, including hire purchase, from your own funds. Firms funding outlays on behalf of clients without charges (including interest) are unlikely to be using the licence. However those who do make charges are likely to be offering consumer credit.

C – Credit brokerage

Allows you to introduce people to third party sources of consumer credit, consumer hire, or other credit brokers, but not to provide credit itself. On the basis of our survey a significant number of firms use the existing licence to introduce clients to sources of consumer finance and brokers.

D – Debt adjusting

Allows you to negotiate with people’s creditors on their behalf, or to take over debts. On the basis of our survey many firms operate in this area, particularly in instances such as negotiating with heritable creditors for an interest only period or otherwise in connection with potential repossession. A smaller number of firms operate on a commercial and/or non-commercial charitable basis.

E – Debt counselling

Allows you to advise people on debt problems under consumer credit agreements or consumer hire agreements. On the basis of our survey many firms are advising on debt problems and this area is of course experiencing significant growth in the current climate.

F – Debt collecting

Allows you to collect debts owed to other people under consumer credit agreements or consumer hire agreements. On the basis of our survey many firms operate at some level in this area pursuing commercial debts under consumer credit agreements.

G – Debt administration

Allows you to administer debts under consumer credit agreements or consumer hire agreements on behalf of the owner or creditor, but not engage in debt collecting. On the basis of our survey a number of firms operate in this area.

H – Credit information services (excluding credit repair)

Allows you to obtain information from credit reference agencies on behalf of other people, and to offer advice about the information obtained, but does not allow you to secure corrections or amendments to the information.

On the basis of our survey a significant number of firms use the Society’s group licence to advise clients.

H1 – Credit information services (including credit repair)

Allows you to obtain information from credit reference agencies on behalf of other people, to offer advice about the information obtained and to secure corrections or amendments to the information.

On the basis of our survey a smaller number of firms operate in this area.