On 1 April 2015, responsibility for consumer credit in the UK transferred from the Office of Fair Trading (“OFT”) to the Financial Conduct Authority (“FCA”). A consequence of this was to replace the OFT’s Consumer Credit Act licencing scheme with the FCA’s authorisation scheme under the Financial Services and Markets Act 2000 (“FSMA”).
The impact of this has been significant and has led us to publish a practice note on Consumer Credit Law for Insolvency Practitioners on Lexis PSL.
The practice note summarises the transfer from the OFT to the FCA and the impact on insolvency practitioners and professional services firms. Under the old OFT regime, accountants and lawyers could rely on the group licences issued to their regulatory bodies, and did not need to obtain individual licences. The group licencing scheme no longer exists. Although lobbying resulted in exclusions being introduced for IPs providing debt advice in “reasonable contemplation of an appointment” and for IPs once appointed as such, and also for solicitors carrying on debt collection activities with the intention of litigating, the exclusions are limited in their scope.
Consumer credit is a very complex area of law and shoehorning it into FSMA has left a lot of unanswered questions. It is very easy to enter into a regulated credit agreement. There is an argument that simply agreeing a payment plan with an individual debtor and giving him or her time to pay could create a regulated credit agreement. Additionally, an IP could very easily breach consumer credit law if they try to collect the debts due to an insolvent company who has unwittingly entered into a regulated credit agreement without the necessary authorisation.