Consumer credit regulation

We are in the process of developing helpsheets and videos for this area.  This content will be available soon.  Please visit this section of the website again.

Firms conducting consumer credit activities will require to be either:

• A regulated consumer credit firm with the FCA (or as an appointed representative of an FCA firm);or

• Be covered by one of the professional bodies’ Designated Professional Body (DPB) arrangements as an Exempt Professional Firm (also called the Part XX regime) - as long as the consumer credit activities are incidental and the firm is eligible under the DPB arrangements.

If you conduct consumer credit activities and meet our three requirements below your firm will be automatically covered by our DPB (Consumer Credit) arrangements.  No application process is needed and no fee is required.

There are three main requirements:

If you need any assistance or advice please contact us at 0131 347 0282 or regulatoryauthorisations@icas.com.

If you think you might need FCA authorisation, please contact the FCA FCA Consumer Credit Authorisation

Who is a consumer?

Consumer credit activities are only regulated if they are provided to a consumer client.  A consumer client is defined in legislation and is included as a defined term in our DPB (Consumer Credit) Handbook:

• An individual (that is a natural person)
• A partnership consisting of two or three persons of which at least one partner is an individual
• An unincorporated body that does not consist entirely of bodies corporate and that is not a partnership.

An example of the last item would be an unincorporated charity.

There is one exception to this - for the purposes of debt administration only, a consumer client also includes any person including a body of persons corporate.

What are consumer credit activities?

This guide should help you in identifying whether you are conducting any consumer credit activities Guidance on Credit Related Regulated Activities.

ICAS has also published further guidance on when advising a client becomes the regulated activity of debt counselling: Guidance on Consumer Credit Debt Counselling

If you offer your clients the facility to spread their professional fees, by allowing fee payment by instalment, this is a regulated consumer credit activity (called ‘entering a regulated credit agreement’).  Unless you can apply one of the exemptions available:

Available Exemptions

The following instalment arrangements are exempt:

• Instalment credit agreements entered into before 18 March 2015: where there are 4 payments or less in a 12 month period, with no interest or charges (except for default charges).
• Instalment credit agreements entered into on or since 18 March 2015: following lobbying by ICAS, and other affected bodies, the instalment credit has been extended to 12 instalment payments or less in a 12 month period, with no interest or charges (except for default charges).  However firms wishing to apply this exemption require to ensure all client agreements are dated on or after 18 March 2015;

Agreeing new terms on or after 18 March 2015

If you want to avail of the new 12 payment exemption, you will require to refresh your engagement terms with your clients.  The FCA has indicated that notifying your clients is not enough and that it is important to obtain the client’s agreement to the new terms in writing e.g. by issuing new engagement letters or new standards terms and obtaining the clients’ agreement.

Sample engagement letter wording: ‘We offer you the facility to pay your professional fees by [monthly][quarterly] instalments.  We do not charge any interest or charges [except for default charges].  As these terms have been agreed after 18 March 2015 this instalment agreement is not a regulated credit agreement.’

If you do not conduct any consumer credit activities (called credit-related regulated activities in the handbook) you don’t need to comply with the Handbook.

If, however, you conduct such activities you will require to apply our Handbook if you are covered by our DPB (Consumer Credit) arrangements (see previous menu items).

The Handbook replaces the transitional arrangements.

We will be issuing helpsheets in due course to guide you through the Handbook.

Downloads

DPB(Consumer Credit)Handbook

To be covered by our DPB (Consumer Credit) arrangements you need to ensure that all consumer credit activities (called ‘credit-related regulated activities’ in our Handbook) are incidental, complimentary and arise out of professional services, which are not themselves regulated activities.

These requirements are set out in regulations 3.04 and 3.05 of the Handbook.  Guidance on incidentality is set out in Schedule 2 of the DPB (Consumer Credit) Handbook.

A firm should be able to show that:

• is mainly concerned with providing professional services other than regulated activities; and

• the provision of any regulated activities is not isolated from the firm's other activities such that there is in effect a separate business.

When any set of services, such as auditing, accounting or taxation, are provided to a consumer client the services will not necessarily be provided in a particular order - the exempt credit-related regulated activity can be provided to the consumer client as the first service.

How consumer credit changes could affect firms involved in insolvency PDF [155 KB]

Insolvency Practitioners can avail of a statutory exclusion while acting as an Insolvency Practitioner in respect of the activities of:

• debt adjusting;
• debt counselling;
• debt collecting;
• debt administration; and
• providing credit information services.

This exclusion extends to when an Insolvency Practitioner is acting in "reasonable contemplation of appointment".  In this case, the relevant activities are:

• debt adjusting;
• debt counselling; and
• providing credit information services.

The exclusions also apply to those working for the practitioner.  The legislation does this by including within the definition of "'acting as an insolvency practitioner" (or acting in "reasonable contemplation" of appointment) the insolvency practitioner’s:

• employer;
• partnership (if the IP is a partner); or
• LLP (if the IP is a member of an LLP).

These are "exclusions" rather than "exemptions".  So if the insolvency practitioner carries out other credit-related regulated activities that require FCA authorisation, then FCA authorisation will be required unless the firm is eligible to avail of the ICAS DPB arrangements.

For firms to use the DPB (Consumer Credit) Handbook all their Insolvency Practitioners must be licensed by ICAS (or ICAEW or CAI).

• Can firms which have FCA authorisation for consumer credit apply PROF 5.2 for any non-mainstream investment business of consumer credit activities?
  • No, as ICAS has no regulatory scope for investment business or consumer credit activities undertaken by FCA ‘Authorised Professional Firms’, ICAS does not monitor the investment business or consumer credit activities of those firms.
  • Such firms cannot therefore adopt the DPB (Consumer Credit) Handbook or DPB (Investment Business) Handbook and must apply the FCA Handbook to all mainstream and non-mainstream investment business and consumer credit activities.

If you have any consumer credit queries please contact regulatoryauthorisations@icas.com or 0131 347 0286.

A notice for firms with interim permission with FCA for Consumer Credit activities and who were DPB licensed for Investment Business

By virtue of a statutory instrument issued on 27 March 2014 (The Financial Services and Markets Act 2000 (Consumer Credit) (Transitional Provisions) (No. 2) Order 2014) a firm that before 1 April 2014 held an OFT standard licence and after that date has an interim permission to undertake credit related regulated activities will be able to use the DPB exemption, for a transitional period, for other exempt regulated (investment business) activities as set out in the DPB handbook. This transitional period end will end when the FCA notifies the firm that it has 'full' permission. At that point when the firm obtains full permission for consumer credit activities it will no longer be eligible to hold a DPB licence for investment business and will have to cease the investment business and other activities permitted by the DPB Handbook. If it wishes to continue to undertake such activities (after receiving full FCA permission for credit-related regulated activities) the firm should apply to the FCA for permission to undertake such activities.