SRA statement on consumer credit work
The Solicitors Regulation Authority (SRA) has issued a statement to solicitors reminding them that a second consultation has been published by the Financial Conduct Authority setting out its rules and guidance for regulating consumer credit activities from 1 April 2014. The SRA is urging all solicitor firms that undertake consumer credit work to look at the consultation to ensure they have the correct arrangements in place when the law changes next year.
In September, the SRA told firms that the FCA will take over the regulation of consumer credit activity from the Office of Fair Trading (OFT) on 1 April. The group licence under which SRA-regulated firms currently operate will cease to have effect from that date.
Currently the SRA is responsible for the regulation of SRA firms carrying on consumer credit activities under the group licence issued by the OFT. The FCA will not be continuing the group licence regime, so SRA-regulated firms will need to consider how the ending of the group licensing regime will affect them.
Firms will need to consider whether they will meet the criteria set out in Part 20 of the Financial Services and Markets Act 2000 (see sections 327 and 332(4)) (FSMA) and therefore be exempt from the need to hold a consumer credit permission from FCA. Firms should already be familiar with the Part 20 regime in relation to financial services but it will now also be relevant to consumer credit activities.
Firms that do not believe that they will meet the Part 20 criteria will need to consider whether they wish to apply for an individual OFT consumer credit licence. Only firms with a current OFT consumer credit licence will be eligible to apply for interim permission. Meeting either the Part 20 criteria or holding an appropriate interim permission from the FCA on 1 April 2014 will ensure that a firm can continue to provide consumer credit activities.
Firms carrying on consumer credit activities without falling into one of these categories after 31 March 2014 will be committing a criminal offence and a breach of FCA regulations. Further information is available at http://www.oft.gov.uk/OFTwork/credit-licensing/apply.
The interim permission application process began on 1 September 2013. Forms and guidance on how to apply can be found on the FCA website at http://www.fca.org.uk/firms/firm-types/consumer-credit/consumer-credit-interim. The FCA consultation can be found on the FCA website at http://www.fca.org.uk/news/cp13-10-consumer-credit-detailed-proposals.