Need Consumer Credit?
- Do you need a Consumer Credit Licence?
- Credit Licences and You
- The Types of Business Requiring a Licence
- Applying for a Licence
- Useful Addresses
DO YOU NEED A CONSUMER CREDIT LICENCE?
There are several things you need to consider before applying for a Consumer Credit Licence, including determining whether your business requires you to obtain a licence at all.
If your company is in any way connected with transactions where customers are given time to pay (for example, if it sells on credit, hires or leases out goods, lends money, issues trading checks or credit cards, arranges credit for third parties, offers HP terms, collects debts, helps others with debt problems or advises on the credit standing of individuals) you may need a Consumer Credit Act licence from the Office of Fair Trading.
Every trading name licensed by the OFT must be different, and over 500,000 OFT licences have been issued. If your Company is likely to need a CCA Licence, these names should be checked before registering a Company name. We can check this register for you, and apply for an OFT licence on your behalf.
| The total search, licence and levy charges are as follows: | |
| Sole Trader: Search, application fees and levy | £445 inc VAT |
| Partnership or Company: Search, application fees and levy | £795 inc VAT |
| Unlimited Name Searches fee only | £25 |
CREDIT LICENCES AND YOU
The Consumer Credit Act 1974 applies to Great Britain and Northern Ireland. If your business is connected in anyway with transactions where customers are given time to pay, you may need a licence.
Why?
Licensing was introduced to help make the provision of credit fair to both sides of the counter and to prevent those who had not been fair in the past from undertaking credit business. Therefore licences are not granted to traders who are known to be unfit to hold one.
If you make transactions that come within the scope of the Act and you do not have a licence:
* You are committing a criminal offence and
* You cannot enforce the agreement if your customer defaults, but customers can still enforce an unlicensed agreement against you.
How can I tell if I need a licence?
It depends on the nature of your business.
First ask yourself these questions:
Do I deal with companies only?
Is the amount of credit or the cost of hire always more than £25,000?
If you answer YES to either of these questions, you are not likely to need a licence. If you answer NO to either of them, ask yourself the following:
Do I want to sell on credit?
Hire or lease out goods for more than three months?
Lend money?
Issue trading checks or credit cards?
Arrange credit for others?
Offer HP terms?
Help people with debt problems?
Advise on people's credit standing?
If you answer YES to any of the questions, you are likely to need a licence:
THE TYPES OF BUSINESS REQUIRING A LICENCE
There are several different kinds of business activity involving credit which can only be carried on if you have a licence. The Office recommends that you apply for a licence 'to cover all categories of credit and hire business' (as specified on the application form). If you want only a specific category licence, it is important that you read the following information very carefully and seek every category your business needs. Apart from criminal penalty, your licence could be revoked entirely if you are not covered for all your credit activities. Professions and trades are 'businesses' for licensing purposes. Even if your business does not make a charge for its services or is non-profit making it may still need a licence. You will need a licence even if the credit activity forms only a small part of your overall business.
Consumer Credit Business
If, as part of your business you lend money, offer credit or give people time to pay for goods or services, you are likely to need a credit licence for category A.
Consumer credit business covers a wide range of different transactions, such as:
- Hire purchase
- Instalment sales
- Trading checks
- Credit cards
- Cash loans
- Overdrafts
- Budget accounts
- Subscription accounts
Examples: retailers or trade suppliers offering credit using their own funds, banks, finance houses, building societies, pawnbrokers, money lenders, check traders, mail order firms, credit card companies, tallymen, firms offering loans to their employees.
Consumer Hire Business
If you want to hire out, lease or rent out goods under transactions which may last for more than three months and where the total hire payments do not exceed £25,000, you are likely to need a credit licence to cover you for category B.
Examples: businesses leasing or hiring out TVs, cars, office or factory equipment, plant or vending machines.
Credit Brokerage
Even if you are not going to offer credit or hire yourself, you may want to introduce your customer to someone who will. If so, you are likely to need a credit licence covering category C.
For example, a car dealer may want to introduce a customer to a firm offering hire purchase facilities; an estate agent may want to arrange a mortgage for a client through a building society; a supplier may want to arrange credit with a finance house for a customer wishing to lease equipment.
Credit brokerage covers introducing people to virtually any source of credit or hire where the amount does not exceed £25,000 or to sources of mortgages for house purchase for any amount. It makes no difference if no commission or charge is received for effecting the introduction.
Examples: mortgage and insurance brokers, retailers who introduce customers to finance houses, car dealers, estate agents, accountants.
Debt Adjusting and Debt Counselling
If you help people with their debt problems by taking over their debts or negotiating on their behalf, or if you want to advise them how to discharge specific debts, you are likely to need a licence covering category D where the debts arise under consumer credit or hire agreements.
Motor dealers, for example, may need a licence covering category D if they negotiate the terms of settlement on outstanding hire purchase agreements when cars are being part-exchanged. If they simply obtain a settlement figure with a finance house, they will be covered by their category C brokerage licence. But it becomes debt adjusting, requiring a credit licence covering category D, if they try to obtain a more favourable settlement, by offering, say, to place the HP business for the replacement car with the same HP company.
Examples: accountants, motor dealers, mortgage and insurance brokers, social and consumer agencies who give advice about debt problems.
Debt Collecting
If you collect debts due to others arising from credit or hire agreements not exceeding £25,000, you are likely to need a credit licence covering category E. For example, if you take active steps to collect payments for an HP company by writing to or visiting the debtor.
A licence covering you for category E activities is not necessary where you collect your own debts, or you do no more than receive payments as they are due, or you merely collect rent due under a normal tenancy agreement.
Examples: debt collectors, trade protections societies, finance houses, which discount the debts of others.
Credit Reference Agency
If you want to collect information about the credit-worthiness of people with a view to giving it to others, you will be regarded as a credit reference agency and are likely to need a licence covering category F. Merely giving references based on records of your own dealings with customers, however, does not make you a credit reference agency.
Examples of businesses requiring a credit licence covering category F: credit reference agencies, trade protection societies, one of a group of companies that supplies information to other members in the group.
Canvassing credit off trade premises
The Act places restrictions on traders canvassing credit off trade premises. Broadly speaking, this term means calling uninvited on individuals to try and persuade them to transact credit or hire business.
Some types of canvassing do not come within the scope of the Act. Other types are permitted, but only if the canvasser holds a licence which has been endorsed to authorise canvassing off trade premises, and some types of canvassing are prohibited altogether.
APPLYING FOR A LICENCE
Application Form - Apply online
You must not enter into credit activities covered by the Act before you have applied for, and have been granted, a licence.
Public Register
A public register holds information on consumer credit licence applications under consideration, whether people are licensed and which of their activities are covered by the licences. The register contains details of licence applications; existing licences; revocations; suspensions or variations of licences.
Duration of your licence
The licence is valid for five years from the starting date shown on it.
Transferring a licence
A licence cannot be transferred to another person. Because of this rule, changing the structure of your business - for example from a partnership to a company - will usually mean applying for a new licence.
Penalties for unlicensed trading
It is a criminal offence to engage in activities controlled by the Act before your licence has been granted. Even if you have got a licence it is an offence to engage in activities which are not covered by that licence.
