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Consumer Credit License

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Introduction

The Consumer Credit Act 1974 states that businesses that offer credit or lend money to consumers should be licensed by the OFT (Office of Fair Trading). It is actually an offence to arrange or grant credit without a licence, doing so can result in a fine or imprisonment. There are rules you have to follow if you are a business that offers credit and any agreements have to contain the right and specific information.
Licensing arrangements may also be required by debt collectors, debt advisors and businesses that offer goods for hire or leasing.

If your consumer credit business deals with first charge mortgages, payment protection insurance or other types of insurance, then you may need permission from the Financial Services Authority to sell or administer regulated mortgage contracts and general insurance contracts. You should make sure you obtain permission before offering mortgages and insurance as you are taking the risk of being fined or even imprisoned. It is a criminal offence to carry out any activities that are not covered by your licence.
To find out if your business needs to be licensed by the FSA see the FSA website.

How much does it cost to get a license?

Fees applicable from the 6 April 2007 as follows:

Sole trader - £135
Partnership, limited company or other organisations - £335

For more detail, see the OFT website

How long does a licensing arrangement last?

A license lasts five years – the OFT has the power to revoke, suspend or vary the arrangement at any time.

How many arrangements is needed?

Your business may consist of several different companies or partnerships, if so then each company or partnership will need seperate licensing arrangements. One licensing agreement can cover any number of premises.

More than one Business name

Make sure if you trade under more than one name, that all the names are specified in the licensing arrangement. Before you choose to use a name you should make sure that no one else is trading under that name, you can do this free of charge by checking the Consumer Credit Register.

Changing Names and or Categories

You can change your trading name and your category by applying for a variation to your licensing arrangement. There will of course be an extra fee to pay unless that is you are making a renewal of your license at that time.

Businesses that require a licence

Your business requires a licence if you:

  • sell goods on credit or hire purchase terms
  • hire or lease out goods for more than three months
  • lend money
  • issue credit cards or trading checks
  • arrange credit for others
  • collect debts
  • help people with debt problems

It may be that you don't actually charge for services, or you may be non profit making, you should still make enquires to see if you require a license or not. Better to be sure than to break the law.