Tuesday, March 25, 2014

Consumer Credit Licence changes from 1 April 2014

We thought that ICAEW’s outline of the new FCA regulation was so good that we could just refer to it, but we have had several subsequent queries from IPs who have not read it, have been contacted by their regulators, or have read one of the more scaremongering posts around social media. As a result, we felt that we needed to say something more before the new regulation comes into force on 1 April. This post is adapted from some of the emails that we have recently sent to clients.  

The best current advice, in our opinion, is the ICAEW FAQ page that we recently highlighted in our Blog. Here is a link to it again:


There has also recently been guidance from R3 on the topic. Our understanding of this is that most IPs doing their normal work will not need a stand-alone Consumer Credit Licence. The big upside of not obtaining your own licence is cost – a stand-alone Consumer Credit Licence costs a four figure sum and the application form is extremely time consuming to complete!

ACCA have recently written to their members offering them the chance to sign up to be regulated under their “Designated Professional Body” (“DPB”) regulations, and presumably the other regulators will shortly be doing the same, if they have not already done so. This is a bit like the old group licence and will not cover you for specialist consumer credit work, but would cover you for anything “incidental” to your main work.  

The only possible downside is the uncertainty over how the FCA will treat DPB licences (i.e. those licences operated by the RPBs for their members) in the future, but you will then be in the company of the rest of the insolvency profession and the IP exemption should cover most of your work anyway.  

Our understanding is that the situations where you might need a separate licence over and above the IP exemption and the regulator’s licence under the DPB regime are few and far between. You should be protected as long as you keep detailed notes about your meeting with any individuals and the advice given, which you should be doing anyway, to show that the advice given was in reasonable contemplation of an insolvency appointment. You cannot know for certain that there is going to a formal insolvency appointment until you have actually had your first discussions with the individual. The FCA have made it clear that they do not expect every meeting held where advice is given to result in a formal insolvency appointment.

 Your file note of meeting should:

· set out the purpose of the discussions held – e.g. to consider whether a formal insolvency procedure is appropriate for Joe Bloggs, a director, in respect of guarantee liabilities following the failure of his company;

· summarise what was actually discussed; and 

· record the outcome of those discussions – e.g. after discussions it became clear that Joe Bloggs was not a suitable candidate for a formal insolvency procedure and he was advised to speak to/negotiate with his creditors/discuss a re-mortgage with a financial advisor.

From reading the ICAEW FAQs we think that the insolvency practitioner’s exemption will catch just about everything you do and we don’t think you are likely to need the back-up of the regulator’s scheme, but it may be prudent to get it as an extra layer, just in case.