Categories of consumer credit included in Institute’s group licence
(The following extract is included for information purposes only – the Institute’s Group Licence has now ceased)
There are 10 categories of consumer credit and six are included in Institute’s group licence (information is provided below on each of these categories):
Credit brokerage
If you introduce any individual to a third party so they can obtain credit then you will be using this category. This includes where clients need to borrow money to buy goods and services for which they would not otherwise have funds and are introduced to a source of that money. This may be the case, for example, in a hire purchase transaction, such as a car purchase. An introduction does not depend upon the broker forwarding the application to the lender. A recommendation to deal with a particular lender may amount to credit brokerage. It is also credit brokerage to introduce people to other credit brokers.
Debt adjusting
You will use this category if you carry out one or more of:
- Negotiate terms with the creditor on behalf of an individual for the discharge of a debt;
- Take over in return for payments by the debtor, his obligation to discharge a debt; or
- Engage in any similar activity concerned with the discharging of a debt.
If you offer to negotiate with creditors on someone's behalf, you will be using this category.
Debt counselling
Debt counselling is giving advice to a borrower about the liquidation of a debt due under a credit agreement or giving advice to a hirer about the liquidation of a debt due under a consumer hire agreement. ‘Liquidation’ is:
- Paying off the debt in full and in time;
- Agreeing a rescheduling or a temporary halt to paying off the debt;
- The debtor being released from the debt; or
- Agreeing a reduced repayment amount (including the creditor agreeing to accept token repayments).
Debt administration
Debt administration is needed if you take steps to:
- Perform duties under a consumer credit agreement or a consumer hire agreement on behalf of a creditor or owner, or
- Exercise or to enforce rights under such an agreement on behalf of a creditor or owner so far as the taking of such steps is not debt-collecting.
This category may include for example, some peer-to-peer lending platforms (but see below) and includes activities such as ensuring relevant documentary information and credit agreements comply with, and are completed in accordance with, relevant legal requirements.
You will not need this category if you are acting in your own interest; for example, administering loans where you are a creditor or owner.
Consumer credit
This category covers a wide range of activities including the following (non-exhaustive list):
- Hire purchase
- Issuing credit cards
- Budget accounts
- Instalment credit
- Cash loans
- Overdrafts
- Personal loans
- Pawnbroking
- Payday loans
- Bridging loans
- Shared equity loan.
For firms the relevance of this category is it includes allowing clients to pay their bills by instalments even if no interest is charged. If the instalment arrangement is for 4 or fewer payments over a 12 month period and no interest is charged, this is not consumer credit.
You will use this category if you:
- Obtain information on behalf of an individual about his financial standing (for example credit rating information), including asking a credit reference agency if it holds the information
- Provide advice to an individual on how to;
- Alter the credit information held;
- Omit some of the information;
- Restrict the availability of the information; or
- Do any of the above on behalf of an individual.
You do not need this category to request changes to your own information or if you are simply seeking information about an individual's creditworthiness, on your own behalf, for example a credit check on a new client.
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