Guidance, what activities can I do?

This section provides guidance on the activities that a firm may undertake after 1 April 2014 and identifies whether it is a credit-related regulated activity by reference to the activities and definitions used in the Regulated Activities Order (as amended) (RAO). It then identifies if the activity can be undertaken by any firm, a firm eligible to conduct credit-related regulated activities under the Institute’s Consumer Credit (Transitional Arrangements) Regulations (a ‘consumer credit firm’) or only by a firm authorised by the Financial Conduct Authority (FCA).

This section is not intended to be an exhaustive list of potential activities, but is intended to identify the most common ones. These may not match the specific circumstances which a firm may have to consider, and in such circumstances further guidance should be sought.

In considering the following credit-related regulated activities, a client is a ‘consumer’ who is defined as:

  • An individual;
  • A partnership consisting of two or three persons of which at least one partner is an individual; or
  • An unincorporated body that does not consist entirely of bodies corporate and that is not a partnership.

If the client is not a consumer as defined then the activity is not a credit-related regulated activity.

Generally the credit-related regulated activities have to be in respect of a credit agreement or a consumer hire agreement. If this is not the case then the activity is not a credit-related regulated activity. Credit, as used in ‘credit agreement’ is defined in the RAO as including a cash loan and any other form of financial accommodation. It includes:

  • Hire purchase
  • Budget accounts
  • Installment credit
  • Cash loans
  • Overdrafts
  • Personal loans
  • Payday loans
  • Bridging loans

The section has two parts:

  • Table A is divided into the credit-related regulated activities that are listed in the RAO. If a ‘consumer credit’ firm can undertake an activity, then so can a FCA authorised firm, provided that firm has the appropriate FCA permissions.
  • Table B is the situation of a firm that assists its clients with a range of fee paying options .

Credit-related regulated activities - Table A

Activity/scenario Is this a credit-related regulated activity? Who can undertake this work?
Credit Broking
1 Client is referred to a lender for a loan that is to be a credit agreement with a value over £25,000. No, provided the loan is for the purposes of the client’s business. Any firm
2 Client is referred to a lender for a loan that is to be a credit agreement with a value under £25,000. Yes, even if the loan is for the purposes of the client’s business. A consumer credit firm
3 Client is referred to a lender for a loan, regardless of the purpose of the loan, but with a value exceeding £60,260. No, provided this is made in compliance with FCA rules which require various statements from the client agreeing, for example, to forego the protections provided if the agreement was to be a regulated credit agreement. Any firm
4 Client is referred to a lender for a hire purchase loan. Yes, a hire purchase loan is a regulated credit agreement. A consumer credit firm
Note, when making any of the above referrals, the firm should consider carefully the amount of the likely loan and so whether it is a credit-related regulated activity or not.
Debt adjusting
5 Negotiating terms with creditors on behalf of a client for settlement of the debt due under a specific regulated credit or consumer hire agreement. Yes A consumer credit firm
Debt counselling
6 Providing advice to a client about the liquidation of a debt due under a specific regulated credit or consumer hire agreement. Yes A consumer credit firm
Debt administration
7 Taking steps to perform duties or exercise rights under a specific regulated credit or consumer hire agreement on behalf of a creditor or owner (but not to debt collecting). Yes A consumer credit firm
Debt collecting
8 All steps connected with the collecting of debts owed to others, when the debts are due under specific regulated credit or consumer hire agreements Yes An FCA authorised firm
Entering into a regulated credit agreement as lender
9 A firm would normally only do this in the context of arrangements made with a client to pay its fees, see table B. Otherwise the firm should consider if such an arrangement is permitted under the Code of Ethics. Yes An FCA authorised firm
Consumer hire
10 Hiring, renting out or leasing goods to clients. Yes An FCA authorised firm
Providing credit information services
11 Seeking to obtain information on behalf of a client about his financial standing such as his credit rating. Yes A consumer credit firm
12 On behalf of a client seeking to amend information held by a credit information agency about his financial standing or to prevent that agency holding or disclosing such information. Yes A consumer credit firm
Providing credit references
13 Client has requested that the firm provides a reference in support of a mortgage or other loan application. No Any firm
14 Providing credit references on consumers to third parties. Yes An FCA authorised firm
Other
15 Client has requested general advice from the firm on the terms of a regulated credit or consumer hire agreement. No, provided the advice does not amount to debt adjusting or counselling. Any firm
16 Client has requested general advice from the firm about budgeting. No Any firm
17 Client has requested the firm to produce cash flows (or similar) to support an application for a regulated credit or consumer hire agreement. No Any firm

Credit-related regulated activities in relation to a firm's fees - Table B

In the following, it does not matter if the instalments are paid by cheque, standing order or direct debit, it is payment by instalments that is the key.

Activity/scenario Is this a credit-related regulated activity? Who can undertake this work?
Credit Broking
1 Client is referred to a lender who provides the client with funds to pay the firm’s fee and then repays the credit provider by instalments. Yes A consumer credit firm
Debt collecting
2 Taking action to collect firm’s own outstanding fees. No Any firm
Entering into a regulated credit agreement as lender
3 Firm renders fee on completion of work with normal payment terms such as 30 days from invoice date. No Any firm
4 Client pays fees by credit card. No Any firm
5 Client takes longer than normal credit terms to pay invoice. No Any firm
6 Client asks for time to pay invoice, suggesting payment by instalments to clear the outstanding balance. No, but only if there are no more than four instalments in any twelve month period and no interest is charged. Any firm
7 Client asks for time to pay invoice, suggesting payment by more than four instalments to clear the outstanding balance. Yes A consumer credit firm
8 Client pays a fixed amount each month throughout the year, firm renders a bill each month for the same amount, with a final fee note rendered at the end of the year. No Any firm
9 Client pays a fixed amount each month throughout the year, with a fee note rendered at the end of the year. No, fees paid in advance are not credit-related. Any firm
10 Client pays a fixed amount each month throughout the year with periodic fee notes rendered throughout the year. No, provided any outstanding amount due from the client does not represent more than four times the monthly payment. Any firm if the outstanding amount does not represent more than four times the monthly instalment, otherwise a consumer a credit firm.
11 Firm charges interest on late payment of fees (no instalments). No, but these terms must be set out in advance in the engagement letter. Any firm
Providing credit information services
12 Obtaining a report from a credit information agency as part of client take-on procedures. No Any firm
Note: If you no longer provide regulated credit agreements, as set out above, but still have agreements in force, you will still need to be within the scope of the Consumer Credit (Transitional Arrangements) Regulations.

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