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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
Category: Finance
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Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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Consumer Credit Act

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I need to know when a person has to registered as a money lender under the Consumer Credit Act. e.g. Person A lends to a friend Person B loan of £6,000 by monthly instalments which is a personal loan with no security. Person A however lends money regularly charging interest in commercial transactions and takes a mortgage over a commercial property to secure his loan. Does Person A have to be licensed under CCA for all the above loans

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

The key point here is -- as you say -- person A regularly lends money and charges interest at commercial rates. This makes this a commercial activity.

YES, he would definitely need a license. There are many categories of licenses and he needs to take one of them. Read more below.

http://oft.gov.uk/OFTwork/credit-licensing/do-you-need/licence-categories/#.UmqDAkDX9c8


Further to this, also note that if Person A continues such activities without obtaining license, he can be subjected to penalties. Read more at :

http://oft.gov.uk/OFTwork/credit-licensing/penalties-and-requirements/#.UmqC90DX9c8


In case of any complaint or greivances, you can certainly contact OFT - Office of Fair Trading. You many have further details at :

http://oft.gov.uk/contactus


I am sure this would help. You may please leave a positive rating if this helps as this ist the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards,
Customer: replied 5 years ago.

Thank you Rakhi,Just so that you know I had already read the CCA and had more or less came to the same conclusion but had some concerns that if he lent on first charge on commercial properties that appears to be exempt under the CCA and is not a regulated activity under the FSMA [as opposed to residential properties that are regulated]and if did not need licensing under FSMA [if that is correct] then he did not need licensing under the CCA..So in view of that I am not convinced your answer is correct . The OFT website you have referred to in your link says:


 


Category A [License] does not cover lending for first charge mortgages. These are regulated by the Financial Services Authority (FSA).


 


However, as you know I have paid for a detailed answer and so I need to know the actual part of the legislation that justifies your conclusion in your second paragraph. I will find that information far more convincing.


 


I look forward to your reply


 


Allen Elliott

Dear Allen,

Hello and welcome again. Thank you for your follow up reply.

There is difference of interpretation here. Let me explain. What you have read has to be read in conjunction of Person A's activities.

The most important point here is that Person A regularly indulges in this. Creating a first charge is interpreted as a one off transaction. Or else, even regular money lenders who has lending as a business and who are the first charge creaters would stand exempted. Which is obviously not the case.

In this case, the Person A is deemed money lender as he is does this FREQUENTLY and charges commercial interest. This would be a deemed business income and anyone who is a professional money lender would require licensing.

Having said this, I draw your kind attention to the following link, in whose definition person A falls. It says ".............If you or your business sells goods or services on credit, offers goods for hire or provides debt counselling or debt adjusting services to consumers, you almost certainly need to be licensed by the OFT............"

http://oft.gov.uk/OFTwork/credit-licensing/do-you-need/;jsessionid=B94AA4A06358B9C314004DC8230DDA4C#.Umt1AFPl3XQ



Having said this --
the above shall apply ONLY if he is giving money which in turn is sourced from somewhere else. In that case he shall require "category C, 'Credit brokerage'. License.

Further to this, if he is lending is own money, then he will not require license under CCA. IN THIS CASE, he would be regulated by FSA- Financial Conduct Anthority. Refer :

http://www.fsa.gov.uk/doing/do


The botXXXXX XXXXXne is -- he cannot do such business without licensing. If he is lending his own money, he HAS to be regulated and licensed by FSA. If he is securing you money sourced by third party,he would require "category C, 'Credit brokerage'. License under CCA. BUT HE CANNOT continue unregulated and unlicensed.


I am sure this would help. You may please leave a positive rating if this helps as this ist the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards,
Customer: replied 5 years ago.

Rakhi, I think we are nearly there. I thought I had made it clear that he was lending his own money [reference to brokerage or third party has never been mentioned] and for the avoidance of doubt he does none of the following:


If you or your business sells goods or services on credit, offers goods for hire or provides debt counselling or debt adjusting services to consumers, you almost certainly need to be licensed by the OFT............".


He just lends his own money to mostly companies by first charge and sometimes individuals on an unsecured basis


 


I do not understand why you say if he is lending his own money then he is not covered by CCA but covered by FSA.


 


Did you mean to say that if he lends his own money by first charge then it is not covered by CCA but FSA [now FCA]


 


If not, Please refer me to the legislation or guidance note that supports your statement statement.


 


Thanks Again


 


Allen Elliott

Dear Allen,

Hello and welcome again. Thank you for your follow up reply. Let me throw more light on your query.

There is a definite reason why I talked about if he is lending is own money. Let me take you to Category A license which is meant for "Consumer Credit". It says that "........Category A does not cover lending for first charge mortgages. These are regulated by the Financial Services Authority (FSA).........."

Refer the link below.

http://oft.gov.uk/OFTwork/credit-licensing/do-you-need/licence-categories/#.UmuzGVPl3XR


Now, let me also tell you the reason why I asked if he is lending his own money. The above applies if he is lending his own money. BUT if he is NOT lending his own money, then the above link also says that "........If however you will arrange finance for your customers through a third party see category C, 'Credit brokerage'......."

http://oft.gov.uk/OFTwork/credit-licensing/do-you-need/licence-categories/#.UmuzGVPl3XR


To sum up, this was the basis of my opinion. If he is lending his own money, since first charge mortgages are not covered under CCA, he would be regulated by FSA. If he is procuring credit for you from third party, only then he would need category C License from CCA.

I am sure this would help. You may please leave a positive rating if this helps as this ist the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards,
Dear Allen,

Did your query got resolved ? I hope by now you must have definitely made out why I am referrring you to FSA and not CCA.

Person A lending his own money brings him under the jurisdiction and regulatory scope of FSA.

I understand that you have paid for a detailed reply which I tried my level best to provide. However, even if you have paid we do not receive credit for assisting you unless you leave a positive rating.

If this has helped, you may kindly do so and oblige.

Warm Regards
Customer: replied 5 years ago.

Rakhi,I want to close this off as well but so that I totally understand your final advice :- in so far as the same person is lending his own money by way of unsecured personal loan [that is without any mortgage security whatsoever] he will need to be licensed under the CCA [Category A being a " cash loan"]


 


is that correct?


 


and lastly, I notice at no time have you referred me to any particular section of any act , so actually we are relying on OFT Guidelines on the CCA contained in the links you gave me e.g " Do I need a license?"


 


is that correct?


 


Allen Elliott

Dear Allen,

Hello and welcome again. Thank you for your reply.

Let me reconfirm what I said.

1. -- YES.. You are correct to understand this. If this is a cash loan / personal loans / unsecured loans, he would need Category A License under CCA

ONLY in case of first charge, he would be subject to FSA regulations.


2. --We are relying on Provisions of Consumer Credit Act, 1974, whose section 24 and 24A deals with licensing requirements. Kindly refer the legislation below. OFT is established under this act.

http://www.legislation.gov.uk/ukpga/1974/39/section/24A



I am sure this would help. You may please leave a positive rating if this helps as this ist the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards,
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