In the meantime, the FCA and the OFT have written to firms asking them to check that they are correctly registered and licensed under the current regime. Apart from the obvious static details - name address etc ( and making sure that your licence is current and not expired) the issue for many firms is to establish what exactly the correct licensing categories are for the business that they undertake.
The purpose of this blog is to give a bit of background to this and to help firms head in the right direction. before reading on, you might want to check this information yourself on the OFT web site here:
http://oft.gov.uk/OFTwork/credit-licensing/do-you-need/licence-categories/#.UgoOg5JONy0
However, if you would prefer to hear a point of view first, read on.
This blog lists out the categories and suggests the circumstances in which they would be needed. The next blog that I issue will explain what you have to do if you need to make any changes.
What are the Categories ?
There are 9 distinct categories of activity under the consumer credit licence and exactly which ones you need to have will depend upon exactly what you do. I am going to offer suggestions for those categories that would apply to a 'normal' mortgage brokerage and so whilst this may be useful for some firms, I would emphasise that you need to get verification before you can sit back a relax.
Category A Lending under the CCA
Before you offer to lend money from your own funds, for regulated consumer credit agreements you will need this category. Most brokers that I know and deal with do not offer their own funds to clients under consumer credit regulated agreements and so generally speaking will NOT NEED this Category.
Category B Hire Purchase Agreements
Again, most brokers that I know and deal with do not hire, rent out, or lease goods under any regulated agreements, where the arrangement is capable of lasting for more than three months. This category would NOT NORMALLY APPLY to mortgage brokers.
Category C Arranging credit
You will need this category if you will introduce any individual to a third party so they can obtain credit. The OFT site states the following (I have not updated the obsolete references to the FSA with FCA ):
Most financial advisors need this category and almost all appointed representatives need their own licence, for example, to use their own business premises or own trading style. You may also need to be authorised by the Financial Services Authority (FSA) before you can obtain a consumer credit licence. Introducing people to lenders or other credit brokers for the purposes of obtaining a first charge mortgage is now generally regulated by the FSA. Basically YOU SHOULD HAVE THIS CATEGORY.
Category D Debt Adjusting
This is the first of those categories that could be contentious.
The OFT states that :
You may need this category if you will:
- negotiate terms with the creditor on behalf of an individual for the discharge of a debt, or
- 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.
This may leave firms to believe that category D is not required.
However, the OFT also makes the point that :-
However, the OFT also makes the point that :-
If a customer has existing debts, before you lend or broker additional funds you may undertake to adjust the existing debts owed by the customer. For example this covers the following: ...
- financial advisors who discharge existing debts as they lend additional funds.
You may simply offer to negotiate with creditors on someone's behalf - before you do, you may need this category. I would further make to observation that if you do not have this category of licence you could be precluded from discussing or arranging repayment of existing CCA regulated debts before a mortgage is advanced. Many firms that I have dealt with will at some time become involved in discussions with existing creditors on behalf of clients. It is RECOMMENDED that you have this category in place even though the OFT site says:-
Since 31 October 2004, it has not generally been debt adjusting to carry on any of the above activities solely for debts due under mortgages regulated by the FSA. Such activity is regulated by the FSA.
BUT, The pre-existing credit I am referring to is not the current mortgage but existing unsecured loans or credit cards.
Category E debt Counselling
The OFT states that :-
It would be unusual for any business to adjust a client's debts without having counselled or advised them about it first. It is expected that both Categories D and E are applied for together in such circumstances.
Although the usual statement is evident on the OFT site (Since 31 October 2004, it has not generally been debt counselling to carry on this activity solely for debts due under mortgages regulated by the FSA. Such activity is instead regulated by the FSA.) the point here is that in recommending a mortgage, you may recommend certain courses of action in relation to any existing consumer credit loans or cards. For example, the mortgage lender might require certain loans to be cleared before agreeing an advance. Suggesting this to a client falls under this category of licence.
It is RECOMMENDED that you have this category in place.
Category F Debt Collecting
You will need category F if you will take steps connected with the collecting of debts owed to others under any regulated consumer credit or hire agreements and you will simply be collecting those debts on the third party's behalf.
Most firms that I know and deal with do not routinely engage in this kind of activity and so I suggest that this is not required for most. You do not need this category if you collect debts owed to you or your own firm.
Category G Debt administration
You will only need this category of licence if you engage in the administration of consumer credit regulated debts on behalf of a consumer credit lender or other firm. Again , most firms that I know and deal with do not routinely engage in this kind of activity and so I suggest that this is not required for most.
Category H Credit Information Services
You will need this category if you will take steps to check the financial standing or credit ratings of individuals, such as contacting the credit reference agencies for information on your clients' behalf. If in addition you want to be able to contact credit reference agencies on behalf of a client to repair the credit record, you will also need category H1.
You will need category H1 if you want to:
- seek to 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 individuals on:- how to seek to alter,
- or secure the omission of, the information- how to seek to restrict the availability of the information seek to alter,
- or secure the omission of, information about an individual's financial standing seek to restrict the availability of the information.
It is recommended that you have H and H1 as part of your licence.
Category I Credit reference agency
A normal brokerage will not require this category. it more or less applies to the big credit reference agencies like Experion.
Canvassing Off trade premises
Canvassing Off trade premises
Since the end of the Mortgage Code, this additional option has possibly not been required. However, there could be circumstances where you visit a client for a mortgage and end up offering unsecured or other consumer credit regulated loans to a client. To cover you in this event, you should hold this category.
I think that is enough for now. As I said above, I will be issuing a blog about how to update your CCL shortly but in the meantime if you have any queries, please feel free to contact me through the Blog comments or directly to david.c.payne1@btinternet.com
I think that is enough for now. As I said above, I will be issuing a blog about how to update your CCL shortly but in the meantime if you have any queries, please feel free to contact me through the Blog comments or directly to david.c.payne1@btinternet.com
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