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Do you currently hold one of the old consumer credit licences which show permissions for multiple categories you never use? It will no doubt be due for renewal soon, and you will need to apply for the categories you use. We have detailed the main points to consider when applying for a consumer credit licence or renewing one.
Do I need a licence?
The type of business and customer type will decide if you need a licence or not. You are likely to need one if you: sell goods or provide service on credit, hire or lease out goods for more than three months, lend money, arrange credit for others, offer hire purchase terms, collect debts or purchase debts, help people with debt problems, advise people of, or help them find information on, their credit standing administer agreements (but do not collect debts).
For a standard mortgage broker then if you sell secured loans, buy to let mortgages or provide debt counselling via debt consolidation re-mortgages then you will need a licence. Failure to hold a licence or use a trading name not listed on your licence can lead to a fine and/or imprisonment.
Now that you have established you need a licence you should be aware of the cost, this is not dependent on the type or number of categories you require it’s based on company type.
For sole traders it is £575
For a partnership, company or other organisation it is £1215
It’s important you make sure your application details are correct and include the correct categories as changes later will cost from £80.
Category A consumer credit business
Category B consumer hire business
Category C credit brokerage
Category D debt adjusting
Category E debt counselling
Category F debt collecting
Category G debt administration
Category H provision of credit information
Category I credit reference agency.
Most mortgage brokers will require Category C - Credit Brokering (for secured loans, buy to lets, even if you introduce this business) and Category E - Debt Counselling (for advising individuals about how to discharge specific debts such as debt consolidation for a mortgage).
Most debt management firms will require just Category D and E.
Consumer credit applications take a lot longer now and a more thorough check is carried out by the OFT before granting applications.
The OFT advertised timescales state that 90% of low risk applications are completed within 25 days and 75% of high risk applications within 50 days. However debt management applications are scrutinised more and take anywhere from six months to a year. Timescales are no doubt based on fully completed applications with minimum further questioning after submission, they also depend on how quickly you respond to any requests for further information from the OFT.
You need to ensure the business name or any trading names listed on your application are not misleading or undesirable. It would be considered misleading to use a name already listed on companies house or authorised by the OFT. Even if you come to renew your application and been using a trading name previously the OFT can have it removed if it feels it breaches guidelines.
Website addresses should carry the same name as on the licence otherwise they need to be listed as a trading name. Prefixes within web addresses can also lead to them having a requirement to be listed separately on the licence. For more information regarding trading names see the OFT guide here
As a warning all firms should ensure they have listed trading names and or website addresses if different from the main business name in any way on their licence.
CCP1 & CRP1
The OFT will expect certain documents to be available to check and in effect you will be required to self certify these are ready to be inspected when putting an application in. Some of these documents will be listed within the credit risk profile (CRP1) or a credit competence plan (CCP1) application which are required to be completed if you have applied for high risk activities.
The CCP1 form will need to be completed if you apply for:
Cat F Debt collection
Cat E Commercial debt counselling
Cat D Commercial debt adjusting
Cat H Commercial credit repair
The CRP1 form will need to be completed if you apply for:
Cat A Consumer credit business
Cat C Credit brokerage (if clients are considered high risk)
Cat G Debt administration
Cat I Credit reference agency
Unlike the main application which is started online these forms are editable PDF documents and need to be completed separately and either uploaded with your application or printed and posted.
The forms require more in-depth details regarding how the business will operate, what compliance procedures and checking is in place, the background of the controllers and experience towards the categories applying for.
We can help in the completion of both the CCP1 and CRP1 forms and with the application as a whole, we can also provide template documents and draft compliance monitoring plans, procedures manuals etc. Please get in touch for more information on how we can help and the costs involved.