Government cuts regulation for firms involved in consumer credit work
Passmore: Continuing to work with FCA on “effective way forward”
The government has reduced the scope of regulation for law firms involved in consumer credit work, such as debt collection.
The Solicitors Regulation Authority (SRA) said an order, which came into force last week, extended an existing exemption for solicitors providing advocacy or litigation services to include pre-issue consumer credit work.
The Financial Conduct Authority (FCA) assumed overall responsibility for regulating consumer credit work in April last year. Earlier this year, it agreed to a request from the SRA to extend the current transitional arrangements, due to run out on 1 April, until 31 October 2015.
A spokesman for the SRA said the Financial Services and Markets Act 2000 (Miscellaneous Provisions) Order 2015 (SI 2015/853), which came into force on 24 March 2015, would be “particularly beneficial to firms, without any detrimental effect in terms of consumer protection”.
He went on: “Certain consumer credit activities, such as debt collecting, will now be excluded from regulation under the Act where those activities are undertaken by solicitors – or others authorised under the Legal Services Act 2007 – in the course of providing advocacy services or litigation services. The definitions of these services would include pre-issue work.”
In a further move to cut the scope of regulation, the government has increased the ability of firms to offer payment by instalments. From 18 March, the number of repayments of fees and other costs that clients can make, before agreements are treated as regulated credit agreements, increase from four to 12.
The SRA has warned that this exemption is not available where an agreement is entered into after the debt has been incurred, but said that in this case it would be responsible for regulating firms under the transitional provisions.
Crispin Passmore, SRA executive director for policy, said the changes would “further help to reduce regulatory burdens” on firms providing consumer credit services.
“We continue to work with the FCA on an effective way forward in regulating law firms for consumer credit in a way that protects the public, at the same time taking into account the way solicitors work and the SRA’s regulatory approach.”
The SRA is still discussing with the FCA the way forward for consumer credit regulation after the transitional provisions expire in October this year.
The regulator said last autumn that around 1,100 firms were involved in debt collection, while other consumer credit work included negotiating terms with creditors for settlement of divorce debts, or amending information held by credit reference agencies.
Tags: consumer credit, Financial Conduct Authority, Solicitors Regulation Authority
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