The Consumer Credit Act 1974 requires most businesses that offer credit or lend money to consumers to be licensed by the Office of Fair Trading. This includes where credit is arranged to finance the purchase of goods or services. Licensing arrangements may also be required by debt collectors, debt advisors and businesses that offer goods for hire or leasing. Trading without a licensing arrangement is a criminal offence and can result in a fine and/or imprisonment.
The Act also requires certain credit and hire arrangements to be set out in a particular way and to contain certain information. For more information on what kind of businesses need to be licensed, how to apply, and the different fees see the OFT website. You can also download application forms and detailed guidance for applicants and holders.
If your consumer credit business deals with first charge mortgages, payment protection insurance or other types of insurance, then you may need permission from the Financial Services Authority to sell or administer regulated mortgage contracts and general insurance contracts. You risk a fine or imprisonment if you carry on mortgage or general insurance business without permission or arranging to become exempt. See the FSA website
Beat the Loan Sharks – Bite Back!
The Wales Illegal Money Lending Unit was established in November 2007 to tackle Illegal Lending (Loan Sharks) in Wales. If you lend money without a Consumer Credit Licence it is Illegal (a criminal offence) and any loans provided are unenforceable which means that they do not have to be paid back.
There are Two Types of lenders:
1. Someone who will lend small or large amounts of money to local residents and charge interest on those payments without causing fear and intimidation. If this is the case they still need a Consumer Credit Licence to operate and must operate within the rules of the consumer Credit Act 1974 and 2006.
2. Loan Sharks prey on the most vulnerable in our society and often revert to violence and intimidation in order to obtain money that is owed.
On most occasions they will charge extortionate interest rates, which means that you will often end up paying back much more than you borrowed and be permanently in debt.
People often live in fear of the Loan Shark and will find any means by which to pay them. This could mean using rent money, electric money and sometimes shopping money. In many cases the Loan Shark will take their victims giros, benefit payment cards or bank cards to ensure they receive payment. Some even force their victims into prostitution and drug running.
The Wales Illegal Money Lending Unit (IMLU) will help tackle this problem in different ways:
Ensuring all lenders have licences
Removing the violent Loan Shark from the community, initiate court procedures (with a possible prison sentence)
Helping victims find alternative forms of affordable credit, benefit and debt advice and referral to other support services.
1. Caller contacts the team using the 24hour hotline number 0300 123 3311. The call is charges at standard rate and the caller will be called back straight away to avoid incurring any costs. Alternatively clients can be referred via a community worker.
2. Callers will have the opportunity to report a Loan Shark, or if a Client, they can provide details of their situation.
3. The Client Liaison Officer will arrange to meet the Client or Caller at a neutral venue, somewhere safe and will cover costs of travel (within reason)
4. The Client Liaison Officer will discuss actions and remedies with Client/Caller and in some cases obtain a witness statement.
5. All investigative work surrounding the activities of the Loan Shark, will be covert (undercover) and carried out by the Investigating Officers without any risk being posed to the Client.
6. Clients will be supported through every step of the process and will have an Investigating Officer and Client Liaison Officer dealing with their case.
The safety of the callers and Clients is the top priority.
Telephone: 0300 123 3311