What is a Consumer Credit License?
A consumer credit license is an official certification that enables financial intermediaries or other lending institutions in the United Kingdom to provide financing to the general public. Companies in the United Kingdom that offer loans to prospective borrowers must, by law, possess a consumer credit license in order to legally own and operate their business in a legitimate manner.
The consumer credit license and the process aligned with certification was a fundamental aspect of the Consumer Credit Act. This piece of legislation, which was passed in 1974 in the United Kingdom, was developed to act as a safeguard for consumers in regards to dealing with loan providers.
Prior to the act, unsolicited and un-licensed agencies or financial institutions could offer loans or financing to any consumer without obtaining any formal license. This format, although beneficial in theory, proved to be debilitating to a number of consumers who eventually fell victim to predatory lending rates and pervasive lending companies.
Based on federal law in the United Kingdom, the obtainment and adherence to procedural guidelines in relation to the consumer credit license, is a crucial and fundamental step for the legalization of lending techniques. As stated before, any company, bank, corporation or lending institution of any kind, who offers loans to consumers or other businesses, without a consumer credit license, will be deemed as a fraudulent and illegal business model.
What is the process of obtaining a Consumer Credit License?
Managers or owners of lending companies may apply for a consumer credit license at the website of the office of Fair Trading. This government agency is the primary distributor of consumer credit licenses and is responsible for administering the necessary procedural guidelines for the obtainment of the consumer credit license. At the Office of Fair Trading’s website an individual can apply for a new consumer credit license, renew their licenses, or make changes to an existing license.
The beginning of the application will request the owner or manage to state the type of business applying for the consumer credit license. For example, if you own a trade union or building society, you will need to select the appropriate business entity on your application. Following the satisfaction of this information, you must write down your reference number—12 digit letter/number combination unique to your business.
The application will continue to ask basic questions concerning your business and the lending activities attached to your business. The consumer credit license application, once started, must be completed and subsequently submitted for review in 45 days or less.
In addition to this time constraint, the consumer credit license application will require the fulfillment of a number of required fees. The fees associated with the consumer credit application will range from 150 to 970 pounds and must be paid via a credit card or debit card.