In most cases, providing credit to consumers means you need authorisation from the Financial Conduct Authority (FCA). You would also need to join the Financial Services Register.
There may be situations where you want to offer a credit facility to your customers. In this case, you must be authorised by the Financial Conduct Authority.
Offering credit to consumers without FCA registration is a criminal offence. The worst cases can result in a fine and prosecution - or imprisonment.
You could also have further difficulties if a customer fails to make the required payments (details below).
Note: You would not be able to enforce this type of agreement if you did not have Financial Conduct Authority (FCA) authorisation.
Your business would need to meet minimum standards to get FCA authorisation to offer credit to your customers. It would need to have a suitable business model and show that 'fit and proper' people are running the firm.
There would be extra rules to follow on how you run your business and treat your customers, such as:
You would not need a licence if the customer will pay in four (4) or less instalments and within one (1) year of the date of sale.
An example would be making a daily supply (e.g. milk or newspapers). In this case, you could collect the payment at the end of the month.
Note: The Financial Conduct Authority provides a checklist of the main things you need to do before applying for consumer credit authorisation.
The list of things you need consumer credit authorisation for is concise. You would need to check if they would apply to the proposed business of your firm.
Common regulated consumer credit activities that you need to get FCA authorisation to carry out, include:
Note: All businesses that offer credit or financing to customers (not only credit specialist companies) must have FCA authorisation. This rule also applies to non-profit organisations.
What action is available if a customer fails to make the required payments? In this case, you would need to send them a notice of default before taking any legal action. You would then be able to take court action to enforce the agreement.
You would only be able to make a default charge or debt collection costs to the customer if the original agreement included this particular right.
You may decide to use a debt collection agency or pursue the debt yourself. But, using improper debt collection practices means you could lose your consumer credit licence. Thus, the regulations do not allow you to:
As a rule, there would be no need to have authorisation if your business only offers credit to other businesses. An exception would apply if the customer is:
In most cases, providing credit to these types of customers would mean you need to be FCA authorised.
Laws on Offering Credit to Consumers in United Kingdom