Consumer Credit Bill

House of Lords

Session 2004 - 05
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Other Bills before Parliament

Consumer Credit Bill

Consumer Credit Bill
19

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Enforcement of agreements by unlicensed trader etc.
(1)
In section 40 of the 1974 Act (enforcement of regulated agreements made by
unlicensed trader) for subsections (1) and (2) substitute—
“(1)
A regulated agreement is not enforceable against the debtor or hirer by
a person acting in the course of a consumer credit business or a
5
consumer hire business (as the case may be) if that person is not
licensed to carry on a consumer credit business or a consumer hire
business (as the case may be) of a description which covers the
enforcement of the agreement.
(1A)
A regulated agreement is not enforceable against the debtor or hirer
10
if—
(a)
it was made by the creditor or owner in the course of a
consumer credit business or a consumer hire business (as the
case may be); and
(b)
at the time the agreement was made he was not licensed to carry
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on a consumer credit business or a consumer hire business (as
the case may be) of a description which covered the making of
the agreement.
(2)
Where—
(a)
during any period a person (the ‘trader’) has made regulated
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agreements in the course of a consumer credit business or a
consumer hire business (as the case may be), and
(b)
during that period he was not licensed to carry on a consumer
credit business or a consumer hire business (as the case may be)
of a description which covered the making of those agreements,
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he or his successor in title may apply to the OFT for an order that the
agreements are to be treated as if he had been licensed as required.”
(2)
In subsection (4) of that section—
(a)
in paragraph (a) for “regulated agreements made by the trader during
that period” substitute “the regulated agreements in question”;
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(b)
in paragraph (b) after “covering” insert “the making of those
agreements during”;
(c)
in paragraph (c) for “obtain a licence” substitute “be licensed as
required”.
(3)
In subsection (6) of that section after “This section” insert “(apart from
35
subsection (1))”.
(4)
After that subsection insert—
“(7)
Subsection (1) does not apply to the enforcement of a regulated
agreement by a consumer credit EEA firm unless that firm is precluded
from enforcing it as a result of a prohibition or restriction mentioned in
40
subsection (6)(a) or (b).
(8)
This section (apart from subsection (1)) does not apply to a regulated
agreement made by a person if by virtue of section 21(2) or (3) he was
not required to be licensed to make the agreement.
(9)
Subsection (1) does not apply to the enforcement of a regulated
45
agreement by a person if by virtue of section 21(2) or (3) he is not
required to be licensed to enforce the agreement.”

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Applications for licences and fitness to hold a licence etc.
27
Charge on applicants for licences etc.
(1)
After section 6 of the 1974 Act insert—
“6A
Charge on applicants for licences etc.
(1)
An applicant for a licence, or for the renewal of a licence, shall pay the
5
OFT a charge towards the costs of carrying out its functions under this
Act.
(2)
The amount of the charge payable by an applicant shall be determined
in accordance with provision made by the OFT by general notice.
(3)
The provision that may be made by the OFT under subsection (2)
10
includes—
(a)
different provision in relation to persons of different
descriptions;
(b)
provision for no charge at all to be payable by persons of
specified descriptions.
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(4)
The approval of the Secretary of State and the Treasury is required for
a general notice under subsection (2).”
(2)
In section 6 of that Act (which contains provision relating to applications) after
subsection (2) insert—
“(2A)
The application must also be accompanied—
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(a)
in the case of an application for a licence or for the renewal of a
licence, by the charge payable by virtue of section 6A;
(b)
in any other case, by the specified fee.”
(3)
In section 191(1)(a) of that Act (special provisions as to Northern Ireland) after
“notices” insert “, charges”.
25
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Applications for standard licences
After section 24 of the 1974 Act insert—
“24A
Applications for standard licences
(1)
An application for a standard licence shall, in relation to each type of
business which is covered by the application, state whether the
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applicant is applying—
(a)
for the licence to cover the carrying on of that type of business
with no limitation; or
(b)
for the licence to cover the carrying on of that type of business
only so far as it falls within one or more descriptions of
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business.
(2)
An application within subsection (1)(b) in relation to a type of business
shall set out the description or descriptions of business in question.
(3)
References in this Part to a type of business are references to a type of
business within subsection (4).
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(4)
The types of business within this subsection are—

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(a)
a consumer credit business;
(b)
a consumer hire business;
(c)
a business so far as it comprises or relates to credit brokerage;
(d)
a business so far as it comprises or relates to debt-adjusting;
(e)
a business so far as it comprises or relates to debt-counselling;
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(f)
a business so far as it comprises or relates to debt-collecting;
(g)
a business so far as it comprises or relates to debt
administration;
(h)
a business so far as it comprises or relates to the provision of
credit information services;
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(i)
a business so far as it comprises or relates to the operation of a
credit reference agency.
(5)
The OFT—
(a)
shall by general notice specify the descriptions of business
which can be set out in an application for the purposes of
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subsection (2) in relation to a type of business;
(b)
may by general notice provide that applications within
subsection (1)(b) cannot be made in relation to one or more of
the types of business within subsection (4)(c) to (i).
(6)
The power of the OFT under subsection (5) includes power to make
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different provision for different cases or classes of case.”
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Issue of standard licences
(1)
In section 25 of the 1974 Act (licensee to be a fit person) for subsection (1)
substitute—
“(1)
If an applicant for a standard licence—
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(a)
makes an application within section 24A(1)(a) in relation to a
type of business, and
(b)
satisfies the OFT that he is a fit person to carry on that type of
business with no limitation,

he shall be entitled to be issued with a standard licence covering the
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carrying on of that type of business with no limitation.
(1AA)
If such an applicant—
(a)
makes an application within subsection (1)(b) of section 24A in
relation to a type of business, and
(b)
satisfies the OFT that he is a fit person to carry on that type of
35
business so far as it falls within the description or descriptions
of business set out in his application in accordance with
subsection (2) of that section,

he shall be entitled to be issued with a standard licence covering the
carrying on of that type of business so far as it falls within the
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description or descriptions in question.
(1AB)
An applicant who fails, in relation to a type of business, to satisfy the
OFT as mentioned in subsection (1) or (1AA) shall be entitled to be
issued with a standard licence covering the carrying on of that type of
business so far as it falls within one or more descriptions of business
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if—

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(a)
he satisfies the OFT that he is a fit person to carry on that type
of business so far as it falls within the description or
descriptions in question;
(b)
he could have applied for the licence to be limited in that way;
and
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(c)
the licence would not cover the doing of something which was
not covered by his application.
(1AC)
In this section ‘description of business’ means, in relation to a type of
business, a description of business specified in a general notice under
section 24A(5)(a).
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(1AD)
An applicant shall not, by virtue of this section, be issued with a licence
unless he satisfies the OFT that the name or names under which he
would be licensed is or are not misleading or otherwise undesirable.”
(2)
For subsection (2) of that section substitute—
“(2)
In determining whether an applicant for a licence is a fit person for the
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purposes of this section the OFT shall have regard to any matters
appearing to it to be relevant including (amongst other things)—
(a)
the applicant’s skills, knowledge and experience in relation to
consumer credit businesses, consumer hire businesses or
ancillary credit businesses;
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(b)
such skills, knowledge and experience of other persons who the
applicant proposes will participate in any business that would
be carried on by him under the licence;
(c)
practices and procedures that the applicant proposes to
implement in connection with any such business;
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(d)
evidence of the kind mentioned in subsection (2A).
(2A)
That evidence is evidence tending to show that the applicant, or any of
the applicant’s employees, agents or associates (whether past or
present) or, where the applicant is a body corporate, any person
appearing to the OFT to be a controller of the body corporate or an
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associate of any such person, has—
(a)
committed any offence involving fraud or other dishonesty or
violence;
(b)
contravened any provision made by or under—
(i)
this Act;
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(ii)
Part 16 of the Financial Services and Markets Act 2000 so
far as it relates to the consumer credit jurisdiction under
that Part;
(iii)
any other enactment regulating the provision of credit to
individuals or other transactions with individuals;
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(c)
contravened any provision in force in an EEA State which
corresponds to a provision of the kind mentioned in paragraph
(b);
(d)
practised discrimination on grounds of sex, colour, race or
ethnic or national origins in, or in connection with, the carrying
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on of any business; or
(e)
engaged in business practices appearing to the OFT to be
deceitful or oppressive or otherwise unfair or improper
(whether unlawful or not).”

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(3)
In subsection (3) of that section for “(2)” substitute “(2A)”.
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Guidance on fitness test
After section 25 of the 1974 Act insert—
“25A
Guidance on fitness test
(1)
The OFT shall prepare and publish guidance in relation to how it
5
determines, or how it proposes to determine, whether persons are fit
persons as mentioned in section 25.
(2)
If the OFT revises the guidance at any time after it has been published,
the OFT shall publish it as revised.
(3)
The guidance shall be published in such manner as the OFT thinks fit
10
for the purpose of bringing it to the attention of those likely to be
affected by it.
(4)
In preparing or revising the guidance the OFT shall consult such
persons as it thinks fit.
(5)
In exercising and performing its powers and duties by virtue of this
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Part the OFT shall have regard to the guidance as most recently
published.”
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Variation of standard licences etc.
(1)
In section 30 of the 1974 Act (variation of licences by request) for subsection (1)
substitute—
20
“(1)
If it thinks fit, the OFT may by notice to the holder of a standard
licence—
(a)
in the case of a licence which covers the carrying on of a type of
business only so far as it falls within one or more descriptions of
business, vary the licence by—
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(i)
removing that limitation;
(ii)
adding a description of business to that limitation; or
(iii)
removing a description of business from that limitation;
(b)
in the case of a licence which covers the carrying on of a type of
business with no limitation, vary the licence so that it covers the
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carrying on of that type of business only so far as it falls within
one or more descriptions of business;
(c)
vary the licence so that it no longer covers the carrying on of a
type of business at all;
(d)
vary the licence so that a type of business the carrying on of
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which is not covered at all by the licence is covered either—
(i)
with no limitation; or
(ii)
only so far as it falls within one or more descriptions of
business; or
(e)
vary any term of the licence not relating to the activities it
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covers.
(1A)
The OFT may vary a licence under subsection (1) only in accordance
with an application made by the holder of the licence.

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(1B)
References in this section to a description of business in relation to a
type of business—
(a)
are references to a description of business specified in a general
notice under section 24A(5)(a); and
(b)
in subsection (1)(a) (apart from sub-paragraph (ii)) include
5
references to a description of business that was, but is no longer,
so specified.”
(2)
In subsection (1) of section 31 of that Act (compulsory variation of licences) for
“the licence should be varied” substitute “it should take steps mentioned in
subsection (1A)”.
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(3)
After that subsection insert—
“(1A)
Those steps are—
(a)
in the case of a standard licence, steps mentioned in section
30(1)(a)(ii) and (iii), (b), (c) and (e);
(b)
in the case of a group licence, the varying of terms of the
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licence.”
(4)
After subsection (7) of that section insert—
“(8)
Subsection (1) shall have effect in relation to a standard licence as if an
application could be made for the renewal or further renewal of the
licence on the same terms (except as to expiry) even if such an
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application could not be made because of provision made in a general
notice under section 24A(5).
(9)
Accordingly, in applying subsection (1AA) of section 25 in relation to
the licence for the purposes of this section, the OFT shall treat
references in that subsection to the description or descriptions of
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business in relation to a type of business as references to the description
or descriptions of business included in the licence in relation to that
type of business, notwithstanding that provision under section 24A(5).”
(5)
In section 32 of that Act (suspension and revocation of licences) after
subsection (8) insert—
30
“(9)
The OFT has no power to revoke or to suspend a standard licence
simply because, by virtue of provision made in a general notice under
section 24A(5), a person cannot apply for the renewal of such a licence
on terms which are the same as the terms of the licence in question.”
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Winding-up of standard licensee’s business
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(1)
After section 34 of the 1974 Act insert—
“34A
Winding-up of standard licensee’s business
(1)
Where the OFT determines to take a step falling within subsection (2)
in relation to a standard licence, it may, if it thinks fit, defer the taking
of that step for such period as it thinks fit for the purpose of enabling
40
the licensee to transfer or otherwise to wind up his business or any part
of his business.
(2)
The steps falling within this subsection are—
(a)
the refusal of an application for the renewal of the licence;
(b)
the renewal of the licence in terms different to those applied for;
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(c)
the variation of the licence under section 31;
(d)
the suspension or revocation of the licence.
(3)
Subject to subsection (4), where the OFT defers the taking of a step
falling within subsection (2), the licence shall continue in effect for the
period of the deferral—
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(a)
on the same terms (disregarding the OFT’s determination to
take the step falling within subsection (2)); or
(b)
in the case of a step falling within subsection (2)(b), on the terms
applied for;

and, in the case of a step falling within subsection (2)(a) or (b),
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notwithstanding that apart from this subsection the licence would
expire before the end of the period of the deferral.
(4)
Where the OFT defers the taking of a step falling within subsection (2),
it may—
(a)
specify activities or descriptions of activities which are to be
15
excluded from the activities authorised to be carried on by
virtue of subsection (3);
(b)
specify requirements which must be complied with by the
licensee during the period of the deferral in relation to the
activities authorised to be carried on by virtue of that
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subsection;
(c)
terminate the period of the deferral if the licensee fails to
comply with a requirement specified under paragraph (b).
(5)
Under subsection (4)(a) an activity may be excluded for the whole of
the period of the deferral or for only a specified part of it.
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(6)
The OFT may—
(a)
defer the taking of a step falling within subsection (2) in relation
to a licence only on the application of the licensee; and
(b)
require the licensee’s application to be made (if one is to be
made at all) within the period of 21 days beginning with the day
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on which the OFT gives the licensee a notice under this
subsection or within such longer period as the OFT may allow.
(7)
If the licensee makes an application, unless the OFT determines to defer
the taking of the step falling within subsection (2) in accordance with
the application, it shall, before determining it, by notice—
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(a)
inform the licensee, giving its reasons, that (as the case may be)
it is minded to refuse the application, or to grant it in terms
different from those applied for, describing them; and
(b)
invite the licensee to submit to the OFT representations in
support of his application in accordance with section 34.
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(8)
The procedures set out in subsections (6) and (7) shall be carried out
concurrently with the OFT’s consideration of whether it should take
the step falling within subsection (2).
(9)
Accordingly, the OFT’s determination of any application of the licensee
shall be made at the same time as its determination to take the step
45
falling within subsection (2).
(10)
If an appeal lies from the determination of that application, the step
falling within subsection (2) shall not be taken before the end of the