Consumer Credit Bill

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Consumer Credit Bill

Consumer Credit Bill
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Applications for licences and fitness to hold a licence etc.
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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 OFT a
5
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)
includes—
10
(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.
(4)
The approval of the Secretary of State and the Treasury is required for
15
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—
(a)
in the case of an application for a licence or for the renewal of a
20
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”.
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Applications for standard licences
25
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
applicant is applying—
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(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
business.
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(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).
(4)
The types of business within this subsection are—
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(a)
a consumer credit business;

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(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;
(f)
a business so far as it comprises or relates to debt-collecting;
5
(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;
(i)
a business so far as it comprises or relates to the operation of a
10
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
subsection (2) in relation to a type of business;
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(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
different provision for different cases or classes of case.”
20
29
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—
(a)
makes an application within section 24A(1)(a) in relation to a
25
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
carrying on of that type of business with no limitation.
30
(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
business so far as it falls within the description or descriptions
35
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
description or descriptions in question.
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(1AB)
If such an applicant makes an application within section 24A(1)(a) or
(b) in relation to a type of business but fails to satisfy the OFT as
mentioned in subsection (1) or (1AA) (as the case may be), he shall
nevertheless 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
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more descriptions of business 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 any activity 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 carrying out its functions under this Part the OFT shall have regard
15
to the guidance as most recently published.”
31
Variation of standard licences etc.
(1)
In section 30 of the 1974 Act (variation of licences by request) for subsection (1)
substitute—
“(1)
If it thinks fit, the OFT may by notice to the licensee under a standard
20
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—
(i)
removing that limitation;
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(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
carrying on of that type of business only so far as it falls within
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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
which is not covered at all by the licence is covered either—
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(i)
with no limitation; or
(ii)
only so far as it falls within one or more descriptions of
business; or
(e)
vary the licence in any other way except for the purpose of
varying the descriptions of activities covered by the licence.
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(1A)
The OFT may vary a licence under subsection (1) only in accordance
with an application made by the licensee.

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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)”.
10
(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
25
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.”
32
Winding-up of standard licensee’s business
35
(1)
After section 34 of the 1974 Act insert—
“34A
Winding-up of standard licensee’s business
(1)
If it thinks fit, the OFT may, for the purpose of enabling the licensee’s
business, or any part of his business, to be transferred or wound up,
include as part of a determination to which subsection (2) applies
40
provision authorising the licensee to carry on for a specified period—
(a)
specified activities, or
(b)
activities of specified descriptions,

which, because of that determination, the licensee will no longer be
licensed to carry on.
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(2)
This subsection applies to the following determinations—
(a)
a determination to refuse to renew a standard licence in
accordance with the terms of the application for its renewal;
(b)
a determination to vary such a licence under section 31;
(c)
a determination to suspend or revoke such a licence.
5
(3)
Such provision—
(a)
may specify different periods for different activities or activities
of different descriptions;
(b)
may provide for persons other than the licensee to carry on
activities under the authorisation;
10
(c)
may specify requirements which must be complied with by a
person carrying on activities under the authorisation in relation
to those activities;

and, if a requirement specified under paragraph (c) is not complied
with, the OFT may by notice to a person carrying on activities under the
15
authorisation terminate the authorisation (in whole or in part) from a
specified date.
(4)
Activities carried on under an authorisation shall be treated for the
purposes of sections 39(1), 40, 148 and 149 as if carried on under a
standard licence.”
20
(2)
In section 29 of that Act (renewal of licences) after subsection (3) insert—
“(3A)
In its application to the renewal of standard licences by virtue of
subsection (3) of this section, section 27(1) shall have effect as if for
paragraph (b) there were substituted—
‘(b)
invite the applicant to submit to the OFT in accordance with
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section 34 representations—
(i)
in support of his application; and
(ii)
about the provision (if any) that should be included
under section 34A as part of the determination were the
OFT to refuse the application or grant it in terms
30
different from those applied for.’”
(3)
Subsection (5) of that section (which gives the OFT power to give directions
allowing licensees to carry agreements into effect) shall cease to have effect.
(4)
In section 31(2) of that Act (procedure to be followed in case of proposed
compulsory variation of a standard licence) for paragraph (b) substitute—
35
“(b)
invite him to submit to the OFT in accordance with section 34
representations—
(i)
as to the proposed variations; and
(ii)
about the provision (if any) that should be included
under section 34A as part of the determination were the
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OFT to vary the licence.”
(5)
In subsection (2) of section 32 of that Act (procedure to be followed in case of
proposed revocation or suspension of a standard licence) for paragraph (b)
substitute—
“(b)
invite him to submit to the OFT in accordance with section 34
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representations—
(i)
as to the proposed revocation or suspension; and

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(ii)
about the provision (if any) that should be included
under section 34A as part of the determination were the
OFT to revoke or suspend the licence.”
(6)
Subsection (5) of that section (which gives the OFT power to give directions
allowing licensees to carry agreements into effect) shall cease to have effect.
5
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Consequential amendments relating to ss. 27 to 32
(1)
In section 21(1) of the 1974 Act (businesses needing a licence) for “consumer
hire business” substitute “a consumer hire business or an ancillary credit
business”.
(2)
In section 22 of that Act (standard and group licences) after subsection (5)
10
insert—
“(5A)
A group licence to carry on a business may limit the activities it covers
in any way the OFT thinks fit.”
(3)
In subsection (1) of section 23 of that Act (authorisation of specific activities) for
“this section” substitute “the terms of the licence”.
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(4)
In subsection (4) of that section for “Regulations may be made specifying”
substitute “The OFT may by general notice specify”.
(5)
After section 27 of that Act insert—
“27A
Consumer credit EEA firms
(1)
Where—
20
(a)
a consumer credit EEA firm makes an application for a standard
licence, and
(b)
the activities covered by the application are all permitted
activities,

the OFT shall refuse the application.
25
(2)
Subsection (3) applies where—
(a)
a consumer credit EEA firm makes an application for a standard
licence; and
(b)
some (but not all) of the activities covered by the application are
permitted activities.
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(3)
In order to be entitled to be issued with a standard licence in accordance
with section 25(1) to (1AB) in relation to a type of business, the firm
need not satisfy the OFT that it is a fit person to carry on that type of
business so far as it would involve any of the permitted activities
covered by the application.
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(4)
A standard licence held by a consumer credit EEA firm does not at any
time authorise the carrying on of an activity which is a permitted
activity at that time.
(5)
In this section ‘permitted activity’ means, in relation to a consumer
credit EEA firm, an activity for which the firm has, or could obtain,
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permission under paragraph 15 of Schedule 3 to the Financial Services
and Markets Act 2000.”