Consumer credit

You're likely to need a consumer credit licence if your business:

• sells on credit
• hires or leases out goods for more than three months
• lends money
• issues credit cards or trading checks
• arranges credit for others
• offers hire-purchase terms
• collects consumer credit debts
• helps people with debt problems
• advises on people's credit standing
• administers agreements for creditors or assignees but does not collect debts
• helps individuals to find and correct records about their financial standing

Credit agreements between businesses

Consumer credit regulations apply to agreements, regardless of the amount of credit or the cost of the hire, where the borrower or hirer is:

• an individual
• a sole trader
• a partnership with three or fewer partners
• an unincorporated association

In general, credit agreements between businesses do not fall under the scope of the regulations, particularly if the credit amount is greater than £25,000. You should seek legal advice before entering into a credit agreement with another business.

Unless your business is a credit reference agency, you're unlikely to need licensing if you:

• only deal with limited companies or Limited Liability Partnerships
• offer no other form of credit than accepting credit cards issued by someone else
• allow customers to pay their bills in four or fewer instalments over a year

Remember - the rules don't just apply to specialist credit businesses. If, for example, you run a small retail business that offers credit terms or hires out goods to consumers, you should check whether you need to be licensed.

If your business requires consumer credit licensing and you trade without being licensed, you're committing a criminal offence that could result in a fine or a prison sentence - or both.