Definitions
An ancillary credit business is defined in Section 145 of the Act as any business that works in credit brokerage, debt adjusting, debt collecting, debt counselling or as a credit reference agency.
Credit brokers are people involved in negotiating deals between potential debtors looking for credit and creditors, normally in exchange for a commission. Under the Act, "credit broker" includes not only mortgage brokers and loan brokers but also car dealers, shops that introduce customers to financial houses for hire-purchase agreements and solicitors who negotiate advances for non-corporate clients. An exception to this is if introductions and negotiations are not made in the individual's capacity as an employee of a business.
Debt adjusting is when a company or individual negotiates with the creditor or owner in an agreement on behalf of the debtor to change the terms for the discharge of the debt, takes over the debt in exchange for payment by the debtor or engages in "any similar activity concerned with the liquidation of a debt".Pieheads This is again a wide area; the base definition covers, for example, solicitors and accountants who act as negotiators for clients who owe money to a third party. There are certain exceptions; a solicitor negotiating for the settlement of his client's debts is not considered to be working as a debt adjuster thanks to Section 146 of the Act, which excludes "a solicitor engaging in contentious business" as defined in the Solicitors Act 1957.
Debt counselling is the giving of advice to debtors or hirers about the liquidation of debts under consumer credit or consumer hire agreements. This covers any debt counsellor, regardless of if it is free legal advice; as a result the Citizens Advice Bureau, for example, is considered a debt counsellor, although its advisers are covered by a group license. Debt collectors are covered by similar provisions, and are defined as anybody who takes steps to "procure payment of debts due" under consumer credit agreements and consumer hire agreements. Those who "purchase" debts and attempt to collect on them are covered by this definition.
Exceptions for these definitions are provided under Section 146 if the credit broker, debt adjuster, debt counsellor or debt collector is the creditor or owner under the credit agreement, the supplier under the agreement, a credit broker who has acquired the business of the supplier or somebody expressly excluded from certain definitions, such as a solicitor. The provisions for suppliers only come into effect when the credit is a loan, so that the supplier and creditor are different people. The exceptions do not include people who "buy" the roles above by purchasing the debts, such as professional debt buyers or financial houses.
Credit reference agencies are covered separately from other ancillary credit businesses, and are defined in Section 148 as individuals or companies which carry on a business "comprising the furnishing of persons with information relevant to the financial standard of individuals, being information collected by the agency for that purpose". This definition was the subject of much academic debate, because the holding of the license for a credit reference agency involves a duty to supply information on credit status which the company might prefer to keep confidential. There are exceptions; the information must be collected for the purpose of giving it to others, so the fact that a bank, for example, has that information, does not mean they need to obtain a license as a credit reference agency.
Read more about this topic: Consumer Credit Act 1974, Provisions of The Act, Part X: Ancillary Credit Businesses
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