Wednesday, 10 October 2012

Credit licence?

I am still trying to get my head around this whole consumer credit licence thing. I may try and get proper advice just so I know one way or the other. I have already paid their extortionate fee to renew, but who knows? I may be able to get a refund.

We have several ways we provide stuff to consumers, and I am not even 100% sure what counts as "credit" for a lot of what we do.

e.g. The typical broadband consumer pays the same every month, invoiced on the 1st and direct debited on the 1st or immediately after. The invoice is for that month, and so the payment is at the same time as we start providing the service - no "time to pay" and nothing on credit. Well, maybe if the 1st is on a Saturday and DD on Monday, but the way banks work mean the non banking days count as next banking day - so we see the money on 1st or in fact the night before at the latest. So not on credit!

Not all consumers work like that, but most could. Those that don't want 1st for DDs could be billed on a different phase in the month but still not on credit. But I am still not sure what counts as credit in this case. The way we normally work is that we don't expect to be paid until we raise the invoice. This means, if we invoiced, say, 14 days before the start of the month, or a month in advance, or even a month later, we would consider we are owed for that invoice from when we raise it. Some of those options may count as credit in the law, and some may not.

But what if we did invoiced later? Is the 5 working day time to advise a DD (we work on 5 working days not 10, as is allowed under DD rules, believe it or not) counted as credit? What if (like the regular monthly bills) we advised a DD and arranged for the DD to come out on the same day as the actual invoice. That means no "time to pay" from our point of view - not delay between invoice date and payment? Or is that not what credit means.

We do have a couple of snags. We supply routers, though normally that is free with the service, so no credit. Even so, we could arrange the invoice and DD to coincide. For new installs and even chargable routers and kit, we could ask the customer to agree a 2 working day collection by DD (that is allowed if per-case agreed with customer) which means we could get paid before an installation is complete - so we can again make it so not actually giving credit. We could even as for a fast payment bank transfer before shipping goods. We are not doing credit cards these days.

Indeed, it seems to me that we could make it that everything we do with consumers is not on credit at all, surely?

Though there are phone calls on VoIP and extra usage on broadband. That is tricky as it is not due until we invoice, as far as we are concerned, but we are allowing calls on credit I suppose. Maybe we should do a pre-pay for that? Would be possible to change to that. We are talking consumers not business here.

Even so, the Act mentions ongoing accounts, so what we do may simply not count anyway!

Or I could just pay up every few years. I suspect any professional advice would say "pay up" as that is the safe answer for any solicitor to say.

What worries me slightly is that this now has a surcharge towards the financial ombudsman or some such. I have dealt with an ombudsman before, and I am now concerned in case we are inadvertently liable to some other crowd of muppets. I am not in the business of lending money, and the last thing we need is someone referring us to a financial ombudsman. I would rather change the way we work than have that!

Obviously no changes proposed at the moment (we have renewed our licence) , but if we do find we are able to avoid the licence, and especially if we are tied in to some new ombudsman madness now, we may make changes. The good news is most consumers stay the same with a fixed bill and DD on 1st of each month so only a minor change for a few consumers, and no change for businesses.

Lets see what I find.


  1. Credit's one of those tricky things. Credit implies extension of goods or services prior to receiving payment, so the title in those goods and services remains with you until that point. I would understand DD mandates as differing here as they're continuous payment agreements preagreed to fall on a set day of the agreed billing cycle and are either used in a prepaid or a postpaid-proforma basis (so invoice simultaneously raised with receipt of payment).

    I've never come across a DD where notification of taking of payment indicates a credit period after the invoice is received; my bills fall due on the valuation date of the DD.

    In the eyes of the Law a credit period may have a slightly different meaning, but I think it's mainly to do with the wording of the contract drawn up between merchant and customer. If you state a credit period will be provided due to a grace period between invoicing and payment, you're extending credit. If the invoice is reactively produced based upon debiting of the amount (fixed or varying, as per DD scheme) this is agreed by the customer and is more akin to a subscription where the amount due may vary based upon usage in that cycle, and all covered by the DD guarantee with regards to chargebacks for erroneous payments taken.

    Semantics, but as you likely know based upon your own supplier agreements a true credit account extends an unguaranteed and preagreed credit limit with no warranty that the customer will ever pay the amount due... A world of hurt and risk. With DD, the customer's already agreed that any charges levied are fair and appropriate unless they explicitly challenge a transaction.

    ... That's my abridged take on it. I'm probably just as confused as you, I just sound convincing. ;-)

  2. I'm rather surprised at this actually. I would have expected government regulation and such to apply if you were taking money *before* supplying, not the reverse. E.g. I would have expected the pre-pay type account situation to be more onerous in terms of complying with laws and such than post-pay. Perhaps I just have entirely the wrong end of the stick! Thank goodness I don't have any consumers as customers so far...

    1. I was even thinking this before I saw your comment this morning. Indeed, you would have thought so. But it is lending money (even if no interest charged at all and even if term is short - like until end of month) that is apparently the concern here!

  3. You mentioned recently that you cycle: do you run the "cycle to work" scheme at your company? If so, there's a fringe benefit to getting a consumer credit license, i.e. you can buy bikes that cost more than £1000.

    1. Yes, more info here:

      I set this scheme up in my workplace. Technically, the employer buys the bike and then the employee hires it for a year; at the end of that time, the employer might hypothetically choose to sell it to the employee, but they can't promise to do that, otherwise it becomes a hire purchase scheme (different tax legislation). Anyway, the government have done an exemption so that companies can buy/lease bikes up to £1000 without needing a consumer credit licence, but if you've got the licence then you could go higher.