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Introduction to Consumer Credit

Consumer credit refers to credit in some form given to the consumers. It is a way of financing a client on condition of a deferred payment, at a later date or within a particular period of time.

The businesses that provide consumer credit facilities need to comply with some regulations as lay down by the laws of the state. It is equally applicable to specialist credit businesses like credit card providers and money lenders to mail-order businesses or shops that permit the customers to buy on credit or lease out or hires goods. That is, the enterprises that give consumer credit facilities have to have a valid consumer credit license from the Office of Fair Trading (OFT). It is a mark of assurance to the customer that the business firm certified by OFT is fit for serve the customers.

Let us see which all businesses require a consumer credit license as a mandatory requirement by the law. The businesses that sells on credit, leases out or hires goods for over a period of 3 months, lends dollars, involved in credit card selling, arranges credit for others, provides hire/purchase commodities, collects debts, and give advise on others credit standing come under the purview of a consumer credit license.

But those lends amounts or hire goods for a cost more than a fixed amount, those deal only with limited companies and those allow the clients to pay back the amount in four or lesser installments are exempted from the consumer credit license.




Ideally one should check the guidelines from the OFT website to find out clearly which all businesses need a consumer credit license. Remember, to trade without a consumer credit license when you are required to earn one is a crime that invites fine or prison term or both.

Consumer credit license is valid for a fixed time period (5 years or so) and is required by the business to renew it after its expiry. However, the OFT can revoke, suspend or change the license at any point of time. The decision to do so is at the exclusive discretion of the authority. All the consumer credit license holders will be listed in the Consumer Credit Register, which is given free of cost for the public.

If the business consists of many companies, each trading in any of the categories, then each of the firms requires a separate license. Also, the OFT has laid down rules regarding advertising credit and credit agreements. All these details are furnished in the OFT website.

The government and the regulatory body assume that it is the duty of the business to keep themselves informed about the rules and regulations that govern their enterprises. Any breach of conduct can result in hefty fines and prison terms. It is all about being law-obedient and straight.

About the author:

Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.