The Solicitors Regulation Authority has secured a further seven-month deferral by City watchdogs of potentially disruptive changes to regulation of consumer credit work conducted by law firms.
Options to call for a delay were discussed today at an SRA board meeting at which the regulator admitted it is seeking to preserve existing arrangements for as long as possible. It had previously argued it does not have the resources to continue regulating such work and had signalled its intention to transfer responsibility to the Financial Conduct Authority (FCA) from 1 April.
The Law Society has warned that the types of work which would require authorisation by the City watchdog could even include allowing clients to pay by instalments, potentially encompassing a majority of all firms and increasing their compliance costs.
Two preferred options were discussed this afternoon by the SRA board, the second of which was their first choice:
* to continue talks with the FCA effectively deferring transfer until 31 October. However, board papers warned that the FCA ‘is unlikely to agree to an extension [of current transitional provisions] unless we commit to a direction of travel which reflects the FCA’s expectations of the SRA as a designated professional body’; and
* to seek an extension of the transitional provisions beyond 31 October for up to 18 months to allow a longer period for ‘alternative approaches to be discussed and any final decision to be communicated and implemented’.
In a statement issued in the last hour, the SRA disclosed that the FCA has already agreed to a further seven-month deferral, until 31 October 2015.
Enid Rowlands, chair of the SRA board, said: ’We are committed to finding the best possible solution for law firms and the users of legal services. Moving responsibility for consumer credit regulation from the Office of Fair Trading to the FCA is an opportunity to review how oversight of the work of law firms engaged in various forms of consumer credit activity should be delivered.
’We have had open, constructive and positive discussions with the FCA about how our differing models of regulation can work together to provide proportionate and effective protection. However, this is a complex and important area and we felt more time was needed to allow the options to be properly and thoroughly explored. The FCA has agreed, and we will continue to work closely with them. We will keep firms up to date with any changes that may affect them as and when we know.’
Speaking after the board meeting, chief executive Paul Philip said both the SRA and Law Society have instructed counsel to get to grips with what potential changes mean.
‘The two issues from speaking to practitioners were the cost of regulation and the dual burden [of being regulated by the SRA and FCA],’ he said.
‘We are trying to find a way to extend and continue the status quo.’
Until 2014, consumer credit work was regulated by the now defunct OFT. The Society held a group licence from the SRA which covered all firms (there remains an exemption for firms pursuing debts in the context of contentious business).
On 1 April 2014, responsibility for regulating consumer credit work transferred from the OFT to the FCA, but the SRA continued as regulator for law firms under transitional arrangements. However, the SRA proposed in a consultation which closed last month that from April 2015 law firms carrying out activities which are not covered by an exemption would indeed have to be regulated by the City watchdog.
The SRA said it lacks the resources to implement the changes needed to be compliant with FCA standards.