The Financial Conduct Authority has given the green light to proposals for allowing law firms to offer consumer credit without being subject to dual regulation.
The Solicitors Regulation Authority announced in September that solicitors would be able to continue offering certain activities under its wing. It had previously been thought that consumer credit, such as allowing clients to pay in instalments, would be regulated by the FCA.
Solicitors can continue offering consumer credit as long as activities are central to the legal services they provide, with the new rules prohibiting activities such as pawnbroking.
The two regulators have been in talks for more than a year and the FCA has now joined its legal counterpart in backing the plans.
Crispin Passmore (pictured), SRA executive director for policy, said: ‘We have worked hard with the FCA to produce proposals that offer a balanced and proportionate approach to regulation. These proposals are good news for firms and their clients alike and continue our ongoing work of simplifying and streamlining our regulatory approach.’
The final decision will now rest with the Legal Services Board, with the changes expected to come into effect on 1 April 2016.
The SRA had previously suggested dropping regulation of consumer credit altogether, leaving firms facing dual regulation and significant extra costs and burdens.
The FCA agreement means that firms will face eight pages of SRA rules rather than the hundreds of pages they might have encountered.
Firms will be prevented from entering, as a lender, into regulated credit agreements which are secured on land by a legal or equitable mortgage.
The proposed rules do not prevent firms from making a referral to a credit provider or intermediary, neither do they stop firms from advising and assisting clients with the repayment of a loan.