Chancery Lane has written to local law societies warning solicitors about the potentially damaging consequences for hundreds of firms of changes to regulation of consumer credit work.
In a letter yesterday, Law Society president Andrew Caplen warns of ‘significant problems’ if the Solicitors Regulation Authority withdraws from regulating firms under the new regime, transferring those responsibilities to the Financial Conduct Authority.
The Society is taking legal advice to provide clarity about the impact of the change on solicitors and will also voice its concerns at a meeting with Financial Conduct Authority (FCA) chair John Griffith-Jones.
Until this year, consumer credit work was regulated by the Office of Fair Trading. 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, responsibility transferred to the FCA and from next April, firms carrying out activities which are not covered by an exemption will have to be regulated by the FCA. Firms that do such work may be guilty of a criminal offence if they are not.
The SRA recently launched a consultation signalling its preference to withdraw from regulating firms under the new regime, leaving the task to the FCA. The solicitors regulator claims it lacks the resources to implement the changes needed to be compliant with FCA standards.
Caplen says in the letter: ’We are concerned that:
* It is not clear what activities will actually be brought in scope of FCA regulation;
* There will be significant costs to firms in dealing with the SRA or FCA, particularly at a time when the Government is seeking to reduce the burden on business;
* There is no evidence that a regime intended for unregulated firms and those offering credit as their main business is appropriate for solicitors.’
A Law Society spokesperson said: ’While we support appropriate and proportionate regulation, we do not feel that the impact of the proposed changes is clear enough. It risks undermining both consumers and the profession, so would not be in the public interest. Until clarity is obtained, it may not be possible to achieve the right regulatory solution.’
The SRA consultation closes on 15 December.