Regulation and Licences


While there are a number of organisations and individuals in the debt counselling and solutions industry who are thoroughly regulated, there are also a large number of companies for whom the regulation is much less demanding.

For example, any organisations who advise on or provide lending or who offer insolvency services (such as Individual Voluntary Arrangements) are tightly governed, whereas there is currently relatively little to control, for example, debt management companies.

For many people, regaining control of their finances is an important and emotive matter. Clear Start is able to advise on the regulation and legislation that applies to different types of businesses in this area, and can steer individuals towards the best advice and solutions for their situation.

The following sections give a brief overview of the regulation that applies to the various types of organisation and business in the debt counselling and solutions industry. For further information it is possible to visit the web site of the relative Recognised Public Body (RPB).

Common Licences and Authorisation Required

There are some requirements that are common to all organisations in this industry who provide a service to consumers regardless of the specific role they are playing.

All companies who do business in the UK must have a Company Number. This number must be shown in the footer of all letters and contractual correspondence from that company along with the address at which the company is registered, and the laws under which the company is governed (for example England and Wales).

All organisations who offer financial advice or debt counselling to individuals must hold a Consumer Credit Licence, and in particular have applied for the specific sections of the licence that allow them to offer the services they are supplying.

All organisations who handle personal information about individuals must hold a Data Protection Licence. The organisation should be able to communicate what its policies and procedures are in this area, and should normally have information easily available on this subject on its website (usually to be found in 'privacy statement', 'privacy policy' or 'terms and conditions').

Most organisations in the industry should also hold a valid VAT Registration Number. This applies to companies with revenues over a certain threshold offering certain products and services. The main exceptions to this are lending organisations whose products and services are exempt from VAT.

Debt Advice and Debt Management - Licences and Authorisation

This is perhaps the least regulated part of the industry, and the one where the individual should adopt the most caution. The risk is that the organisation may provide advice that is not necessarily in the best interest of the individual.

In December 2001 the Office of Fair Trading (OFT) issued a paper entitled "Debt Management Guidance". This publication aimed to provide a set of guidelines under which debt management, and other commercial debt advisory organisations should operate. This mechanism of governance is relatively lightweight as there are no requirements for ongoing checks, monitoring or auditing, however the OFT retains the right to refuse or revoke a Consumer Credit Licence should it receive substantial evidence that an organisation is acting inappropriately.

Insolvency Services - Licences and Authorisation

Where the individual is insolvent, that is to say that they are unable to re-finance or service their debts, it is often the case that a licensed insolvency practitioner (or IP) is required to facilitate a settlement between the individual and their creditors. In an Individual Voluntary Arrangement (IVA) an insolvency practitioner is required to act as both Nominee and Supervisor, and under bankruptcy the court will appoint an insolvency practitioner as the Official Receiver.

Under the Insolvency Act 1986, only authorised individuals may act as insolvency practitioners. Authorised insolvency practitioners may be nominated in a meeting by creditors (and contributories in a company), or appointed by the Secretary of State.

Insolvency practitioners are authorised on the basis of education, practical training and experience. They are subject to monitoring and regulation and must hold a security bond guaranteeing the proper performance of their duties. Seven recognised professional bodies (RPBs) are responsible for about 92% of all authorisations. The bodies currently recognised are:

Insolvency practitioners who are not members of an RPB can also be authorised directly by the Secretary of. The Insolvency Practitioners Policy Section handles their applications, and also regulates their performance, investigating cases of possible impropriety or dishonesty.

Lending Organisations - Licences and Authorisation

Lending organisations are heavily regulated and primarily so by the Office of Fair Trading under the Consumer Credit Act for credit up to £25,000, and the Financial Services Authority (FSA) for most mortgages and a number of other financial products.

Of note in particular is that this regulation not only applies to the lenders themselves (i.e. the banks and building societies) but extends also to the various intermediaries and advisors who interact with the consumer during the acquisition of the lending product.

The strictest legislation is around mortgages (and re-mortgages), this is because of the large amounts of money being borrowed and the associated large amounts of interest that the banks earn on those loans. Since these mortgages are particularly valuable to the banks they offer significant sums to brokers or other intermediaries to introduce this business to them.

Often these fee payments are well-justified as the broker will go through quite some effort to make initial contact with the customer and then help them to select and set up the right solution. At the same time, however, there is also a risk that the broker will be influenced more by the fees they can earn than by giving the best advice to the customer. This practice of mis-selling is the focus of much of the legislation in this area and in particular on 31st October 2004 a series of controls were brought into place across the industry to improve the mortgage sales process.

Clear Start Authorisation and Licences

All Insolvency Practitioners that are employed either directly or indirectly by Clear Start, or to whom individuals are referred for advice or to set up and supervise an IVA, are authorised by one of the appropriate seven Recognised Public Bodies or directly by the Secretary of State. They are also all members of The Association of Business Recovery Professionals (R3).

As governed by the Office of Fair Trading, under the Consumer Credit Act 1974, Clear Start holds a Consumer Credit Licence, and has been authorised for all categories available therein. As a policy, Clear Start also adheres to the guidelines on debt management and debt advice as laid out in the document published by the OFT in December 2001.

As governed by the Financial Services Authority, under the Financial Services and Markets Act 2000, Clear Start holds Appointed Representative status as an introducer of mortgage business.

As governed by the Information Commissioners Office, under the Data Protection Act 1998, Clear Start holds a Data Protection Licence, and has maintains appropriate policies and procedures to ensure compliance.

As administered by Companies House, an Executive Agency of the Department of Trade and Industry (DTI), and as required by the Companies Act 1985 and the updating legislation contained in the Companies Act 1989, Clear Start is registered under the laws of England and Wales as Clear Start UK Ltd with Company Number 5384991.

As governed by the HM Revenue & Customs, under the Value Added Tax Act 1994, Clear Start is VAT registered, with VAT Registration Number GB 858 4371 89.

Under the Money Laundering Regulations 1993, Clear Start has an appointed Money Laundering Officer and follows defined processes and procedures to ensure compliance.

Contact us for free, confidential advice

Clear Start UK Limited. Registered Office: Eversheds House, 70 Great Bridgewater Street, Manchester, M1 5ES.
Registered in England. Company number 05384991.