Consumer hire agreements can become regulated under the Consumer Credit Act 1974 (the “Act”). However, knowing when a hire agreement becomes regulated may not be as simple as it first seems.
It’s important to know when a hire agreement may fall into scope of the Act as authorisation by the Financial Conduct Authority (“FCA”) is likely required where it does. Obtaining the appropriate permissions is vital as conducting regulated activity without the proper permission is a criminal offence which carries a penalty of up to two years in prison and an unlimited fine.
How does the Act define a hire agreement?
Under the Consumer Credit Act 1974, a consumer hire agreement is an agreement under which goods are hired by an individual, natural persons, small partnerships and unincorporated bodies for a period which is capable of continuing for more than three months and is not a hire-purchase agreement (a hire-purchase agreement is different from that of a consumer hire agreement) and does not fall under one of the exemptions as set out under articles 60O to 60Q of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (RAO) (article 60N, RAO).
When might a hire agreement become regulated?
How the Act defines a hire agreement means that a hire agreement would likely become regulated if the agreement is capable of subsisting for more than three months. It is important to note that an agreement which does not provide any indication on the duration and is therefore open ended would be regulated under the Act as it is still capable of lasting more than 3 months. The actual duration of the hire might be for example 2 weeks but as there is no end date the hire agreement is capable of lasting for more than 3 months which may push the agreement into regulatory scope.
What permissions might be needed for regulated hire agreements?
Where a regulated hire agreement is being entered into, will likely require authorisation from the FCA. However, the permissions which you require may be nuanced depending how you are providing hire agreements. To enter into regulated hire agreements you will likely need one of or a combination of the following permissions;
- Credit broking
- Entering into regulated consumer hire agreements as owner
- Exercising or having the right to exercise the owner’s rights and duties under a regulated consumer hire agreement
Becoming authorised to enter into regulated consumer hire agreements can be done through direct authorisation with the FCA or by becoming an Appointed Representative of a Principal firm which holds the relevant permissions for the activity you are conducting.
Consumer Credit Compliance is authorised and regulated by the FCA to conduct credit broking, entering into regulated consumer hire agreements as owner and exercising or having the right to exercise the owner’s rights and duties under a regulated consumer hire agreement. We support a number of firms which provide hire agreements to their customers by acting as their Principal firm by offering guidance, support and monitoring to ensure that firms can offer your customers regulated hire agreements the right way.
