A new public body set up by the government to educate consumers on personal finance, money, debt and pensions may be asked to consider whether a ban on pro bono solicitors providing consumer credit advice should be relaxed.
Pro bono charity LawWorks says the prohibition arises from unintended consequences of secondary legislation under the Financial Services and Markets Act 2000.
In 2014, responsibility for regulating consumer credit and consumer credit advice in the UK transferred from the Office of Fair Trading to the Financial Conduct Authority. A group licensing regime was abolished and replaced by an individual authorisation and permission regime for credit-related regulated activities.
The transfer did not affect not-for-profit organisations, such as Citizens Advice, which were allowed to provide services under 'grandfathering' provisions. However, it affected the Law Society's group licence, which covered clinics in the LawWorks network. Such clinics could not rely on the grandfathering provisions because they did not have their own group licence before April 2014. As a consequence, solicitors and firms who volunteer at clinics risk committing a criminal offence when providing debt and consumer credit advice services.
Last month LawWorks wrote to Guy Opperman MP, a barrister and minister at the Department for Work and Pensions, suggesting that a clause could be added to the Financial Guidance and Claims Bill, which establishes the single financial guidance body. The clause would empower the arms-length body - which will replace the Money Advice Service, Pensions Advisory Service and the government's Pension Wise guidance - to review the ban and recommend regulatory changes.
LawWorks' proposed clause, tabled by Yvonne Fovargue, Labour MP for Makerfield, was discussed in a public bill committee session on Tuesday.
Fovargue insisted that she does not want an unregulated market, 'but I want pro bono solicitors to be able to offer the advice they are trained to give. It complements one of the bill's main aims, which is to facilitate a free and impartial money guidance service to the public'.
Opperman acknowledged that the FCA transfer 'created some anomalies'. However, not-for-profit debt advice providers widely supported FCA regulation 'because they felt it was important to ensure that all debt advice was of high quality', he said.
Individual organisations can apply to be regulated under FCA rules, Opperman added, 'but I think it appropriate that we consider it in more detail and invite the [single financial guidance body] to go away and decide whether it is something it would recommend as part of the statutory remit we have set up under clause 3'.
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