In 2015, the Government, through the Financial Credit Authority (FCA), introduced legislation which changed the regulations for the provision of credit. This was of relevance to golf clubs who allowed their members to pay their annual subscriptions by direct debit whilst charging them a fee for that service. Essentially, unless you operate under the allowed exemption (see below), you are required to obtain Authorisation from the FCA to continue with that service.
It is apparent, from recent enquiries to the Helpdesk, that many clubs are still operating direct debit schemes that contravene the legislation and as such are liable to be fined and/or prosecuted. Those clubs that are still operating illegally under the impression that the FCA have better things to do, should be aware that smaller firms are now being investigated and golf clubs may now be a target. Therefore, if you do not have authorisation and are not operating under the exemption below, then you may be in line for an uncomfortable dialogue.
The exemption, under the new legislation, states that a credit agreement will be exempt if it meets all the following criteria:
- it is repayable by no more than 12 instalments (e.g. monthly), within no more than 12 months
- it is a borrower-lender-supplier agreement (i.e. it finances the acquisition of specific goods or services)
- it is for a fixed amount
- it involves no charges or interest (e.g. there can be no admin fee) or is secured on land
This last point did require clarification from the FCA, but it is now clear that offering a discount for paying in full will constitute a charge or interest on those who pay by instalments. In fact, any scheme which results in a member paying by instalments paying more than a member paying in full, will mean that the credit agreement cannot be exempt from the requirement to have Authorisation.
The above exemption came into force on 18 March 2015 and it applies to all credit agreements entered or brokered on, or after, that date.