The business of credit institutions law is a constantly evolving body of law. The current legal environment has witnessed profound changes in all fields of business. In this evolving legal framework, the term 'credit institution' refers to any one who, with the consent of creditors, lends money, other than the direct type of loans extended by family members or friends. Key legal definitions for the purpose of application and interpretation of the Law governing: authorised credit institution or ACI, debt collection agency, debt relief service, debt management company, as well as the business of credit institutions law, shall have the same meaning ascribed to the word in article 2 of the Business of Credit Institutions Laws enacted by the Parliament. An authorised credit institution is any recognised or accredited credit institution duly registered with the appropriate regulatory authority.
Financial institutions are now governed by many strands of laws and rulings that together form an intricate tapestry of legal obligation. One such ruling is that all credit institutions are jointly and severally bound by the obligations set out in the Insolvency Act 1974. Another ruling concerns the relationship between the financial institutions and their relationship with their respective customers. Under this ruling, the credit institutions are bound to maintain strict accounts records of their clients. Such records shall be kept confidential and all information relating to such records shall be held securely by the credit institutions and their respective branches or offices.
Under the Insolvency Act, all those involved in the business of credit institutions and the related activities are defined as Insolvency Practitioners. A person who practises Insolvency, is a debtor, i.e. a person who is not legally qualified to collect on a loan, and who is not in a position to satisfy the requirements of that loan. Such a person may be a bankrupt or may have become bankrupt for reasons such as incapacity to pay loans. The Insolvency Practitioner may also include in his business of credit acquiring companies.
According to the business of credit institutions law, the Insolvency Practitioner is the person who supervises the organization that he is managing and has absolute power to bind the companies under his control. The Insolvency Practitioner is also responsible for examining the assets and the corresponding liabilities of the Insolvency Practitioner. The Insolvency Practitioner may delegate the duties to other licensed insolvency practitioners under him. He may delegate other activities associated with insolvency, like collecting debts and providing advice to Insolvency Practitioners. The Insolvency Practitioner may conduct meetings to review the progress of the Insolvency Practitioner.
According to the business of credit institutions law, the Insolvency Practitioner is required to prepare a code of principles that governs the Insolvency Practitioner's activities relating to Insolvency, including the provision of advice to Insolvency Practitioners and the supervision of companies. The Insolvency Practitioner has to ensure compliance with licensing requirements and complete financial reports that comply with the requirements of the UK Financial Services Authority (FSA). The FSA insures that regulated companies operate according to proper standards and do not engage in any activity that is contrary to the provisions of the FSA's Code of Practice. The Insolvency Practitioner must submit annual financial reports that comply with the requirements of the Office of Fair Trading (FOLT).
In the business of credit institutions law, the borrower shall mean the person who borrows from a lender or from a credit institution. The word “borrower” refers to a borrower. “Credit institution” means any credit company or body that lends money. It does not . . . . . . necessarily mean that the borrower shall be a member of a creditor's group.
The business of credit institutions law refers to credit facilities. Credit facilities may include loans, credit cards, overdrafts, lease payments, hire purchase agreements, credit facilities for businesses, and so on. The term “credit facility” is used to refer to an agreement between a lender and a borrower. In such an agreement, the lender agrees to lend money and the borrower agrees to pay interest on that loan, in return for which the lender charges a fee and charges an exit fee if the borrower defaults on the repayments.
In the business of credit facilities, the lenders normally appoint one or more agents called “Guarantors”. A borrower referred to as “Resident” in such an agreement is normally a non-dominant borrower. Residual guarantee is a term used to describe a borrower who is normally a dominant borrower in credit facilities legislation but is transferred by another borrower. There are two types of guarantors: primary guarantor and contingent guarantor. A primary guarantor is one who guarantees to repay the credit facility to which he is assigned and a contingent guarantor is one who guarantees to refund a credit facility only if his income declines and his ability to earn income are affected. A third type of guarantor is a self- guarantor who is assigned the responsibility by his employer to undertake any obligations arising out of employment and who is not obliged to undertake any commitments under such guarantee.