Not Regulated Credit (UK)
The below is the legal opinion given from our counsel with regard to the support of our advance payment to merchants, be that direct to an account or deployed to an issued physical or digital payment card.
Legal Opinion
The below is the legal feedback given from our counsel with regard to the support of our advance payment to merchants, be that direct to an account or deployed to an issued physical or digital payment card.
From: Morrison, Thomas \[email protected]\
Date: Wed, 17 Aug 2022 at 10:05
Subject: RE: [EXTERNAL] Advice for lopay
To: Richard Carter \[email protected]\
Cc: Ollie Mahoney \[email protected]\, Armstrong, Craig \[email protected]\
Richard,
Many thanks to you, Lucinda and Ollie for your time on the call yesterday. I'll set out the key advice below
As discussed, I'm comfortable that what Lopay is proposing to do here would not amount to regulated credit. Regulated credit has a very specific legal meaning, which was confirmed in the House of Lords case of Dimond v Lovell [2000] 2 All E.R. 897. For the purposes of regulated credit, "credit" is given when the lender contractually agrees that the customer must pay, or has the option to pay, later than the time for repayment that otherwise would apply. Typically when money is loaned, it is immediately repayable unless agreed otherwise. Likewise, if a merchant provides goods or services, then common law would say that payment is on demand unless agreed otherwise. Therefore, if the lender (or merchant) contractually agrees that the customer can repay at a later date, then this is "credit" in the regulated sense.
This means that, in order for regulated credit to arise, Lopay would have to agree contractually with the customer that the customer can repay this at a later date. The requirement for the contractual deferment of the right to be repaid is crucial here. It means that where someone lends money but does not pursue repayment immediately, then the delay in seeking repayment does not mean that they have granted regulated credit.
In the scenario you have described, Lopay is not contractually agreeing to defer repayment of any "credit" that is given, so the concept of regulated credit cannot arise. Consequently, Lopay would not be carrying on the regulated activity of entering into regulated credit agreements as lender.
I hope this is useful. Please let Craig and me know if you have any further questions.
Kind regards.
Thomas Morrison (He/Him)
Principal Associate (Scottish Qualified)
+44 (0) 2072 824 080