How consumer credit regulation affects the sports industry

Most lawyers (the author included) would generally consider the two topics of consumer credit and sport as perennially distinct and, whilst they often both fall under the remit of commercial lawyers generally, it seems difficult on the face of it to see how the two topics might overlap.

But, as with most activities, participation in sport for the average person (ranging from actually playing a sport to supporting a team) costs money. This personal monetary cost often leads to cash-flow management, and there are plenty of products in the market that are designed to do just this¹ – spreading out the cost of participation in sport for the individual over a chosen period, in much the same way that one might take out a personal loan to pay for any other type of good or service.

Some are designed to turn a profit and some are not, but the fundamental purpose from the individual’s perspective is to enable a purchase to be made that an individual otherwise could not or would not fund in one lump sum payment. Thus, in the sporting context, a person might be able to stagger their gym membership over a period of time, or pay for their football season ticket incrementally in a similar way.

This article looks at how consumer credit is regulated in the UK, and how the regulation affects the sports industry.

Regulating Consumer Credit

As a response (amongst other things) to a perceived need for greater and more effective regulation, on 1 April 2014 the UK government transferred responsibility for regulating these types of arrangements from the Office of Fair Trading (“OFT”) to the Financial Conduct Authority (“FCA”).² With it came a wholesale review of the consumer credit regime in the UK and the way that entities offering consumer loans are supervised in their activities. To date, this change manifests itself in the form of much stricter requirements for registering with the FCA to provide consumer credit-related activities,³ along with revised powers for the FCA to enforce mal-practice.

The consumer credit regime in the UK is, in effect, a consolidation of a number of pieces of primary and secondary legislation, supplemented by rules and guidance.⁴ A full explanation of this is beyond the scope of this article, however there are certainly a number of the components of the regime that are relevant to the daily life of most sports fans or amateur participants and it is these that I would like to focus on here.

How does consumer credit legislation apply to sport?

Why does this matter in the sporting context? Well, under the new regime, entities wishing to carry out consumer credit-related activities were given certain timeframes in which to convert their existing OFT permissions into full FCA permission for the activities carried out. At the time of writing, this process continues, but as it does so, more and more sports clubs will need to (if they have not done so already) analyse whether their activities in this arena continue to require full FCA permission or whether there is a handy exemption that they can take advantage of, which may operate to mean that the consumer credit regime can be avoided in full or in part (as to which, please see below).

‘Sports clubs’ is meant in the widest context. Compliance with the consumer credit regime is not a new concept for established professional sports outfits and the football industry is as good as any place to provide an example of this. One need only look at historic season ticket purchase packages to see that:

1. the costs of tickets can be spread out over a period of time (e.g. six or twelve months); and
2. the cost of a season ticket purchased in this way is generally more expensive than a ticket which is purchased in one lump sum payment.

This practice is consumer lending in its most obvious form as the club is financing the cost of the annual ticket at the outset (as well as supplying the ticket), with the ticket purchaser repaying this sum in instalments over time. The additional price of the ticket purchased over time will amount to the ‘cost’ of the loan to the purchaser of the ticket, and the percentage take up of these products suggests that this is a price worth paying for the ease of spreading the cost over a period of time.

But ‘sports clubs’ obviously also include the vast array of amateur sports clubs to which many of us belong in various different guises. These entities (be they gyms, golf clubs, rugby clubs) all generally charge subscription fees to members, and depending on the cost of membership and the various packages offered with respect to how those membership subscriptions are paid, these clubs may also find themselves within the scope of the consumer credit regime, either requiring appropriate FCA permission or suitable advice as to how to avoid the need for permission.