The Office of Fair Trading has taken the unprecedented step of granting the Law Society group credit licence for only one year, citing its failure to monitor solicitors effectively for not giving a full five-year licence.
The society has been given one year to address the office's director general's concerns and implement procedures to investigate complaints and take disciplinary action.
The group consumer credit licence allows solicitors to offer consumer credit to clients, to introduce clients to sources of credit and to deal with debt collecting, counselling and adjusting.
If the Law Society has its licence revoked, solicitors wishing to offer credit to clients will have to apply individually.
The blow comes as the society announced the first stage of its u10m plan to deal with a backlog of complaints at the Office for the Supervision of Solicitors.
"They have given us a one-year renewal and that gets us through," says Jane Betts, secretary general of the Law Society, who has taken over management of the OSS since the suspension of boss Peter Ross.
"By then we will be able to prove to them we are on top of it. I'm sure we can crack it."