Consumer Credit Law
The availability and use of consumer credit has increased exponentially in recent decades. This is now actively regulated by the Consumer Credit Act 1974. This provides protection to those using credit in their capability as a “consumer’ – so for example companies are not afforded protection.
Consumer credit is regulated overall by the Office of Fair Trading – outside the scope of this note other than to say it governs the way credit companies promote credit and by regulating individual credit agreements.
Consumer credit comes in a variety of shapes and sizes including:-
Conditional Sale or Hire Purchase Agreements – goods are hired and ownership of the property is transferred at the end of the agreement term if the buyer exercises an option to purchase
Credit Sale Agreement – credit is advanced and used to purchase goods
Hire purchase, conditional, credit sale loans, overdrafts and credit cards may all be covered by regulations
Consumer Credit Agreements can be cancelled where the following criteria can be met:-
- The creditor (or an agent on his behalf) made oral representations concerning the product in the presence of the customer and
- The credit agreement was executed away from the creditor’s business premises
Once both the creditor and debtor have signed the agreement the creditor must give a complete copy of the agreement to the debtor. The debtor has 5 days from receipt of this document to cancel the agreement. Cancellation notice must be in writing and the effect is (with limited exceptions) to treat the agreement as if it never came into effect. Any monies already paid by the borrower are to be repaid by him and he is released from the obligation to pay any further money. The borrower must return goods advanced to him by the creditor.
CONSUMER CREDIT AND CONSUMER RIGHTS
In many consumer credit situations the buyer will use either a credit card or finance organised by the seller (for example finance organised by car dealers) to fund their transaction.
Buyers in these situations may have additional protection. The usefulness of this has been seen recently with the demise of various tour operators during the recession. Customers who lost the price of their holiday and have no useful rights against the insolvent tour operator will look instead to the finance company –S75 Consumer Credit Act 1974. This applies only to transactions of value of over £100.
In addition a credit card or finance company may become liable pursuant to S56 Consumer Credit Act 1974. A seller who makes representation about a product will be deemed to be an agent for the finance company. A finance company may be liable for misrepresentations made by the seller.