Wednesday, 06.08.14 (190 views)

Consumer Credit Act

Consumer Credit Act

The Consumer Credit Act (CCA) regulates credit card purchases and gives you protection when you enter into a loan or hire agreement.

What does CCA cover?

Consumer credit is regulated by the Consumer Credit Act and covers the following:

APR – Calculating the annual percentage rate.

Credit Advertising - Form and content of credit agreements.

Procedures related to early settlement or default termination.

Extra protection on products costing above £100 up to £30,000 paid through a credit card (Section 75).

A credit worthiness assessment is done prior to granting a credit or while increasing the credit.
A credit holder is informed of the following prior to an agreement:
  • Parties involved in the agreement.
  • Nature of the agreement.
  • Credit limit or the value of credit.
  • APR
  • The agreement’s tenure.
  • Total Payable amount.
  • Repayment values and payment amount.
The above information should be documented and titled ‘Pre-contract Agreement’. This has to be provided separately.

The agreement is signed by both parties and copies are given to either side on the date of signing or after seven days.

Why prefer a CCA member?

Borrowing from a CCA member ensures that a person will get the best service possible. The reason is – All CCA members are governed by the stringent CCA regulations that have been outlined in the CCA Code of Practice.

What Does CCA Offer?

The CCA is considered quite a popular source of advice for consumers dealing in credit matters. And CCA assists to get the most out of the relationship with the home credit lender.

The CCA, established in 1978, knows the home credit industry inside out more than anyone else.

CCA members work closely with the government as well as the industry regulators. This is to ensure that customers always receive a fair and responsible response.

Cooling off period of Credit agreement:

There is a provision to cancel a credit agreement within the cooling off period. For that, a notice of the cancellation right should be included and sent via email or post within seven days.

There would also be five clear days (excluding the date of receipt) to cancel the same as well.

Under section 67, when an agreement is cancelled, all or any transaction that might have occurred is treated as null and void. Hence, the company repays all sums received by it and all or any goods taken must be returned back to the company.

Credit agreements:

When a credit agreement is agreed upon in person, over the phone or online, the financial services or distance marketing regulations come into force.

According to the regulation, certain information must be provided before the contract comes into force.
The information should include:
  • Details of the main features of the credit agreement.
  • Name and address of the creditor.
  • Total payable credit.
  • Payment terms
  • Information concerning withdrawal right.

The right to withdraw from credit agreement(s):

Every customer has a cooling off period stipulated in the agreement during which he or she can change their mind and cancel the agreement. In that case, the borrowed amount will have to be repaid along with interest (if any) that has accrued up to the point of cancellation of the credit.

However, there are few agreements that can’t be cancelled once they are signed for example, if the credit amount exceeds £60,260 or if the agreement(s) is secured on land. The 14 days cooling off period starts from the day the agreement comes into force or perhaps later when the customer gets a copy of the agreement.

In case of a credit card, the cooling off period starts when the customer is delivered a copy of the agreement. While the credit agreement can be withdrawn, the contract for the service or the item in question will not be affected for example, if someone purchased a car on finance, the person will have to find some other way to pay off the dues unless there is some other provision to cancel the main contract.

Contract breach exceeding £30,000:

Section 75 won’t apply if the service or item requested exceeds £30,000, however, there might be some protection under section 75A. The credit amount arranged by the seller should not exceed £60,260. If for any reason the agreement does not work out, the credit provider will be held responsible as long as:
  • The seller has become insolvent.
  • The seller is untraceable.
  • The seller might have been contacted but failed to respond.
  • Appropriate steps were taken to pursue the seller, but the results were unsatisfactory.
It is to be noted that if anything goes wrong and if the seller offers compensation or a replacement, which if the provider accepts, then there will not be any claim as per Section 75A.

Lesser interest for early repayment:

If a part of the loan or maybe a part of it is paid off before the full term of the credit agreement, the buyer, in that case is not required to pay the full interest amount.

If the buyer decides to pay off some or the entire loan before the stipulated period, a written notice has to be sent to the credit provider to know how much will have to be paid to clear the debt. Also the buyer can mention the amount that he/she wishes to pay.

The Consumer Credit (Early Settlement) Regulations 2004 and the Consumer Credit (Settlement Information) Regulations’ 1983 would take care of this aspect. A settlement statement would be provided to the buyer within the next seven working days after receiving the request.

If the credit provider doesn’t respond stating the amount to be paid to clear either a portion or the whole of it (as appropriate) or if the buyer feels that the charge is too much, the buyer can always warn the credit provider that the matter would be forwarded to the Financial Ombudsman Service as the right to settle the agreement early is being denied for no valid reason. The buyer is also advised to inform the local Trading Standards Department in such a scenario.

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