The Consumer Credit Act 1974 (“CCA”) as it currently stands , even with all the recent changes to simplify it, still remains to be complex with traps for the unwary.
Amongst other things, the CCA covers consumer credit agreements. These are agreements between an individual (the debtor) and any other person (the creditor) by which the creditor provides the debtor with credit of any amount.
Individuals & Credit Limit
In the past the CCA did not cover agreements with partnerships. Because of the new definition of “individual” any new agreements with a partnership of no more than 3 partners (with at least one of those partners being a natural person), or an unincorporated body of persons (with at least one being a natural person), will now fall within the scope of the regime.
Also if the agreement is not wholly or predominantly for the purposes of the customer’s business it will be covered irrespective of the value of the contact. Where it is for business purposes, only those under the upper financial limit of £25,000 (which is usual in these cases) will be covered by the CCA.
Therefore, the CCA (as amended) now covers agreements with natural persons (or partnerships of 2 or 3) for any value in the context of the customer entering into the agreement for private use, and for £25K or less in the case of the customer entering into the contract for business use.
Credit – payment by installments?
You should also be aware that “credit” is defined as not only a cash loan but any other form of financial accommodation. This means that any circumstances in which the debtor is allowed time to pay (such as installments) can be held to be credit. There are certain exceptions but these have strict repayment provisions and installment periods which must be applied to ensure exclusion from the CCA.
Variations
The legislation requires any rescheduling of payments, or changes of equipment, or other aspects of the agreement to be recorded in a “modifying agreement”. This is something that is often overlooked by financiers or financial advisers.
Unfair Relationship
The “unfair relationship” provisions which were introduced into the CCA recently, have been applied retrospectively whatever the date of an agreement. These replace the provisions in the CCA which formerly struck down extortionate credit bargains. Both sets of provisions apply to both regulated and unregulated hire purchase agreements provided that the customer is an individual or a partnership of up to 3 partners (with at least one of the partners being a natural person), and the courts have very wide powers to strike down or amend hire purchase agreements, other than certain lease agreements due to being “unfair” because of their terms, the way rights have been exercised or any other “unfair” acts by or on behalf of the financier.
Michelle Mathers