A layman’s guide to the Consumer Credit Act 1974 (amended 2006)

• Alex Hartley
• 2nd August, 2018
• Money & Finance

The Consumer Credit Act 1974 is designed to give consumers protection with respect to loan agreements, credit card purchases and a range of ancillary issues, such as accessing credit information. Together with the Financial Services and Markets Act 2000, and a number of European consumer credit regulations, it provides a comprehensive set of protections for consumers using credit in the UK.

What does the Consumer Credit Act cover?

In most situations, the protections available under the Consumer Credit Act will only cover credit of between £100 and £30,000. Those debts that are covered by the legislation are called “regulated” debts and these include credit cards, store cards, payday loans, personal loans and hire purchase agreements. Some types of debt are not covered by the act, including mortgages, charge cards, debts that are owed to another individual, debts to an unlicensed lender (e.g. a loan shark) and debts owed to a utilities company.

Entering into credit agreements

The Consumer Credit Act 1974 (CCA) establishes key foundations for the way in which financial bodies can enter into credit agreements with UK consumers. This includes:

• Information that must be provided to a consumer before a credit agreement is signed. For example, the nature of the agreement, name and address of the creditor, duration of the agreement, type of credit and credit limit, details of the interest rate and any charges, as well as the total amount payable.
• The way that credit agreements should be set out, in terms of content and form.
• How Annual Percentage Rates (APR) should be calculated.
• Key procedures to deal with changes to the credit agreement, such as early settlement, default or termination of the agreement.
• The requirement to credit check consumers using information provided by the consumer and also by a credit reference agency.

Cancelling credit agreements

You can cancel a credit agreement that you signed in your own home according to the rights that the CCA gives you. Together with various European regulations, the CCA gives consumers the right to cancel credit agreements in a number of situations, including when you entered into a credit agreement over the phone or at a location not on trade premises (for example at a temporary marketing display). In most cases you will have a cooling off period in which to change your mind – this may be between 5 and 14 days, depending on how you entered into the credit agreement. You should always be given information about the cooling off period before signing anything – if you haven’t been provided with this then ask. It’s worth noting that if you’re entering into an agreement for more than £60,260, or an agreement secured on land, then you may not have a right to cancel.

Your rights if you have debt problems

The CCA provides a number of key protections for anyone who is getting into trouble with their debts, including:

• A creditor must issue a default notice if you fall into arrears with a debt, so that you have time to get your account back up to date.
• A default notice has to take a particular form, including informing you what is owed and what action will be taken if the amounts are not paid. A default notice should give you seven days to get your account up to date.
• If you’re in default with your debts then your creditor must provide regular statements and correspondence to keep you informed about the debt, interest and any charges.
• If you’re not happy with the way your debts have been handled you can make a complaint to the Financial Ombudsman Service.

Hire purchase agreements

Where you have paid a third of the total price under a hire purchase agreement then the CCA prevents the creditor from taking the goods back without first getting a court order. Consumers are entitled to ask the court to suspend the order and accept instalment repayments of what is owed instead.

Additional protection for credit card purchases

Where you have made a credit card purchase for between £100 and £30,000 and you have a claim for breach of contract or misrepresentation against a retailer of goods or services, you may also have a claim against the credit card provider. This could be useful, for example, where you used your credit card to buy services from a company that has become insolvent. As the insolvent company won’t now deliver the services, and is unlikely to be able to repay your money, being able to make a claim against the credit card provider provides another way to get your money back.

These are just some of the protections in the CCA – you can find the full legislation here.

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