Good morning / 29.08.08
Corporate Solutions
Corporate Solutions
The Consumer Credit Act received Royal Assent on 30 March 2006 and on 25 May 2006 the Department of Trade and Industry published a detailed timetable for the Act to be implemented. The aim of the Act is to protect consumers and create a fairer and more competitive credit market.
To read the Consumer Credit Act in full you can visit the website of the Office of Public Sector Information : http://www.opsi.gov.uk/acts/acts2006/20060014.htm
The Government believed that the 1974 CCA, in particular sections 137-140, has had limited effect in enabling borrowers to take effective action against lenders. This has particularly been considered the case in consumer credit transactions where lenders’ behaviour has appeared both unfair and detrimental to borrowers. Research has shown that there are few reported cases of consumers using the CCA in this area. It was also thought that some unscrupulous lenders exploited some borrowers by taking advantage of the difficulties to enforce the current legislation.
One of the main aims is to protect consumers. The new Act means that consumers will be able to exercise their rights more effectively and will also receive better protection through the reformed licensing system as well more information about their accounts. These aims will be achieved through some of the following aspects of the Act:
Periodic statements for fixed sum credit agreements to be provided to the consumer at least annually. Failure to comply would render the agreement unenforceable for the period where no statement was sent, and no interest or charges could be applied.
Additional information on the consequences of missing payments or only making minimum payments to be added to bank account statements.
Lenders required to send notices when a customer falls into arrears. Non compliance would lead to the agreement being unenforceable for the period of the breach and no interest could be charged.
The Office of Fair Trading will issue information sheets on defaults and arrears, which should be sent to customers whenever the lender issues an arrears or default notice.
Notice of default sums (an amount which has to be paid due to a breach in the agreement – late payment fee). Once this notice has been sent to the consumer, the lender cannot apply any interest to the default sum for 28 days.
The creditor will have to notify the consumer if they wish to receive interest after a judgement has been made.
The Act will also work to improve the way the UK consumer credit market works. This will be achieved through the following ways:
Any businesses that currently hold a Consumer Credit Licence will be affected by the reforms in the CCA. Creditors and owners, including those that only enforce agreements, will require a licence under the reforms.
The reforms will mean some small additional costs to businesses however these will hopefully be offset by the improved credit market that the bill will bring about. The OFT will consult on new fees and structure. If a business has a complaint raised against them the first two cases per year will not have a case fee. Any cases over and above that will have a case fee of around £360. Consumer credit businesses will also pay a modest running fee for the scheme or around £10-20 per year.
