Download Consumer Credit Act

Consumer Credit Act 1974 (as amended)
What does it cover?
The Consumer Credit Act is the main piece of law covering credit. The most
common use of credit that you are aware of is probably a ‘credit card.’ Do you
know the difference between a credit card and a debit card? That is your first
challenge!
You may also come across credit when people purchase cars, take out loans
and mortgages to purchase a house. In its simplest form, it is all about
borrowing money, and paying it back at a later date with interest, which is the
profit the borrower makes from you for borrowing the money to you in the first
place. People also use credit when they have car insurance policies and pay
them monthly, as it helps to spread the cost of the insurance if they cannot
pay for it in a lump sum.
Types of finance
Hire Purchase – this is usually used for things like expensive cars, TVs etc.
For example, you have decided to buy a new car, but you don’t have any
savings to buy one, the finance company will buy the
car from the garage for you, and you have to pay
them a certain amount back each month until you
have paid off the money. Even though you get to
keep the car, you are not the legal owner until you
pay the finance company back the money they paid
for the car and their interest. Therefore you are hiring
the car off them until you make your final payment and ‘purchase’ the vehicle.
The contract is between you and the finance company, not the garage.
Credit Card – usually these have limits on the amount of money that you can
spend on them, and you receive a bill at the end of each month asking for
payment. If you do not settle the full balance, then you usually pay interest on
the amount of money that you still owe to your credit card company and are
required to make a minimum payment every month off the amount you owe.
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Fixed sum loan agreement – this is the type of credit that people have to
pay off their car insurance or to buy items such as a sofa. They are loans
arranged by shops and Traders to assist people to buy
goods and services and are for a fixed amount. Have you
seen adverts from furniture stores saying you can buy a
sofa now and not pay anything for a year? These will
usually involve a fixed sum loan agreement.
Consumer Credit Act – the important parts
Section 75 – this section of the Act gives us more protection when we are
purchasing goods and services which cost over £100. If a consumer has
purchased goods or services on a credit card or a fixed sum loan agreement,
then this section applies.
If the Trader breaches any section of the law, goes out of business or does
not complete the contract, you can pursue the finance company for a remedy.
You have the same rights against the finance company as you would have
against the Trader as they are ‘jointly and severally liable.’
Section 57 – this section gives you the right to cancel the contract until both
parties have signed it. Once both parties have signed the contract is called an
‘executed agreement’ and it binding on both parties and cannot be cancelled.
Credit Reference Agencies
When people use credit, a record is kept on their credit file. When applying for
credit, most lenders will be registered with one of the three credit reference
agencies and will check your credit file to help them make a decision about
whether to provide you with the credit.
The credit reference agencies are:



Call Credit
Experian
Equifax
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Test yourself or your team
Question 1
What is a hire purchase agreement?
Question 2
What is the difference between a credit card and a debit card?
Question 3
What is the name of the main Act covering credit?
Question 4
Which two types of finance agreement discussed would be covered by
Section 75?
Question 5
How much do you have to spend for Section 75 to apply?
Question 6
What does Section 57 give parties the right to do?
Question 7
What type of organisation are the three agencies that creditors check a
person’s credit file with?
Question 8
Name the three agencies.
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