Consumer credit

All dealings between banks, finance houses and other lenders and their consumer customers are regulated in some way by the Consumer Credit Act 1976 (“CCA”) and were amended in 2006.

The legislation introduced regulations and restrictions upon agreements reached between those lenders and those consumers. Broadly, the agreements had to:

• be in writing
• be in a certain form
• contain specific information about the loan

If the agreement failed to do so, then it would be potentially unenforceable against the consumer without permission of the Court, or in some circumstances, at all.

The Act also prescribes the procedures that must be followed before enforcement proceeding are issued for example, the service of arrears notices and default notices, without which the proceedings will be stopped.

The Act now covers all agreements offering credit if any is sought, either by loan hire, purchase or running account, as well as equipment leases. There is no upper limit as to the amount (the old limit to £25,000 was abolished in 2006) and will apply between a lender and an individual or partnership of up to three members for whatever purpose the loan was made.

The Act will not regulate agreements where the borrower is a limited company.

• A guide to financial disputes(pdf, 103Kb)

We have considerable experience of advising both lenders and borrowers of the implications of the Act, and issues of enforceability where there have been procedural irregularities.

We advised on a wide range of issues including:

• the form and content of the agreement
• the mechanism by which it came into existence
• enforceability and failure to comply with the information requirements on the agreement
• the consequences of non-service arrears notices and default notices
• applications for permission to enforce to be called
• the likely amount of recovery