An Act to amend the Consumer Credit Act 1974; to extend the ombudsman scheme under the Financial Services and Markets Act 2000 to cover licensees under the Consumer Credit Act 1974; and for connected purposes.
[30th March 2006]
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
Agreements regulated under the 1974 Act etc.
1-
Definition of “individual”
In section 189(1) of the 1974 Act (definitions) for the definition of “individual” substitute—
“‘individual’ includes—
(a)
a partnership consisting of two or three persons not all of whom are bodies corporate; and
(b)
an unincorporated body of persons which does not consist entirely of bodies corporate and is not a partnership;”.
2-
Removal of financial limits etc.
(1)
In section 8 of the 1974 Act (which defines consumer credit agreements)—
(a)
in subsection (1) for “personal” substitute “consumer”;
(b)
subsection (2) shall cease to have effect.
(2)
In section 15(1) of that Act (which defines consumer hire agreements) paragraph (c) and the “and” immediately preceding it shall cease to have effect.
(3)
In section 43(3) of that Act (financial and other limits relating to regulation of advertisements) paragraph (a) and the “or” immediately after it shall cease to have effect.
3-
Exemption relating to high net worth debtors and hirers
After section 16 of the 1974 Act insert—
“16A
Exemption relating to high net worth debtors and hirers
(1)
The Secretary of State may by order provide that this Act shall not regulate a consumer credit agreement or a consumer hire agreement where—
(a)
the debtor or hirer is a natural person;
(b)
the agreement includes a declaration made by him to the effect that he agrees to forgo the protection and remedies that would be available to him under this Act if the agreement were a regulated agreement;
(c)
a statement of high net worth has been made in relation to him; and
(d)
that statement is current in relation to the agreement and a copy of it was provided to the creditor or owner before the agreement was made.
(2)
For the purposes of this section a statement of high net worth is a statement to the effect that, in the opinion of the person making it, the natural person in relation to whom it is made—
(a)
received during the previous financial year income of a specified description totalling an amount of not less than the specified amount; or
(b)
had throughout that year net assets of a specified description with a total value of not less than the specified value.
(3)
Such a statement—
(a)
may not be made by the person in relation to whom it is made;
(b)
must be made by a person of a specified description; and
(c)
is current in relation to an agreement if it was made during the period of one year ending with the day on which the agreement is made.
(4)
An order under this section may make provision about—
(a)
how amounts of income and values of net assets are to be determined for the purposes of subsection (2)(a) and (b);
(b)
the form, content and signing of—
(i)
statements of high net worth;
(ii)
declarations for the purposes of subsection (1)(b).
(5)
Where an agreement has two or more debtors or hirers, for the purposes of paragraph (c) of subsection (1) a separate statement of high net worth must have been made in relation to each of them; and paragraph (d) of that subsection shall have effect accordingly.
(6)
In this section—
‘previous financial year’ means, in relation to a statement of high net worth, the financial year immediately preceding the financial year during which the statement is made;
‘specified’ means specified in an order under this section.
(7)
In subsection (6) ‘financial year’ means a period of one year ending with 31st March.
(8)
Nothing in this section affects the application of sections 140A to 140C.”
4-
Exemption relating to businesses
Before section 17 of the 1974 Act insert—
“16B
Exemption relating to businesses
(1)
This Act does not regulate—
(a)
a consumer credit agreement by which the creditor provides the debtor with credit exceeding £25,000, or
(b)
a consumer hire agreement that requires the hirer to make payments exceeding £25,000,
if the agreement is entered into by the debtor or hirer wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him.
(2)
If an agreement includes a declaration made by the debtor or hirer to the effect that the agreement is entered into by him wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him, the agreement shall be presumed to have been entered into by him wholly or predominantly for such purposes.
(3)
But that presumption does not apply if, when the agreement is entered into—
(a)
the creditor or owner, or
(b)
any person who has acted on his behalf in connection with the entering into of the agreement,
knows, or has reasonable cause to suspect, that the agreement is not entered into by the debtor or hirer wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him.
(4)
The Secretary of State may by order make provision about the form, content and signing of declarations for the purposes of subsection (2).
(5)
Where an agreement has two or more creditors or owners, in subsection (3) references to the creditor or owner are references to any one or more of them.
(6)
Nothing in this section affects the application of sections 140A to 140C.”
5-
Consequential amendments relating to ss. 1 to 4
(1)
In section 8(3) of the 1974 Act (which defines regulated consumer credit agreements) after “16” insert “, 16A or 16B”.
(2)
In section 10 of that Act (running-account credit and fixed-sum credit)—
(a)
in subsection (1) for “personal” wherever occurring substitute “consumer”;
(b)
in subsection (3)—
(i)
for “section 8(2)” substitute “paragraph (a) of section 16B(1)”;
(ii)
for “subsection” substitute “paragraph”.
(3)
In section 17(2) of that Act (small agreements) for “8(2)” substitute “16B(1)(a)”.
(4)
In section 145(4) of that Act (types of hire businesses relevant to credit brokerage) after paragraph (a) insert—
“(aa)
a business which comprises or relates to consumer hire agreements being, otherwise than by virtue of section 16(6), exempt agreements;”.
(5)
In subsection (1) of section 158 of that Act (duty of credit reference agency to disclose filed information) for paragraph (a) substitute—
“(a)
a request in writing to that effect from a consumer,”.
(6)
After subsection (4) of that section insert—
“(4A)
In this section ‘consumer’ means—
(a)
a partnership consisting of two or three persons not all of whom are bodies corporate; or
(b)
an unincorporated body of persons which does not consist entirely of bodies corporate and is not a partnership.”
(7)
In section 181(1) and (2) of that Act (power to alter monetary limits etc.) for “8(2), 15(1)(c)” substitute “16B(1)”.
(8)
In subsection (5) of section 185 of that Act (agreement with more than one debtor or hirer)—
(a)
in paragraph (b) for “a body corporate” substitute “not an individual”;
(b)
for “the body corporate or bodies corporate” substitute “each person within paragraph (b)”.
(9)
In subsection (6) of that section after “a body corporate” insert “within paragraph (b) of that subsection”.
(10)
In section 189(1) of that Act (definitions) in the definition of “exempt agreement” after “16” insert “, 16A or 16B”.
Statements to be provided in relation to regulated credit agreements
6-
Statements to be provided in relation to fixed-sum credit agreements
After section 77 of the 1974 Act insert—
“77A
Statements to be provided in relation to fixed-sum credit agreements
(1)
The creditor under a regulated agreement for fixed-sum credit—
(a)
shall, within the period of one year beginning with the day after the day on which the agreement is made, give the debtor a statement under this section; and
(b)
after the giving of that statement, shall give the debtor further statements under this section at intervals of not more than one year.
(2)
Regulations may make provision about the form and content of statements under this section.
(3)
The debtor shall have no liability to pay any sum in connection with the preparation or the giving to him of a statement under this section.
(4)
The creditor is not required to give the debtor any statement under this section once the following conditions are satisfied—
(a)
that there is no sum payable under the agreement by the debtor; and
(b)
that there is no sum which will or may become so payable.
(5)
Subsection (6) applies if at a time before the conditions mentioned in subsection (4) are satisfied the creditor fails to give the debtor—
(a)
a statement under this section within the period mentioned in subsection (1)(a); or
(b)
such a statement within the period of one year beginning with the day after the day on which such a statement was last given to him.
(6)
Where this subsection applies in relation to a failure to give a statement under this section to the debtor—
(a)
the creditor shall not be entitled to enforce the agreement during the period of non-compliance;
(b)
the debtor shall have no liability to pay any sum of interest to the extent calculated by reference to the period of non-compliance or to any part of it; and
(c)
the debtor shall have no liability to pay any default sum which (apart from this paragraph)—
(i)
would have become payable during the period of non-compliance; or
(ii)
would have become payable after the end of that period in connection with a breach of the agreement which occurs during that period (whether or not the breach continues after the end of that period).
(7)
In this section ‘the period of non-compliance’ means, in relation to a failure to give a statement under this section to the debtor, the period which—
(a)
begins immediately after the end of the period mentioned in paragraph (a) or (as the case may be) paragraph (b) of subsection (5); and
(b)
ends at the end of the day on which the statement is given to the debtor or on which the conditions mentioned in subsection (4) are satisfied, whichever is earlier.
(8)
This section does not apply in relation to a non-commercial agreement or to a small agreement.”
7-
Further provision relating to statements
(1)
In section 78 of the 1974 Act (duty to give information to debtor under running-account credit agreement) after subsection (4) insert—
"(4A)
Regulations may require a statement under subsection (4) to contain also information in the prescribed terms about the consequences of the debtor—
(a)
failing to make payments as required by the agreement; or
(b)
only making payments of a prescribed description in prescribed circumstances.”
(2)
In subsection (7) of that section for “(4) and (5)” substitute “(4) to (5)”.
(3)
In section 185 of that Act (agreement with more than one debtor or hirer) for subsection (2) substitute—
"(2)
Notwithstanding subsection (1)(a), where credit is provided under an agreement to two or more debtors jointly, in performing his duties—
(a)
in the case of fixed-sum credit, under section 77A, or
(b)
in the case of running-account credit, under section 78(4),
the creditor need not give statements to any debtor who has signed and given to him a notice (a ‘dispensing notice’) authorising him not to comply in the debtor’s case with section 77A or (as the case may be) 78(4).
(2A)
A dispensing notice given by a debtor is operative from when it is given to the creditor until it is revoked by a further notice given to the creditor by the debtor.
(2B)
But subsection (2) does not apply if (apart from this subsection) dispensing notices would be operative in relation to all of the debtors to whom the credit is provided.
(2C)
Any dispensing notices operative in relation to an agreement shall cease to have effect if any of the debtors dies.
(2D)
A dispensing notice which is operative in relation to an agreement shall be operative also in relation to any subsequent agreement which, in relation to the earlier agreement, is a modifying agreement.”
Default under regulated agreements
8-
OFT to prepare information sheets on arrears and default
At the beginning of Part 7 of the 1974 Act insert—
“Information sheets
86A
OFT to prepare information sheets on arrears and default
(1)
The OFT shall prepare, and give general notice of, an arrears information sheet and a default information sheet.
(2)
The arrears information sheet shall include information to help debtors and hirers who receive notices under section 86B or 86C.
(3)
The default information sheet shall include information to help debtors and hirers who receive default notices.
(4)
Regulations may make provision about the information to be included in an information sheet.
(5)
An information sheet takes effect for the purposes of this Part at the end of the period of three months beginning with the day on which general notice of it is given.
(6)
If the OFT revises an information sheet after general notice of it has been given, it shall give general notice of the information sheet as revised.
(7)
A revised information sheet takes effect for the purposes of this Part at the end of the period of three months beginning with the day on which general notice of it is given.”
9-
Notice of sums in arrears under fixed-sum credit agreements etc.
After section 86A of the 1974 Act (inserted by section 8 of this Act) insert—
“Sums in arrears and default sums
86B
Notice of sums in arrears under fixed-sum credit agreements etc.
(1)
This section applies where at any time the following conditions are satisfied—
(a)
that the debtor or hirer under an applicable agreement is required to have made at least two payments under the agreement before that time;
(b)
that the total sum paid under the agreement by him is less than the total sum which he is required to have paid before that time;
(c)
that the amount of the shortfall is no less than the sum of the last two payments which he is required to have made before that time;
(d)
that the creditor or owner is not already under a duty to give him notices under this section in relation to the agreement; and
(e)
if a judgment has been given in relation to the agreement before that time, that there is no sum still to be paid under the judgment by the debtor or hirer.
(2)
The creditor or owner—
(a)
shall, within the period of 14 days beginning with the day on which the conditions mentioned in subsection (1) are satisfied, give the debtor or hirer a notice under this section; and
(b)
after the giving of that notice, shall give him further notices under this section at intervals of not more than six months.
(3)
The duty of the creditor or owner to give the debtor or hirer notices under this section shall cease when either of the conditions mentioned in subsection (4) is satisfied; but if either of those conditions is satisfied before the notice required by subsection (2)(a) is given, the duty shall not cease until that notice is given.
(4)
The conditions referred to in subsection (3) are—
(a)
that the debtor or hirer ceases to be in arrears;
(b)
that a judgment is given in relation to the agreement under which a sum is required to be paid by the debtor or hirer.
(5)
For the purposes of subsection (4)(a) the debtor or hirer ceases to be in arrears when—
(a)
no sum, which he has ever failed to pay under the agreement when required, is still owing;
(b)
no default sum, which has ever become payable under the agreement in connection with his failure to pay any sum under the agreement when required, is still owing;
(c)
no sum of interest, which has ever become payable under the agreement in connection with such a default sum, is still owing; and
(d)
no other sum of interest, which has ever become payable under the agreement in connection with his failure to pay any sum under the agreement when required, is still owing.
(6)
A notice under this section shall include a copy of the current arrears information sheet under section 86A.
(7)
The debtor or hirer shall have no liability to pay any sum in connection with the preparation or the giving to him of a notice under this section.
(8)
Regulations may make provision about the form and content of notices under this section.
(9)
In the case of an applicable agreement under which the debtor or hirer must make all payments he is required to make at intervals of one week or less, this section shall have effect as if in subsection (1)(a) and (c) for ‘two’ there were substituted ‘four’.
(10)
If an agreement mentioned in subsection (9) was made before the beginning of the relevant period, only amounts resulting from failures by the debtor or hirer to make payments he is required to have made during that period shall be taken into account in determining any shortfall for the purposes of subsection (1)(c).
(11)
In subsection (10) ‘relevant period’ means the period of 20 weeks ending with the day on which the debtor or hirer is required to have made the most recent payment under the agreement.
(12)
In this section ‘applicable agreement’ means an agreement which—
(a)
is a regulated agreement for fixed-sum credit or a regulated consumer hire agreement; and
(b)
is neither a non-commercial agreement nor a small agreement.”
10-
Notice of sums in arrears under running-account credit agreements
After section 86B of the 1974 Act (inserted by section 9 of this Act) insert—
“86C
Notice of sums in arrears under running-account credit agreements
(1)
This section applies where at any time the following conditions are satisfied—
(a)
that the debtor under an applicable agreement is required to have made at least two payments under the agreement before that time;
(b)
that the last two payments which he is required to have made before that time have not been made;
(c)
that the creditor has not already been required to give a notice under this section in relation to either of those payments; and
(d)
if a judgment has been given in relation to the agreement before that time, that there is no sum still to be paid under the judgment by the debtor.
(2)
The creditor shall, no later than the end of the period within which he is next required to give a statement under section 78(4) in relation to the agreement, give the debtor a notice under this section.
(3)
The notice shall include a copy of the current arrears information sheet under section 86A.
(4)
The notice may be incorporated in a statement or other notice which the creditor gives the debtor in relation to the agreement by virtue of another provision of this Act.
(5)
The debtor shall have no liability to pay any sum in connection with the preparation or the giving to him of the notice.
(6)
Regulations may make provision about the form and content of notices under this section.
(7)
In this section ‘applicable agreement’ means an agreement which—
(a)
is a regulated agreement for running-account credit; and
(b)
is neither a non-commercial agreement nor a small agreement.”
