The Consumer Credit Act and its amendments affect all those who use credit to buy goods and or services, for example, on hire-purchase agreements or using a store credit card. The Act governs the licensing of, and other controls, on traders who supply credit, or goods and services on credit. It is therefore a valuable tool to have knowledge of how it works at your fingertips.
This article explains a recent change to Consumer Credit law – the CCA 2006. Specifically, it explains how, when, where and why a credit agreement may be cancelled.
When can I cancel?
Under the Consumer Credit Act 1974, certain credit agreements can be cancelled provided there were face-to-face negotiations before the agreement (the place where these took place is immaterial) and you didn't sign the agreement on the trade premises of the creditor or supplier (for example, you signed at home or in your office).
However, there are certain conditions:
You must cancel in writing;
You must cancel within five days after you receive the second copy of the agreement, which the creditor is obliged to send you. After these five days, your right to cancel is forfeited.
Cancelling when you purchased at a distance:
Where goods are bought on credit at a distance (for example, over the internet) you have a right to cancel under the Consumer Protection (Distance Selling) Regulations 2002. This cancellation period lasts at least seven days after the day on which you receive the goods, but could be longer. If you cancel under these regulations, any related credit agreement would be automatically cancelled too.
1.
Cancelling before payments are made:
If you have signed a credit agreement and you want to cancel it you can do so within a certain period of time as long as you did not make the deal over the phone and you did not sign the agreement at the seller's shop, office or workplace, (this can include an exhibition stand). Therefore if you signed the agreement in your own home you will be able to cancel after you have signed the agreement.
Cooling off Period:
Cancellable agreements have a cooling-off period starting on the day the customer signs. This period is 14 days for goods bought from a mail-order catalogue. Otherwise, it is five days from the day the customer receives either a second copy of the agreement or a separate copy of a notice of cancellation rights.
2.
Cancelling while payments are still being made:
You can end the agreement by returning the goods. However, you may still have to pay any arrears and an amount of money which, when added to the amount of money paid already, comes to half the total price of the goods.
Cancellation Notice:
The seller is should send you a written notice telling you how you can cancel and how long you have to cancel.
You must cancel by writing to the address given on the notice.
You will be entitled to the return of any deposit paid or goods traded in part-exchange if you cancel the agreement in time.
If you are entitled to cancel the agreement, you must be sent a cancellation notice within seven days of signing the agreement explaining that you have the right to cancel the agreement. A cancellation form will be enclosed with the notice and you can use this (or write a letter) to cancel the agreement. If you do want to cancel, the cancellation must be sent to the lender within five days of receiving the notice
Credit agreements which cannot be cancelled:
Bank overdrafts;
Loans secured on land, for example, mortgages;
Small loans of £50 or less unless they are hire purchase or conditional sales;
Small loans of £35 or less where the agreement was made away from trade premises in the presence of the trader;
Loans to pay death duties.
If by chance you find some error of law or fact in any Net Lawman information page, do please tell us. We should also welcome your suggestions for new subjects for information pages. These notes:
Do not provide a complete or authoritative statement of the law;
Do not constitute legal advice by Net Lawman;
Do not create a contractual relationship;
Do not form part of any other advice, whether paid or free.
