Consumer Credit: Debtor or Creditor has a - “High Net Worth” |
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| Introduction |
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| 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. |
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| This article explains a recent change to Consumer Credit law – the CCA 2006. Specifically, it explains when a debtor or creditor may be entitled to depart from the protection of the Act, if they so wish. |
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| Note: these exemptions will apply from 6th April 2008. |
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| High net worth debtors and hirers |
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| Where the debtor or hirer has a ‘High Net Worth’, they may prefer to be exempt from the protection and regulation imposed by the CCA. The Secretary of State may, in certain circumstances, provide for the exemption of consumer credit agreements or consumer hire agreements from regulation under the 1974 Act. |
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| To be exempted under section 16A, the debtor or hirer must: |
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- Be a natural person (i.e. not a partnership, unincorporated association or body corporate);
- Include a declaration, in the specified form, that they agree to forgo the protection and remedies that would be available under the 1974 Act;
- Provide the creditor or owner with a statement of “high net worth”, again in the specified form, which has been made in relation to him by a specified type of person (e.g. an accountant or a solicitor).
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| “Specified” means specified by order of the Secretary of State. |
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| The statement of ‘High Net Worth |
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| A statement of “high net worth” must be current in relation to the agreement. This means it must not be made more than one year before the date of the making of the agreement. |
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| The statement should state that the debtor or hirer, in respect of the previous financial year (being the year ending 31st March preceding the current financial year in which the statement is made), either: |
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- Received income of a specified description of the specified amount or more during that period; or
- Had net assets of a specified description which were of a value not less than the specified amount during the whole of that period.
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| A statement of high net worth shall be signed by both |
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- The creditor or owner; and
- Either of;
- An accountant who is a member of any of the bodies listed below;
- The Institute of Chartered Accountants in England and Wales;
- The Institute of Chartered Accountants of Scotland;
- The Institute of Chartered Accounts in Ireland;
- The Association of Chartered Certified Accountants;
- The Chartered Institute of Management Accountants;
- The Chartered Institute of Public Finance and Accountancy;
- A professional body for accountants established in a jurisdiction outside the United Kingdom. and;
- The creditor or owner;
- An employee or agent of the creditor or owner or a person who otherwise acts on behalf of the creditor or owner in relation to the consumer credit agreement or consumer hire agreement; or
- An associate of the creditor or owner may only make a statement of high net worth if the creditor or owner is a person who has permission under Part 4 of the Financial Services and Markets Act 2000(a) to accept deposits.
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| Declaration by high net worth debtor or hirer |
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| The declaration must have the following form and content: |
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- I confirm that I have received a copy of the statement of high net worth made in relation to me for the purposes of section 16A(1)(c) of the Consumer Credit Act 1974;
- I understand that by making this declaration I will not have the benefit of the protection and remedies that would be available to me under the Consumer Credit Act 1974 if this agreement were a regulated agreement under that Act;
- I understand that this declaration does not affect the powers of the court to make an order under section 140B of the Consumer Credit Act 1974 in relation to a credit agreement where it determines that the relationship between the creditor and the debtor is unfair to the debtor;
- I am aware that if I am in any doubt as to the consequences of making this declaration I should seek independent legal advice;
- This sentence should be omitted in the case of a consumer hire agreement.
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| Other requirements |
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| Both the ‘declaration for exemption relating to businesses’ and the ‘statement of High Net Worth’ must be in the required format. |
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