Introduction
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 duties and powers of the Office of Fair Trading (OFT) in relation to Consumer Credit.
What does the OFT do?
The Consumer Credit Act 1974 is a consumer protection law in the UK. It requires certain businesses to obtain Consumer credit licenses and protects individuals receiving credit up to £25,000. Appeals under the Consumer Credit Act are made to the Office of Fair Trading.
The OFT has many different powers that enable it to carry out its aim of making markets work better for consumers.
The CCA
The Consumer Credit Act 1974 requires most businesses that offer goods or services on credit or lend money to consumers to be licensed by the OFT. Trading without a licensing arrangement is a criminal offence and can result in a fine and/or imprisonment.
This includes where credit is arranged to finance the purchase of goods or services. Licensing arrangements may also be required by debt collectors, debt advisors and businesses that offer goods for hire or leasing.
The Act also requires certain credit and hires arrangements to be set out in a particular way and to contain certain information.
In Consumer Credit Act 2006 some new changes has been made with respect to the powers and duties of OFT. These are as follows:
Provision relating to unfair relationships
CCA 2006 inserts a new section 140D, which requires the OFT to give advice and information about the interaction between the provisions on unfair relationships and Part 8 of the Enterprise Act 2002.
Part 8 of the Enterprise Act 2002 allows OFT bringing proceedings against a person who, as a consequence of a breach of a statutory obligation, harms the collective interests of consumers in the United Kingdom.
The advice and information published by OFT may include examples of the circumstances, conduct or practices that, in the opinion of OFT, could give rise to an unfair relationship between creditors and debtors.
Enforcement of agreements by unlicensed traders
Section 40(1A) provides that a regulated agreement is unenforceable if the creditor or owner who made the agreement did so in the course of a consumer credit or a consumer hire business but was not licensed at that time to make the agreement.
Where a person has made an agreement without being licensed, that person may apply to OFT for an order to treat him as if he had been licensed to make the agreement.
Charge on applicants for licences
Section 6A requires applicants for licences (or for licence renewal) to pay to the OFT such charges as the OFT specifies by general notice. These charges go towards the OFT’s costs of carrying out its functions under the 1974 Act. The OFT may specify different charges for different classes of persons, including no charges.
Applications for standard licences
The new section 24A gives the OFT power to manage the application process in a more efficient way by requiring people to specify in applications for licences what businesses they want the licence to cover. An applicant must specify whether he wants a licence covering one or more of consumer credit business, consumer hire business and ancillary credit business generally
The OFT will prepare and publish guidance as to the way it determines the fitness of a person to hold a licence.
Section 32 of the 1974 Act gives OFT the power to suspend or revoke licences. The OFT may terminate the authorisation by notice to the licensee.
The OFT can issue licences either indefinitely or for a specified period, provided definite licenses do not exceed a period prescribed by the Secretary of State, and to vary the duration of licenses in certain circumstances. The OFT may specify the form and content of the notice required for a licensee to terminate such a licence.
Power of OFT to impose requirements on licensees
The OFT may, by notice, require the licensee to do or not to do (or cease doing) anything specified in the notice with which OFT is dissatisfied.
The OFT may require additional information or documents that are relevant to the application
Power of OFT to require access to premises
An officer of an enforcement authority may enter the specified premises on reasonable notice and at reasonable times for the purposes of observing the licensee’s or applicant’s carrying on of his business, and to inspect relevant specified documents relating to the licensee’s or applicant’s business kept at those premises, where it is reasonably required for.
Power to impose civil penalties
39A confers a power on the OFT to impose civil penalties on persons who do not comply with a requirement imposed by the OFT. The maximum penalty that may be imposed by OFT is £50,000 for every breach of a requirement.
If the defaulter does not pay the penalty, the OFT may recover it and the unpaid balance will incur interest.
A person may appeal in relation to the decision of OFT to impose a civil penalty.
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