Changes have been made to the Consumer Credit Act to be more relevant for today’s consumers
The Consumer Credit Act for the UK was updated in 2006 from it’s 1974 version with laws making business dealings with consumers more relevant in today’s society. This new act has various changes to the old one and went into full effect on 1 October, 2008.
In April of 2007 the Financial Ombudsman Service(FOS), which settles disputes between customers and businesses providing financial services, was extended to also cover consumer credit. The Unfair Relationships Test was also introduced at this time,replacing the existing “extortionate credit” test. Under this part of the Consumer Credit Act, borrowers are allowed to challenge unfair credit agreements and seek redress, in addition to being able to bring disputes before the Financial Ombudsman Service. The 2006 act also provided court procedure for a borrower to seek more time to pay off a debt with the right to apply for a time order. An unfair relationship between the borrower and lender can be determined by any of the terms or related terms of the agreement with the borrower, the way in which the lender exercised or enforced it’s rights under the agreement, or any other thing done or not done by the lender either before or after the agreement. Courts have the power to alter the terms of the credit agreement, reduce the amount payable by the consumer, ordering the lender to provide a refund to the borrower, removing any duties of the borrower under said agreement, or imposing requirements on a lender.
In April of 2008 the Consumer Credit Appeals Tribunal was developed for appeals against any OFT(Office of Fair Trading) licensing decision. The Unfair Relationships Test was extended for all existing credit agreements and the limit of 25000 pounds was also nullified.
On 1 October, 2008 it became a requirement for businesses to provide account information to consumers on a more regular basis, such as statements and default notices. OFT regulation was extended and any business dealing in credit repair or debt administration now needs to have a consumer credit licence. At this time it was also enacted that consumers could now ask for a time order once they received an arrears notice rather than a default notice.
This is a summary of changes in the Consumer Credit Act 2006. Following will be a summation of the other acts that were previously established which people still have rights to under both the new act and the 1974 Consumer Credit Act.
The Alternative Relief Resolution Scheme gives people the right to use the FOS to deal with complaints against any business or person licensed under the Consumer Credit Act. The ombudsman can only deal with a complaint if the event in which the complaint transpired has taken place after 6 April, 2007 or the trader was licensed under the Consumer Credit Act at the time of the complaint. The ombudsman can only act after the business has had a chance to respond to the complaint or more than eight weeks has gone by since the business received the complaint.
Indefinite licences simply states that consumer credit licences will be issued on an indefinite basis. These licence holders must report any changes to the licence and to get the licence there will be an initial fee and periodic maintenance charge. Any group licence will not be indefinite and will have to be renewed every five years.
The Information Sheets section states general information sheets need to be provided with any default or arrears notice. These sheets provide key rights as well as where someone can go if they need help.
There is also a section of the Consumer Credit Act that covers Investigation and information gathering powers. This gives the OFT the right to gather relevant information for licencing of businesses and individuals. It also gives them the right to enter the premises to search and seize information. They can also delegate these functions to the Local Authority Trading Standards Services.
The Reformed Fitness Test is for credit competence of the licence holder. Once a licence is granted the holder must maintain the standard of fitness upon which it applied for the licence under. When considering fitness relevant circumstances can be taken into account, such as a licensee or applicant being convicted of fraud or engaging in improper or unfair behaviour. They also will take into account the credit competence of a licensee in regards to business practices and procedures as well as all credit activity to ensure that it complies with any legislation.
The Requirements and Penalties section covers the OFT rights to revoke, suspend, or vary existing licences, refuse applications for new licences, grant licences, and impose requirements on both new and existing licences. The maximum penalty for any licensee not following any requirement is 50000 pounds.
The Consumer Credit Act was put in place to protect consumers from unfair lending and business practices. The new revisions to this act increases the consumers rights to act against such companies as well as gives them more rights to settle a debt when dealing with any of these companies. Knowing about these changes can help borrowers in their decision to act if they feel they have been treated unfairly by any lending institution or other licensee. Moving forward consumers now have more options at their disposal if they feel they are met with any unfair practices.
