For Business
The Consumer Credit Act 2006 is good for business as it significantly improves the way the UK consumer credit market works, allowing faster and cheaper dispute resolution, a single standard of conduct to all consumer credit business, and a fairer system for dealing with breaches of contract.
Ombudsman Scheme
Disputes are costly for business. The Act introduced an alternative dispute resolution system, provided by the Financial Ombudsman Service (FOS)on 6 April 2007, to allow for cheap, efficient and quick resolution of consumer disputes, at considerably less cost than court action. For more information, contact FOS
Unfair Relationships Test
This test was introduced in order to provide a single standard of conduct to all consumer credit businesses, which is consistent with industry codes and FSA regulation. This Test was introduced for all new agreements from 6 April 2007 and was extended to all existing agreements on 6 April 2008. For more information, contact the Office of Fair Trading (OFT).
Consumer Information
On 1 October 2008 the post-contract information requirements came into force. This means that now lenders are required to ensure customers are kept informed of the state of their accounts, especially in relation to arrears and defaults. In particular lenders are required to issue annual statements for all fixed-sum credit accounts; include in annual statements for running-account credit agreements information on the impact of making only minimum payments; and issue arrears notices 14 days after the account goes into arrears (and 6-monthly thereafter), along with further information on the fees and charges that will be applied. In addition, lenders are required to include additional information in default notices and give notice before applying post-judgement interest. For more information, contact the OFT.
Licensing Regime
On 6 April 2008, the OFT introduced its new strengthened licensing regime, under the Act. The Act increases the OFT’s ability to ensure applicants are fit to hold a licence and to monitor ongoing conduct and performance. The fitness assessment includes a licence holder's future competence in addition to its past conduct. The OFT also now has stronger powers to investigate suspected cases of misconduct and to apply a wide range of sanctions, including fines of up to £50,000 or further conditions on the credit licence for breaches of licence requirements. For more information contact the OFT.
In addition, the Act established an independent Consumer Credit Appeals Tribunal, as part of the Tribunals Service, to deal with appeals against licensing decisions. For more information contact the Tribunals Service.
Automatic Unenforceability
Parts of section 127 of the 1974 Act which render agreements unenforceable if certain requirements of the Act are not complied with (however technical the breach) have been repealed. Instead, courts now have discretion in relation to enforceability in all cases when provisions are not complied with. This allows the courts to make a judgment proportionate to the detriment caused to the consumer. For more information, contact the OFT.
Credit Agreements over £25,000
Small businesses have the same protections as consumers in entering credit and hire agreements up to £25,000 from 6 April 2008. Agreements over £25,000 which are wholly or predominantly for business purposes are exempt from CCA regulation to ensure that larger organisations are not impacted disproportionately by the regulation. For more information, contact the OFT.