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Background

First Commencement Order (SI 2006/1508)

The First Commencement Order under the new Act was made on 10 June 2006. Schedule 1 of the Order lists the powers coming into force on 16 June 2006, including:

• an administrative change to improve OFT's processing of requests from businesses to disapply the hirer's right to terminate hire agreements, where this is in the hirer's interest;
• powers enabling the Secretary of State to make other secondary legislation (Statutory Instruments), enabling the Office of Fair Trading to give general notices, and defining 'default sum'. These powers prepare the way for the more substantive provisions in the Act to be brought into force later on; and
• laying the foundations for the new consumer credit jurisdiction (CCJ) of the Financial Ombudsman Service. Note: the CCJ itself will begin functioning from 6 April 2007.

Schedule 2 of the Order included a power future-dated to come into force on 1 October 2006 (Common Commencement Date), namely: Section 14(1), and associated transitional provision, to extend the period that consumers have to respond to default notices from 7 to 14 days.

Second Commencement Order (SI 2006 387)

The Second Commencement Order was made on 13 February 2007. This commenced sections of the Act primarily covering the new definition of “individual” for the purposes of the Consumer Credit Act 1974 and provisions relating to unfair relationships and related transitional, saving and repeal provisions in Schedules 3 and 4 of the Act, which came into force on 6 April 2007. It also provided for the bringing into force of section 8 of the 2007 Act, which requires OFT to prepare information sheets on arrears and defaults and came into force on 6 January 2007.

Third Commencement Order (SI 2007/3300)

This Order was made on 22 November 2007. It commenced all the remaining provisions in the Act, apart from section 2 (removal of the financial limit) which was commenced in March 2008 (in the Fourth Commencement Order). In general, this Third Order enables:

• the OFT to publish guidance on fitness and the use of penalties;
• the Ministry of Justice to take forward work on transferring consumer credit appeals to the Tribunals Service, effective from 6 April 2008;
• the strengthened licensing regime to be in place for 6 April 2008;
• the exemptions for high net worth individuals and business lending above £25,000 to come into force on 6 April 2008; and
• the post contract transparency provisions to enter into force on 1 October 2008.

It also creates two new licensing categories of business: debt administration and credit information services, on 1 October 2008.

Fourth Commencement Order (SI 2007/831)

This Order was made on 20 March 2008. It commenced section 2 (removal of the financial limit - £25,000) on 6 April 2008 and associated transitional provisions as follows:

• section 2 commenced for all agreements other than those agreements which satisfy the new criteria for buy-to-let lending. This keeps out of regulation such buy-to-let lending until the Legislative Reform Order to exempt this lending from CCA regulation comes into force on 1 October 2008 (subject to Parliamentary approval); and
• section 2 does not apply to previously unregulated agreements (by virtue of the £25K financial limit) which are varied after 6 April 2008 by a further agreement which either does not involve the provision of further credit (in the form of a cash loan) or is itself an exempt agreement under the Consumer Credit Act 1974.

Statutory Instruments (SIs) covering: exemptions; post-contract transparency and licensing.

The SIs were made on 31st March 2007. They give full effect to a number of sections of the 2006 Act. These fall into three categories:

• Exemptions from regulation – sections 3 and 4 of the 2006 Act. The Order specifies: the conditions under which an agreement made with an individual of ‘high net worth’ may be exempted from regulation; and the form and content of the required statement of high net worth in relation to and the declaration by the individual. The Order also sets out the form and content of declarations by debtors or hirers where an agreement is wholly or predominantly for business purposes and the amount of credit provided under the agreement exceeds £25,000.
• Post-contract information – Regulations relating to sections 6, 7, 9, 10, 12, 14 and 17 of the 2006 Act. These Regulations specify precisely what information must be included in statements and notices given to consumers by creditors and owners. The objective has been to balance the need to ensure that consumers are provided with relevant and clear information about the state of their credit account as set out in the 2006 Act, with the need to ensure that any burden on industry is not disproportionate.
• Licensing issues - Regulations relating to sections 34 and 35 of the 2006 Act. These set out the maximum duration of a time-limited licence, and the periods for the payment of charges for indefinite licences.

Draft Legislative Reform (Consumer Credit) Order 2008

• The draft Legislative Reform Order to amend the Consumer Credit Act 1974 was laid in Parliament on 11 June - the draft Order and the accompanying Explanatory Document can be found on the right.
• The draft Order proposes an exemption for buy-to-let lending, clarifies the position for the giving of statements for fixed-sum credit agreements and provides definitions of "payments" for the purpose of issuing notices of sums in arrears

OFT guidance on use of civil penalties, and fitness and requirements

On 7 January 2008 the OFT published its Statement of Policy on Civil Penalties (which was approved by the BERR Secretary of State) and its guidance on fitness and requirements.