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Consumer Credit Act 1974 is an extremely complicated and long
piece of statute law. Getting to grips with it is not easy,
complicated by all the recent revisions and updates that have
been made. However, these changes have been designed to benefit
consumers by providing further clarification and additional
rights. In this article, we will look at the fundamentals of
the act including consumer rights, creditor obligations and
what happens when you are behind with payments or cannot pay.
Firstly,
you need to understand the kind of credit agreement that you
have and how the contract was made.
Credit
Agreements Explained
The Consumer
Credit Act 1974 covers most credit agreements in the UK. There
are exclusions, such as mortgages,
loans with property
used as security and charge cards such as American Express
and Diners Club. In addition to the following credit agreements,
credit cards, store cards, personals loans and overdrafts
are covered by Consumer Credit Act 1974: conditional sale
and credit sale agreements, hire purchase (HP) agreements
and hire agreements.
A Credit
Sale
This type of agreement is normally used for big-ticket purchases
such as expensive computer equipment, boats and home improvements.
It is essentially a loan for the full cost of the goods being
purchased with the money paid back over a fixed period of
time in equal monthly instalments. . The person owing the
money may pay a deposit, and there may not be anything to
pay for an initial period. However it is set up, you will
own the goods as soon as the contract has been signed, . When
something is advertised as being interest free, you will have
to repay the outstanding balance within a stipulated period,
otherwise the outstanding balance will form part of a new
longer term credit agreement where you will have to pay interest.
B Hire
Purchase (HP)
Under HP arrangements, you pay an amount every month to hire
the goods, but won't have ownership of it before the last
payment has been paid back. Oftentimes, this type of arrangement
includes a lump sum at the end of the period.
C Hire
This is the hire of goods in return for a monthly payment.
You won't ever own the goods and must either sign a new hire
agreement at the end of the existing contract or return the
goods to their owner. If you fail to pay or return the items
before the end of the contract you can be taken to court for
the money owed.
D Conditional
Sale Arrangements
This is very similar to the Hire purchase agreement already
described. The difference is you will not really own the items
until you have paid off the loan. There could be additional
conditions that have to be met before the goods are yours.
Contract
Formation
Basically,
this is about where you entered into the contract. Your rights
as a consumer are affected by where the contract was signed
and who was present. This has an impact on the cooling off
rights, the information given and its presentation.
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