The Consumer Credit Act 2006

A quick summary of the changes, most of which have been brought in April 2007. Remaining bits are being delayed until 2008. For tidy printing a pdf version is available here.

Where repeated notices have to be served every x months below, the legislation has been written to require the following service to be made no more than x months further on. However, in order for a creditor to be sure that the document is to be received on time, it will have to serve early, say at x-1 months. The same period will be used so the second service will be at 2x-2, the third at 3x-3 and so on.

In force already

Individual: excludes a partnership of more than 3 persons (16/06/2006).

Default notices - change of notice period: period has doubled to 14 days (06/04/2007).

Enforcement orders: Subsections (3) to (5) of Section 127 have been repealed, but only for agreements executed on or after 06/04/2007. This means that unenforceability is subject to a court’s decision under Section 127(1) and (2) over culpability etc on all occasions.

Post-judgment interest: the creditor must serve a notice about this on the debtor, and cannot charge for any interest before the notice; it must be repeated every 6 months while the debt continues (06/04/2007).

Unfair relationships: extortionate credit provisions are added to - where a court finds there is an unfair relationship, it may re-open a regulated agreement; things which comprise an unfair relationship include the terms of an agreement, the way in which the creditor is enforcing the agreement, or any other thing done (or not done) by the creditor at any time in relation to the agreement or a related transaction (06/04/2007). For existing agreements, the extortionate provisions will continue to apply for one year only.

Financial Services Ombudsman: will now deal with any complaint relating to a trader licensed under the Consumer Credit Act 1974, but only regarding matters which arise after 06/04/2007. Because it deals with “licensed” rather than “regulated”, the ombudsman can deal with non-regulated agreements provided the creditor holds a licence. One positive side of this is that pre-agreement issues such as refusal can be dealt with.

Due to be brought in 6 April 2008

Personal credit agreement: renamed as a consumer credit agreement.

Financial limits: removed for consumer credit and consumer hire agreements.

High net worth debtors: certain rich people can be exempt from the Act's controls where certified annually as such by an expert such as an accountant.

Business agreements: where credit of over £25,000 is provided, this will be exempt if entered into for the purposes of a business.

OFT's charges for licensing: OFT is now allowed to make charges towards the carrying out of its enforcement duties under the Act, and can choose to make different charges for different types of business.

OFT licensing guidance: OFT is to publish guidance on the fitness test which it will apply in assessing fitness under s.25 of the 1974 Act.

OFT licensing periods: licences may now be valid indefinitely, unless the OFT thinks it should not; group licences shall be time limited unless the OFT considers otherwise. Indefinite licences will still bear periodic charges.

OFT powers: OFT may require licensees to comply with extra requirements, and may also require supervisory bodies to comply with requirements; OFT are also given powers to enter licensees' premises, and these powers are extended to authorised officers from other agencies.

OFT penalties: OFT is given the power to impose civil penalties up to £50,000, rather than its having to us its existing draconian revocation powers.

Consumer Credit Appeals Tribunal: this will be set up to hear appeals from OFT decisions

Due to be brought in 1 October 2008

Definitions of consumer credit and consumer hire businesses: these have been extended to catch a business which acquires an existing regulated agreement from a licensed creditor or owner. (This removes a loophole where a licensed creditor can, on entering into agreement, immediately transfer responsibility to a unregulated lender.)

Debt administration etc. - new licensing category: extends the definition of debt collecting to other activities in relation to an agreement (Category G)*.

Credit information services - new licensing category: any service offering to search credit reference files or to correct any details held by such an agency (Category H)*.

Annual statements on fixed-sum agreements: this was already required for running-account credit, but now other agreements will require an annual summary of the state of the account. (Note that the 12 months period runs from the date of the incident or the most recent notice, so creditors will in fact have to serve the notice every 11 months or so.)

OFT information sheets on arrears and default: OFT has to prepare sheets to advise debtors who in arrears or default.

Notice of arrears: where a debtor is in arrears by a sum equal to two payments, the creditor must serve an arrears notice within 14 days, and repeat every 6 months while the arrears continue.

* The licensing categories are split up, so that D no longer includes debt-counselling. The full list in Section 28(4) of the 2006 Act is: