A quick summary of
the changes, most of which have been brought in April 2007. Remaining bits are
being delayed until 2008.
Individual: now excludes a partnership
of more than 3 persons (with effect from 16/06/2006).
Default notices - change of
notice period:
period has doubled to 14 days (with effect from 06/04/2007).
Enforcement orders: Subsections (3) to (5) of
Section 127 have been repealed for agreements executed on or after 06/04/2007.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 under 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 (with
effect from 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 (with
effect from 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.
Personal credit agreement: renamed as a consumer
credit agreement.
Financial limits: removed for consumer credit
and consumer hire agreements.
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.
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
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.
OFT information sheets on arrears and default: OFT has to prepare sheets to advise debtors who in arrears or default .
Due to be brought in during 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)*.
* 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:
A consumer
credit business
B consumer
hire business
C credit
brokerage
D debt-adjusting
E debt-counselling
F debt-collecting
G debt-administration
H credit
information service
I credit
reference agency
© Bob Imrie 14 May
2007