(c) Copyright 2002 Welsh Consumer Council: www.consumereducation.org.uk
Related Information:
What is credit?
Getting Credit
How to shop around for credit
Credit Concerns
Consumer credit act 1974
There are very strict rules about lending and borrowing and most of them
are laid down in the Consumer Credit Act. They're there to protect you!
Most of the rules in the Act apply to credit agreements, whatever the type
of credit, where the amount you borrow (the amount of credit) is £15,000
or less. So most credit deals you're likely to take on in the future will
be covered.
The consumer credit act::
* requires lenders of money to have a licence e.g.
banks, finance houses, moneylenders, estate agents who arrange mortgages
and TV rental companies
* requires lenders to show the buyer the true cost
of credit
* gives protection against unfair deals, and asks
the Court to reduce 'extortionate' rates of interest
* enables people to claim compensation if the goods
are faulty
* gives a 'cooling off' period if you make a credit
agreement at home. You usually have seven days and the good can be kept
as security until the lender has repaid you. You cannot cancel agreements
for loans less than £30, or loans arranged by post or telephone.
* ensures that if you pay off a loan early you get
a rebate
If goods are faulty:
* The dealer who sells a faulty good is liable to
compensate you. The buyer is protected by the Sale of Goods Act.
* If you borrowed money to pay for the good you
could also claim against the finance company, which lent you the money.
* With hire purchase goods the dealer sells the
goods to a finance company, which then hires or sells them to you, so the
finance company is both the supplier and the lender and is responsible
if the goods are faulty.
Before you get as far as taking out a credit agreement, the Consumer
credit act protects you by having rules about: -
Licensing: The Act says that nearly everyone in the business
of lending money, introducing their customers to credit deals or even hiring
goods out for long periods, must have a special licence. These licences
can only be granted by the Office of Fair Trading in London and then only
if the Director General of Fair Trading is satisfied that the person or
firm applying for one deserves it.
Advertising: Advertising can be very persuasive. Phrases like:
- 'No Deposit' and "This could be yours for only £5 per month" can
be very tempting. So it's a rule that anyone advertising credit must tell
you the truth about the deal they're offering you. There is a specific
warning statement that must be included if the loan is secured on your
home. It should state "Warning. Your home may be at risk if you do not
keep up the repayments due under this loan agreement". Look for it when
comparing advertisements for cash loans and mortgages.
Another safeguard requires budget card advertisements to include a Total
Amount Payable alongside the APR (if specified goods are shown). This information
will help compare the full costs of various types of credit purchase.
Related Information:
What is credit?
Getting Credit
How to shop around for credit
Credit Concerns