(c) Copyright 2002 Welsh Consumer Council: www.consumereducation.org.uk
Related Information:
What is credit?
Getting Credit
How to shop around for credit
Consumer credit act 1974
Credit Concerns
On this page:
Written Quotations: Ask for a written
quotation and take a few home from different shops. You can think about
them with no one around to persuade you one way or the other and can make
up your own mind.
Canvassing: Is when someone knocks uninvited
at your door with the aim of selling you something. A salesman can be more
persuasive than an advertisement and has been described as being 'persuaded
by a man you don't know, to sign an agreement you don't read, to buy something
you don't want with money you haven't got'. It's an offence for people
to call uninvited at your home and offer a straight cash loan. If this
happens, tell Trading Standards. It would be different if you'd asked them
in writing to call and people can legally canvass the sale of goods or
services like double glazing.
Buying on credit when you're
under 18: It's illegal for traders to send anything through the post
to people under 18 inviting them to borrow money or obtain other credit
facilities. Shops are unwilling to do business with under 18 year olds
(what the law calls a minor) as if you don't keep up your repayments, the
shop or lender may not be able to sue successfully to recover their money.
The law says that if a minor fails to pay his debts, the person to whom
he owes money will only succeed in suing if the goods bought with the money
lent were real "necessaries" - i.e. things the minor really needs rather
than just things they want. Traders prefer to deal with the over 18s where
expensive items are concerned or ask someone to stand as guarantor to make
sure they get paid.
Payment Protection Plan: Some
lenders offer a form of insurance policy when they lend money. Should you
fall ill and have difficulty in making your repayments, your policy will
make the payments for you (normally for up to 6 months). Some payment protection
plans (for an extra sum) even cover you for unemployment during the course
of the agreement.
What if
your credit application is turned down? When you apply for credit,
the lender will usually want to make sure that you are 'credit worthy'
i.e. that lending money to you is a safe bet. The lender will consult a
Credit Reference Agency, which have nformation about you. Credit Reference
Agencies collect and store information about people's financial standing,
which they pass on request to their clients. The agencies must have a licence
under the Consumer Credit Act. They do not advise the lender on whether
you may be a good risk or not, or comment in any way on the information
which they provide. This helps the lender in deciding to give you credit
or make him think again.
You can't insist on being given a loan, nor does a dealer or lender
have to tell you why you've been turned down. They must, if you ask in
writing, tell you the name and address of any Credit Reference Agency,
which they consulted, about you. The law says that you can find out exactly
what a Credit Reference Agency has on file about you by writing to the
Agency, giving your addresses for the past six years. If there's something
on your file, which is incorrect, you can have it put right. The lender
may have turned you down for some reason having nothing to do with what
is on your Credit Reference Agency file.
When you take out
a credit agreement...... Comparing what's on offer, applying for credit
and having your creditworthiness checked by the lender are only the beginnings
of a credit deal. You'll be asked to sign a credit agreement and rules
set down in the consumer credit act, aim to protect you, including:
Information, which must he included in a credit agreement: A credit
agreement must set out the terms of the deal and explain your rights under
the agreement. If taking out hire purchase to buy a TV, the agreement must
show:
* The cash price
* The charge for credit
* The deposit
* The total credit price
* The balance to be financed
* The APR
* The amount and date of each repayment
If taking out a credit card agreement, it must show:
* your credit limit or tell you how it will be worked
out,
* details of how your monthly payment will be calculated
* the APR.
Rules vary a little according to the type of payment, but you should be
in no doubt as to your financial commitment. Never sign a blank form, make
sure all the financial details have been filled in first. Read it carefully
and make sure you understand it. If you don't, seek advice before you sign
it. The agreement will contain a section with the heading: Important: You
should read this carefully. This explains your rights under the consumer
credit act and tells you where to go for advice and information. Don't
sign anything if in doubt.
Copies of the Agreement:
You should be given a copy of your agreement as soon as you sign it and
usually you'll receive a second copy through the post within about a week.
Keep copies safe - you may need to refer to them.
Changing your
mind when you sign at home: If you sign a credit agreement at home,
you may have a few days in which to cancel. This short 'cooling-off period'
only applies where the trader has discussed the deal with you in person
(not on the telephone) and you then sign the agreement at home or anywhere
other than at the trader's premises. The cooling-off period, starts from
the day that you get your second copy through the post. When you cancel
a credit agreement you automatically cancel the contract for the supply
of any goods linked to the agreement. The dealer cannot force you to take
the goods. Your agreement should give you clear details of your cancellation
rights. When you sign a credit agreement in a shop, you don't have any
'cooling-off period'.
Once you've taken out a
credit agreement: If something you've bought on credit turns out to
be faulty don't stop making payments. Even though you may have a valid
complaint, you'll be putting yourself in the wrong if you break your side
of the deal. When you have a hire purchase or credit sale agreement, your
agreement is with the finance company and if things go wrong, you must
make sure they know about your problems. Don't just tell the shop you went
to for the goods. Legally, it's the finance company that you're dealing
with. Often, both the company who lent the money and the shop you went
to for the goods or services have to help you if something goes wrong with
what you've bought. This is the case with loans, which the retailer arranges
for you, or credit card purchases. This is important as if the shop has
closed down or gone out of business, you can claim against the lender.
This is known as 'equal liability'.
Get some advice from Trading Standards or Citizens' Advice Bureau -
but do it quickly. The longer you leave it, the trickier it becomes. If
you have problems, remember to put things in writing and always keep copies
of letters.
If you can't keep up the
repayments: If you find yourself having trouble keeping up your repayments,
don't just sit back and do nothing. Let the firm who lent you the money
know straight away. Be honest with them and discuss ways of sorting the
problem out. They may be willing to come to some arrangement with you.
It isn't a good idea to take out another loan to pay off a credit agreement.
Once you start taking out loans to pay off existing loans, things can get
out of hand and you could end up deeply in debt.
If the credit turns
out to be extremely expensive: The Consumer Credit Act gives you the
right to challenge a credit agreement if you think the interest and other
charges are sky-high, or what the law calls an 'extortionate' credit agreement.
It's not easy to successfully claim that an agreement is extortionate.
If the lender is taking a big risk, high charges may be justified. Get
advice if charged far more than similar lenders would charge.
If you want to settle
an agreement early: You can and will be entitled to a rebate (a refund)
in interest but ask for a settlement figure (a quote of what it will cost).
Think it over and decide whether it's the best thing for your money.
If you buy something and then
find out that the person 'selling' it only had it on hire purchase:
The finance company (the owner) has the right to take it back as you aren't
the legal owner. The only exception to the rule would be if you'd bought
a car or motorbike and were genuinely unaware that it was already on H.P.
With anything else, the finance company can take the goods back and the
only way you can recover the money you've paid is to try and get it back
from the person who 'sold' the goods to you.
How the law protects you when
you hire goods: As well as setting down rules to protect you when you
take out a credit agreement, the Consumer Credit Act also gives you some
protection when you hire goods e.g.
* All but the simplest advertisements must give you
certain basic information, to enable you to compare different firms' hire
terms
* You can have a written quote if you want one
* You must be given an agreement setting out all
the terms of the deal, including the deposit and rental payable
* Although some hire firms would prefer you to hire
their goods for a number of years, you'll usually be able to put an end
to a hire agreement after eighteen months. Some firms are more generous
than this. Make sure you can afford the payments for at least the minimum
hiring period.
Remember...
* Make sure you understand what you are taking on
* Make sure you can afford it
* If you run into difficulties, never be afraid
to seek advice and do it quickly.
Related Information:
What is credit?
Getting Credit
How to shop around for credit
Consumer credit act 1974