The Consumer Credit Act is a huge piece of legislation. Understanding it is not an easy task, made harder still by all the amendments and reforms which have taken place in recent years. Nevertheless, these changes have been designed to benefit consumers by providing further clarification and additional rights. In this section, we will look at the basics of the Act, types of credit agreements, consumer rights, creditors’ obligations and what to expect in situations of default or arrears.
The first step is to ask yourself a few basic questions:
- What type of credit agreement do you have?
- How was the contract made?
1. Types of credit agreements
The Consumer Credit Act will regulate the majority of credit agreements. There are exceptions, such as mortgages, loans secured on property, short term agreements and charge cards. In addition to credit and store cards, personal loans and overdrafts, a credit agreement will govern the following types of contracts:
- Finance options for the purchase of goods and services (credit sale agreements)
- Hire purchase agreements
- Hire agreements
- Conditional sale agreements
Credit sale agreements
This is the most common type of financing option when purchasing high-priced goods and services such as cars, electronic goods, or home improvements. It is basically a loan to over the purchase price of the item, with the loan paid back the loan in equal monthly instalments over several months or even years. The consumer (the ‘debtor’) may pay a large initial deposit (such as with the purchase of a car), or not pay anything at all for the first year or two. Either way, you will legally own the goods as soon as the credit sale agreement is made, even if you have paid nothing at all. Where ‘interest-free credit’ is advertised, you will have a specified time to pay back the outstanding balance, otherwise the due balance will automatically roll into a longer term credit agreement where interest will be payable.
Hire purchase (HP) agreements
Under this arrangement, you will pay monthly instalments to hire the item, but will not legally own it until the final instalment has been paid. This type of agreement may also give you the option to buy with a lump sum at the end of the period, such as with ‘balloon payments’ on car finance.
This is simply the hire of goods at a (usually low) monthly fee. You will never own the item, but must keep up the payments for the term of the contract to avoid having the goods repossessed and being sued for the outstanding debt.
Conditional sale agreements
This is very similar to the HP agreement described above. Even though you will be in possession of the goods in question, you will only own them on the condition that you have paid all the instalments. However, the agreement may also specify other conditions to be met before ownership can take place.
2. Way in which the contract was made
Basically, this refers to where you signed the contract. Was it in the presence of the creditor at their place of business? Was it in the presence of the creditor but away from their place of business? Was it at home? Or were you with a broker – either in their office or at home? This will have important implications for your cooling off rights, the information which must be supplied to you and the way in which it must be presented. We will look at cooling off and required information in the following two sections.
- CCA: Required Information
- CCA: Your Rights
- Ending a Credit Agreement
- Defaults, Arrears and Debt Collection Agencies
- Debt Management Companies
- Accessing your Credit File