The Right to Cancel
The Consumer Credit Act does allow a cooling off period, but only for agreements which were discussed face to face, and then signed away from the lender’s normal business premises – i.e. at the consumer’s home, place of work or at an exhibition stand. The cooling off period for agreements made in this way is 5 days after receipt of a second postal copy of the agreement (which contains a cancellation form) from the lender. Cancellation must be in writing and sent by post within the 5 days. Any sums of money already paid will be returned , and the consumer will be released from any associated finance agreements.
if contracts have been signed in the shop or the trader’s office they are legally binding as soon as they have been signed. If the contracts have been made and signed at a distance (by post, internet or over the phone), then the Distance Marketing Regulations apply and provide you with 14 days to change your mind. See our section on Cooling Off and Cancellations to get the whole picture.
Terminating the agreement
Under the Act, there is only provision for legally terminating an agreement if it is an HP, conditional sale or hire (see our Guide to Consumer Credit Agreements for definitions). In the case of HP or conditional sale, the agreement can be terminated at any time before payment of the last instalment, provided at least one half of the total price has been paid and reasonable care of the goods has been taken. For hire agreements the agreement can only be terminated after 18 months (unless an earlier date is mentioned on the contract).
The right to complete payments early
The Consumer Credit Act gives you statutory right to repay the debt early and complete the payments ahead of time, as long as you have provided written notice of intention to the lender. A statutory rebate for the charge for credit will then be returned to you which must be calculated according to regulations set out in the Act – not of the lender’s choosing!
Default on payments
The Act requires certain procedures be followed and specific documentation be provided in the event that two or more payments are missed. Within 14 days of the second default payment, the lender must send you a notice of default to include the following:
- Exact details of the breach – i.e. how much is owed
- How this can be remedied – i.e. what action the consumer must take and by when
- Whether any additional sums of money (default sums) have been incurred as a result and when they must be paid
- Consequences of further default or inaction
- Restrictions (if any) on the lender’s right to repossession
The notice of default will not be enforceable if the procedure is not followed in this way by the lender. Furthermore, the goods cannot be repossessed without first serving this notice and waiting for the required 14 days to enable you to respond.
Applying for a Time Order
A further consumer protection measure the Act incorporates is the ability of the consumer to apply for a ‘time order’ from the courts. If successful, this will provide you with a longer amount of time to pay, in the context of your personal situation. To avoid further action from the lender in the meantime, you must write to them advising them of this intention.