Consumer Credit Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

Consumer Credit Bill

Consumer Credit Bill
1

A
Bill
[AS AMENDED IN STANDING COMMITTEE E]
To
amend the Consumer Credit Act 1974; to extend the ombudsman scheme
under the Financial Services and Markets Act 2000 to cover licensees under the
Consumer Credit Act 1974; and for connected purposes.
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—
Agreements regulated under the 1974 Act
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Definition of “individual”
In section 189(1) of the 1974 Act (definitions) for the definition of “individual”
substitute—
“‘individual’ includes—
5
(a)
a partnership consisting of two or three persons not all
of whom are bodies corporate; and
(b)
an unincorporated body of persons which does not
consist entirely of bodies corporate and is not a
partnership;”.
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2
Removal of financial limits etc.
(1)
In section 8 of the 1974 Act (which defines consumer credit agreements)—
(a)
in subsection (1) for “personal” substitute “consumer”;
(b)
subsection (2) shall cease to have effect.
(2)
In section 15(1) of that Act (which defines consumer hire agreements)
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paragraph (c) and the “and” immediately preceding it shall cease to have effect.
(3)
In section 43(3) of that Act (financial and other limits relating to regulation of
advertisements) paragraph (a) shall cease to have effect.

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Exemption relating to high net worth debtors and hirers
After section 16 of the 1974 Act insert—
“16A
Exemption relating to high net worth debtors and hirers
(1)
The Secretary of State may by order provide that this Act shall not
regulate a consumer credit agreement or a consumer hire agreement
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where—
(a)
the debtor or hirer is a natural person;
(b)
the agreement includes a declaration made by him to the effect
that he agrees to forgo the protection and remedies that would
be available to him under this Act if the agreement were a
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regulated agreement;
(c)
a statement of high net worth has been made in relation to him;
and
(d)
that statement is current in relation to the agreement and a copy
of it was provided to the creditor or owner before the agreement
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was made.
(2)
For the purposes of this section a statement of high net worth is a
statement to the effect that, in the opinion of the person making it, the
natural person in relation to whom it is made—
(a)
received during the previous financial year income of a
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specified description totalling an amount of not less than the
specified amount; or
(b)
had throughout that year net assets of a specified description
with a total value of not less than the specified value.
(3)
Such a statement—
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(a)
may not be made by the person in relation to whom it is made;
(b)
must be made by a person of a specified description; and
(c)
is current in relation to an agreement if it was made during the
period of one year ending with the day on which the agreement
is made.
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(4)
An order under this section may make provision about—
(a)
how amounts of income and values of net assets are to be
determined for the purposes of subsection (2)(a) and (b);
(b)
the form, content and signing of—
(i)
statements of high net worth;
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(ii)
declarations for the purposes of subsection (1)(b).
(5)
Where an agreement has two or more debtors or hirers, for the
purposes of paragraph (c) of subsection (1) a statement of high net
worth must have been made in relation to each of them; and paragraph
(d) of that subsection shall have effect accordingly.
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(6)
In this section—
‘previous financial year’ means, in relation to a statement of high
net worth, the financial year immediately preceding the
financial year during which the statement is made;
‘specified’ means specified in an order under this section.
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(7)
In subsection (6) ‘financial year’ means a period of one year ending
with 31st March.

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(8)
Nothing in this section affects the application of sections 140A to 140C.”
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Exemption relating to businesses
Before section 17 of the 1974 Act insert—
“16B
Exemption relating to businesses
(1)
This Act does not regulate—
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(a)
a consumer credit agreement by which the creditor provides the
debtor with credit exceeding £25,000, or
(b)
a consumer hire agreement that requires the hirer to make
payments exceeding £25,000,

if the agreement is entered into by the debtor or hirer wholly or
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predominantly for the purposes of a business carried on, or intended to
be carried on, by him.
(2)
If an agreement includes a declaration made by the debtor or hirer to
the effect that the agreement is entered into by him wholly or
predominantly for the purposes of a business carried on, or intended to
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be carried on, by him, the agreement shall be presumed to have been
entered into by him wholly or predominantly for such purposes.
(3)
But that presumption does not apply if, when the agreement is entered
into—
(a)
the creditor or owner, or
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(b)
any person who has acted on his behalf in relation to the
agreement,

knows, or has reasonable cause to suspect, that the agreement is not
entered into by the debtor or hirer wholly or predominantly for the
purposes of a business carried on, or intended to be carried on, by him.
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(4)
The Secretary of State may by order make provision about the form,
content and signing of declarations under subsection (2).
(5)
Where the debtor or hirer is a partnership or an unincorporated body
of persons, subsection (2) shall apply with the substitution for ‘by the
debtor or hirer’ of ‘by or on behalf of the debtor or hirer’.
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(6)
Where an agreement has two or more creditors or owners, in subsection
(3) references to the creditor or owner are references to any one or more
of them.
(7)
Nothing in this section affects the application of sections 140A to 140C.”
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Consequential amendments relating to ss. 1 to 4
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(1)
In section 8(3) of the 1974 Act (which defines regulated consumer credit
agreements) after “16” insert “, 16A or 16B”.
(2)
In section 10 of that Act (running-account credit and fixed-sum credit)—
(a)
in subsection (1) for “personal” wherever occurring substitute
“consumer”;
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(b)
in subsection (3)—
(i)
for “section 8(2)” substitute “paragraph (a) of section 16B(1)”;
(ii)
for “subsection” substitute “paragraph”.

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(3)
In section 17(2) of that Act (small agreements) for “8(2)” substitute “16B(1)(a)”.
(4)
In section 145(4) of that Act (types of hire businesses relevant to credit
brokerage) after paragraph (a) insert—
“(aa)
a business which comprises or relates to consumer hire
agreements being, otherwise than by virtue of section 16(6),
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exempt agreements;”.
(5)
In subsection (1) of section 158 of that Act (duty of credit reference agency to
disclose filed information) for paragraph (a) substitute—
“(a)
a request in writing to that effect from a consumer,”.
(6)
After subsection (4) of that section insert—
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“(4A)
In this section ‘consumer’ means—
(a)
a partnership consisting of two or three persons not all of whom
are bodies corporate; or
(b)
an unincorporated body of persons which does not consist
entirely of bodies corporate and is not a partnership.”
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(7)
In section 181(1) and (2) of that Act (power to alter monetary limits etc.) for
“8(2), 15(1)(c)” substitute “16B(1)”.
(8)
In subsection (5) of section 185 of that Act (agreement with more than one
debtor or hirer)—
(a)
in paragraph (b) for “a body corporate” substitute “not an individual”;
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(b)
for “the body corporate or bodies corporate” substitute “each person
within paragraph (b)”.
(9)
In subsection (6) of that section after “a body corporate” insert “within
paragraph (b) of that subsection”.
(10)
In section 189(1) of that Act (definitions) in the definition of “exempt
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agreement” after “16” insert “, 16A or 16B”.
Statements to be provided in relation to regulated credit agreements
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Statements to be provided in relation to fixed-sum credit agreements
After section 77 of the 1974 Act insert—
“77A
Statements to be provided in relation to fixed-sum credit agreements
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(1)
The creditor under a regulated agreement for fixed-sum credit—
(a)
shall, within the period of one year beginning with the day after
the day on which the agreement is made, give the debtor a
statement under this section; and
(b)
after the giving of that statement, shall give the debtor further
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statements under this section at intervals of not more than one
year.
(2)
Regulations may make provision about the form and content of
statements under this section.
(3)
The debtor shall have no liability to pay any sum in connection with the
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preparation or the giving to him of a statement under this section.

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(4)
The creditor is not required to give the debtor any statement under this
section once the following conditions are satisfied—
(a)
that there is no sum payable under the agreement by the debtor;
and
(b)
that there is no sum which will or may become so payable.
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(5)
Subsection (6) applies if at a time before the conditions mentioned in
subsection (4) are satisfied the creditor fails to give the debtor—
(a)
a statement under this section within the period mentioned in
subsection (1)(a); or
(b)
such a statement within the period of one year beginning with
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the day after the day on which such a statement was last given
to him.
(6)
Where this subsection applies in relation to a failure to give a statement
under this section to the debtor—
(a)
the creditor shall not be entitled to enforce the agreement
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during the period of non-compliance;
(b)
the debtor shall have no liability to pay any sum of interest to
the extent calculated by reference to the period of non-
compliance or to any part of it; and
(c)
the debtor shall have no liability to pay any default sum which
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(apart from this paragraph)—
(i)
would have become payable during the period of non-
compliance; or
(ii)
would have become payable after the end of that period
in connection with a breach of the agreement which
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occurs during that period (whether or not the breach
continues after the end of that period).
(7)
In this section ‘the period of non-compliance’ means, in relation to a
failure to give a statement under this section to a debtor, the period
which—
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(a)
begins on the day after the end of the period mentioned in
paragraph (a) or (as the case may be) paragraph (b) of
subsection (5); and
(b)
ends on the day on which the statement is given to the debtor or
on which the conditions mentioned in subsection (4) are
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satisfied in relation to the agreement in question, whichever is
earlier.
(8)
This section does not apply in relation to a non-commercial agreement
or to a small agreement.”
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Further provision relating to statements
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(1)
In section 78 of the 1974 Act (duty to give information to debtor under running-
account credit agreement) after subsection (4) insert—
“(4A)
Regulations may require a statement under subsection (4) to contain
also information in the prescribed terms about the consequences of the
debtor—
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(a)
failing to make payments as required by the agreement; or

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(b)
only making payments of a prescribed description in prescribed
circumstances.”
(2)
In subsection (7) of that section for “(4) and (5)” substitute “(4) to (5)”.
(3)
In section 185 of that Act (agreement with more than one debtor or hirer) for
subsection (2) substitute—
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“(2)
Notwithstanding subsection (1)(a), where credit is provided under an
agreement to two or more debtors jointly, in performing his duties
under section 77A or 78(4), the creditor need not give statements to any
debtor who has signed and given to him a notice (a ‘dispensing notice’)
authorising him not to comply in his case with section 77A or (as the
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case may be) 78(4).
(2A)
A dispensing notice given by a debtor is operative from when it is given
to the creditor until it is revoked by a further notice given to the creditor
by the debtor.
(2B)
But a dispensing notice cannot become operative if that would mean
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that such a notice would be operative in relation to all of the debtors to
whom the credit is provided.
(2C)
Any dispensing notices operative in relation to an agreement shall
cease to have effect if any of the debtors dies.
(2D)
A dispensing notice which is operative in relation to an agreement shall
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be operative also in relation to any subsequent agreement which, in
relation to the earlier agreement, is a modifying agreement.”
Default under regulated agreements
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OFT to prepare information sheets on arrears and default
In Part 7 of the 1974 Act before section 87 insert—
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“Information sheets
86A
OFT to prepare information sheets on arrears and default
(1)
The OFT shall prepare, and give general notice of, an arrears
information sheet and a default information sheet.
(2)
The arrears information sheet shall include information to help debtors
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and hirers who receive notices under section 86B or 86C.
(3)
The default information sheet shall include information to help debtors
and hirers who receive default notices.
(4)
Regulations may make provision about the information to be included
in an information sheet.
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(5)
An information sheet takes effect for the purposes of this Part at the end
of the period of three months beginning with the day on which general
notice of it is given.
(6)
If the OFT revises an information sheet after general notice of it has
been given, it shall give general notice of the information sheet as
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revised.

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(7)
A revised information sheet takes effect for the purposes of this Part at
the end of the period of three months beginning with the day on which
general notice of it is given.”
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Notice of sums in arrears under fixed-sum credit agreements etc.
After section 86A of the 1974 Act (inserted by section 8 of this Act) insert—
5
“Sums in arrears and default sums
86B
Notice of sums in arrears under fixed-sum credit agreements etc.
(1)
This section applies where at any time the following conditions are
satisfied—
(a)
that the debtor or hirer under an applicable agreement is
10
required to have made at least two payments under the
agreement before that time;
(b)
that the total sum paid under the agreement by him is less than
the total sum which he is required to have paid before that time;
(c)
that the amount of the shortfall is no less than the sum of the last
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two payments which he is required to have made before that
time;
(d)
that the creditor or owner is not already subject to a duty to give
him notices under this section in relation to the agreement; and
(e)
if a judgment has been given in relation to the agreement before
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that time, that there is no sum payable under the judgment by
the debtor or hirer.
(2)
The creditor or owner—
(a)
shall, within the period of 14 days beginning with the day on
which those conditions are satisfied, give the debtor or hirer a
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notice under this section; and
(b)
after the giving of that notice, shall give him further notices
under this section at intervals of not more than six months until
either of the conditions mentioned in subsection (3) is satisfied.
(3)
Those conditions are—
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(a)
that the debtor or hirer ceases to be in arrears; or
(b)
that a judgment is given in relation to the agreement under
which a sum is payable by the debtor or hirer.
(4)
For the purposes of subsection (3)(a) the debtor or hirer ceases to be in
arrears when—
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(a)
no sum, which he has ever failed to pay under the agreement
when required, is still owing; and
(b)
no default sum and no sum of interest (including interest on a
default sum), which has ever become payable under the
agreement in connection with his failure to pay any sum under
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the agreement when required, is still owing.
(5)
A notice under this section shall include a copy of the current arrears
information sheet under section 86A.
(6)
The debtor or hirer shall have no liability to pay any sum in connection
with the preparation or the giving to him of a notice under this section.
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