Consumer Credit Bill

House of Commons

Session 2004 - 05
Internet Publications
Other Bills before Parliament

Consumer Credit Bill

Consumer Credit Bill
13

Unfair relationships
19
Unfair relationships between creditors and debtors
After section 140 of the 1974 Act insert—
“Unfair relationships
140A
Unfair relationships between creditors and debtors
5
(1)
The court may make an order under section 140B in connection with a
credit agreement if it determines that the relationship between the
creditor and the debtor arising out of the agreement (or the agreement
taken with any related agreement) is unfair to the debtor because of one
or more of the following—
10
(a)
any of the terms of the agreement or of any related agreement;
(b)
the way in which the creditor has exercised or enforced any of
his rights under the agreement or any related agreement;
(c)
any other thing done (or not done) by, or on behalf of, the
creditor (either before or after the making of the agreement or
15
any related agreement).
(2)
In deciding whether to make a determination under this section the
court shall have regard to all matters it thinks relevant (including
matters relating to the creditor and matters relating to the debtor).
(3)
For the purposes of this section the court shall treat anything done (or
20
not done) by, or on behalf of, or in relation to, an associate or a former
associate of the creditor as if done (or not done) by, or on behalf of, or
in relation to, the creditor.
(4)
It is immaterial for the purposes of this section and section 140B that
one or more parties to a credit agreement or any related agreement do
25
not have any further duties under the agreement.
(5)
An order under section 140B shall not be made in connection with a
credit agreement which is an exempt agreement by virtue of section
16(6C).”
20
Powers of court in relation to unfair relationships
30
After section 140A of the 1974 Act (inserted by section 19 of this Act) insert—
“140B
Powers of court in relation to unfair relationships
(1)
An order under this section in connection with a credit agreement may
do one or more of the following—
(a)
require the creditor, or any associate or former associate of his,
35
to repay (in whole or in part) any sum paid by the debtor or by
a surety by virtue of the agreement or any related agreement
(whether paid to the creditor, the associate or the former
associate or to any other person);
(b)
require the creditor, or any associate or former associate of his,
40
to do or not to do (or to cease doing) anything specified in the
order in connection with the agreement or any related
agreement;

Consumer Credit Bill
14

(c)
reduce any sum payable by the debtor or by a surety by virtue
of the agreement or any related agreement;
(d)
direct the return to a surety of any property provided by him for
the purposes of a security;
(e)
otherwise set aside (in whole or in part) any duty imposed on
5
the debtor or on a surety by virtue of the agreement or any
related agreement;
(f)
alter the terms of the agreement or of any related agreement;
(g)
direct accounts to be taken, or (in Scotland) an accounting to be
made, between any persons.
10
(2)
An order under this section may be made in connection with a credit
agreement only—
(a)
on an application made by the debtor or by a surety to the court;
(b)
at the instance of the debtor or a surety in any proceedings to
which the debtor and the creditor are parties, being proceedings
15
to enforce the agreement or any related agreement; or
(c)
at the instance of the debtor or a surety in any proceedings
where the amount paid or payable under the agreement is
relevant.
(3)
An order under this section may be made notwithstanding that its
20
effect is to place on the creditor, or any associate or former associate of
his, a burden in respect of an advantage enjoyed by another person.
(4)
An order under this section shall not alter the effect of any judgment.
(5)
In Scotland an application under subsection (2)(a) may be made in the
sheriff court for the district in which the debtor or surety resides or
25
carries on business.
(6)
In Northern Ireland such an application may be made to the county
court if the credit agreement is an agreement under which the creditor
provides the debtor with—
(a)
fixed-sum credit not exceeding £15,000; or
30
(b)
running-account credit on which the credit limit does not
exceed £15,000.
(7)
A party to any proceedings mentioned in subsection (2) shall be
entitled, in accordance with rules of court, to have any person who
might be the subject of an order under this section made a party to the
35
proceedings.”
21
Interpretation of ss. 140A and 140B of the 1974 Act
After section 140B of the 1974 Act (inserted by section 20 of this Act) insert—
“140C
Interpretation of ss. 140A and 140B
(1)
In this section and in sections 140A and 140B ‘credit agreement’ means
40
any agreement between an individual (the ‘debtor’) and any other
person (the ‘creditor’) by which the creditor provides the debtor with
credit of any amount.
(2)
References in this section and in sections 140A and 140B to the creditor
or to the debtor under a credit agreement include—
45

Consumer Credit Bill
15

(a)
references to the person to whom his rights and duties under
the agreement have passed by assignment or operation of law;
(b)
where two or more persons are the creditor or the debtor,
references to any one or more of those persons.
(3)
References in sections 140A and 140B to an agreement related to a credit
5
agreement (the ‘main agreement’) are references to—
(a)
a credit agreement which is consolidated by the main
agreement;
(b)
a linked transaction in relation to the main agreement or to a
credit agreement within paragraph (a);
10
(c)
an instrument by virtue of which security is provided in relation
to the main agreement, to a credit agreement within paragraph
(a) or to a linked transaction within paragraph (b).
(4)
For the purposes of this section and sections 140A and 140B—
(a)
the definition of ‘linked transaction’ in section 19 applies (with
15
any necessary changes) in relation to credit agreements which
are not regulated agreements as it applies in relation to
regulated agreements and the definitions of ‘security’ and
‘surety’ in section 189(1) apply accordingly; and
(b)
that definition of ‘security’ applies in relation to credit
20
agreements which are not consumer credit agreements as it
applies in relation to consumer credit agreements and that
definition of ‘surety’ shall apply accordingly.
(5)
For the purposes of this section a credit agreement (the ‘earlier
agreement’) is consolidated by another credit agreement (the ‘later
25
agreement’) if—
(a)
the later agreement was entered into (in whole or in part) for
purposes connected with debts owed by virtue of the earlier
agreement; and
(b)
at any time prior to the later agreement being entered into the
30
parties to the earlier agreement included—
(i)
the debtor under the later agreement; and
(ii)
the creditor under the later agreement or an associate or
a former associate of his.
(6)
Further, if the later agreement is itself consolidated by another credit
35
agreement (whether by virtue of this subsection or subsection (5)), then
the earlier agreement is consolidated by that other agreement as well.”
22
Further provision relating to unfair relationships
(1)
After section 140C of the 1974 Act (inserted by section 21 of this Act) insert—
“140D
Advice and information
40
The advice and information published by the OFT under section 229 of
the Enterprise Act 2002 shall indicate how the OFT expects sections
140A to 140C of this Act to interact with Part 8 of that Act.”
(2)
In section 16 of that Act (exempt agreements) before subsection (8) insert—
“(7A)
Nothing in this section affects the application of sections 140A to 140C.”
45

Consumer Credit Bill
16

(3)
Sections 137 to 140 of that Act (extortionate credit bargains) shall cease to have
effect.
(4)
In section 171 of that Act (onus of proof in various proceedings) at the end
insert—
“(8)
If, in proceedings referred to in section 140B(2), the debtor or a surety
5
alleges that the relationship between the creditor and the debtor is
unfair to the debtor, it is for the creditor to prove to the contrary.”
(5)
In section 181 of that Act (power to alter monetary limits etc.)—
(a)
in subsection (1) before “155(1)” insert “140B(6),”;
(b)
in subsection (2) before “shall” insert “or 140B(6)”.
10
Businesses requiring a licence and consequences of not being licensed
23
Definitions of “consumer credit business” and “consumer hire business”
In section 189(1) of the 1974 Act (definitions)—
(a)
for the definition of “consumer credit business” substitute—
“‘consumer credit business’ means any business being
15
carried on by a person so far as it comprises or relates
to—
(a)
the provision of credit by him, or
(b)
otherwise his being a creditor,
under regulated consumer credit agreements;”
20
(b)
for the definition of “consumer hire business” substitute—
“‘consumer hire business’ means any business being
carried on by a person so far as it comprises or relates
to—
(a)
the bailment or (in Scotland) the hiring of goods
25
by him, or
(b)
otherwise his being an owner,
under regulated consumer hire agreements;”.
24
Debt administration
(1)
In subsection (1) of section 145 of the 1974 Act (types of ancillary credit
30
business) for the “or” after paragraph (d) substitute—
“(da)
debt administration,”.
(2)
After subsection (7) of that section insert—
“(7A)
Subject to section 146(6), debt administration is the taking of steps—
(a)
to perform duties under a consumer credit agreement or a
35
consumer hire agreement on behalf of the creditor or owner, or
(b)
to exercise or to enforce rights under such an agreement on
behalf of the creditor or owner,

so far as the taking of such steps is not debt-collecting.”
(3)
In section 146(6) of that Act (persons who are to be treated as not carrying on
40
types of ancillary credit businesses)—

Consumer Credit Bill
17

(a)
for “or debt-collecting” substitute “, debt-collecting or debt
administration”;
(b)
for paragraphs (a) and (b) substitute—
“(aa)
he is the creditor or owner under the agreement, or”.
(4)
In subsection (3) of section 177 of that Act (saving for registered charges) and
5
in the subsection (3) applied by virtue of subsection (5) of that section for “a
business of debt-collecting” substitute “a consumer credit business, a
consumer hire business or a business of debt-collecting or debt
administration”.
(5)
In section 189(1) of that Act (definitions) after the definition of “debt-adjusting”
10
insert—
“‘debt administration’ has the meaning given by section
145(7A);”.
25
Credit information services
(1)
In subsection (1) of section 145 of the 1974 Act (types of ancillary credit
15
business) before paragraph (e) insert—
“(db)
the provision of credit information services, or”.
(2)
Before subsection (8) of that section insert—
“(7B)
A person provides credit information services if—
(a)
he takes any steps mentioned in subsection (7C) on behalf of an
20
individual; or
(b)
he gives advice to an individual in relation to the taking of any
such steps.
(7C)
Those steps are steps taken with a view—
(a)
to ascertaining whether a credit information agency (other than
25
that person himself if he is one) holds information which is, or
which the agency believes to be, relevant to the financial
standing of an individual;
(b)
to ascertaining the contents of such information held by such an
agency;
30
(c)
to securing the correction of, the omission of anything from, or
the making of any other kind of modification of, such
information so held; or
(d)
to securing that such an agency which holds such information—
(i)
stops holding it; or
35
(ii)
does not provide it to another person.
(7D)
In subsection (7C) ‘credit information agency’ means—
(a)
a person carrying on a consumer credit business or a consumer
hire business;
(b)
a person carrying on a business which comprises or relates to
40
credit brokerage, debt-adjusting, debt-counselling, debt-
collecting, debt administration or the operation of a credit
reference agency;
(c)
a person carrying on a business which would be a consumer
credit business except that it comprises or relates to consumer
45

Consumer Credit Bill
18

credit agreements being, otherwise than by virtue of section
16(5)(a), exempt agreements; or
(d)
a person carrying on a business which would be a consumer
hire business except that it comprises or relates to consumer
hire agreements being, otherwise than by virtue of section 16(6),
5
exempt agreements.”
(3)
In subsection (2) of section 151 of that Act (advertisements)—
(a)
for “or” substitute “to”;
(b)
after “liquidation of debts” insert “or to provide credit information
services”.
10
(4)
In subsection (3) of that section after “debt-counselling” insert “or for the
purposes of a business providing credit information services”.
(5)
In subsection (4) of that section after “advertisement” insert “(other than one
for the purposes of a business providing credit information services)”.
(6)
In section 152(1) of that Act (application of sections 52 to 54 to certain
15
businesses) after “debt-counselling” insert “and to a business providing credit
information services”.
(7)
In section 154 of that Act (prohibition of canvassing off trade premises) after
“debt-counselling” insert “or a business providing credit information services”.
(8)
In section 156 of that Act (regulations about entry into certain agreements) after
20
“debt-counselling” insert “or in the course of a business providing credit
information services”.
(9)
In section 189(1) of that Act (definitions) after the definition of “credit
brokerage” insert—
“‘credit information services’ has the meaning given by section
25
145(7B).”
26
Enforcement of agreements by unlicensed trader etc.
(1)
In section 40 of the 1974 Act (enforcement of regulated agreements made by
unlicensed trader) for subsections (1) and (2) substitute—
“(1)
A regulated agreement is not enforceable against the debtor or hirer by
30
a person acting in the course of a consumer credit business or a
consumer hire business (as the case may be) if that person is not
licensed to carry on a business of a description which covers the
enforcement of the agreement.
(1A)
A regulated agreement is not enforceable against the debtor or hirer
35
if—
(a)
it was made by the creditor or owner in the course of a
consumer credit business or a consumer hire business (as the
case may be); and
(b)
at the time the agreement was made he was not licensed to carry
40
on a business of a description which covered the making of the
agreement.
(2)
Where—

Consumer Credit Bill
19

(a)
during any period a person (the ‘trader’) has made regulated
agreements in the course of a consumer credit business or a
consumer hire business (as the case may be), and
(b)
during that period he was not licensed to carry on a business of
a description which covered the making of those agreements,
5

he or his successor in title may apply to the OFT for an order that the
agreements are to be treated as if he had been licensed as required.”
(2)
In subsection (4) of that section—
(a)
in paragraph (a) for “regulated agreements made by the trader during
that period” substitute “the regulated agreements in question”;
10
(b)
in paragraph (b) after “covering” insert “the making of those
agreements during”;
(c)
in paragraph (c) for “obtain a licence” substitute “be licensed as
required”.
(3)
In subsection (6) of that section after “This section” insert “(apart from
15
subsection (1))”.
(4)
After that subsection insert—
“(7)
Subsection (1) does not apply to the enforcement of a regulated
agreement by a consumer credit EEA firm unless that firm is precluded
from enforcing it as a result of a prohibition or restriction mentioned in
20
subsection (6)(a) or (b).”
(5)
In section 147 of that Act (application of Part 3 to ancillary credit business) after
subsection (2) insert—
“(3)
Part 3 does not require a person to be licensed for the purpose only of
enforcing an agreement for the services of a person carrying on an
25
ancillary credit business.”
Applications for licences and fitness to hold a licence etc.
27
Charge on applicants for licences etc.
(1)
After section 6 of the 1974 Act insert—
“6A
Charge on applicants for licences etc.
30
(1)
An applicant for a licence, or for the renewal of a licence, shall pay the
OFT a charge towards the costs of carrying out its functions under this
Act.
(2)
The amount of the charge payable by an applicant shall be determined
in accordance with provision made by the OFT by general notice.
35
(3)
The provision that may be made by the OFT under subsection (2)
includes—
(a)
different provision in relation to persons of different
descriptions;
(b)
provision for no charge at all to be payable by persons of
40
specified descriptions.
(4)
The approval of the Secretary of State and the Treasury is required for
a general notice under subsection (2).”