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Other Bills before Parliament

Consumer Credit Bill


Consumer Credit Bill

1

 

A

Bill

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 etc.

1       

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;”.

10

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)

15

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) and the “or” immediately after it shall cease to

have effect.

 
Bill 254/1
 
 

Consumer Credit Bill

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3       

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

5

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

10

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

15

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 separate 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.

40

(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.

45

(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.”

4       

Exemption relating to businesses

Before section 17 of the 1974 Act insert—

“16B    

Exemption relating to businesses

(1)   

This Act does not regulate—

5

(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

10

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

15

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

20

(b)   

any person who has acted on his behalf in connection with the

entering into of 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 for the purposes of subsection (2).

(5)   

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.

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(6)   

Nothing in this section affects the application of sections 140A to 140C.”

5       

Consequential amendments relating to ss. 1 to 4

(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)—

35

(a)   

in subsection (1) for “personal” wherever occurring substitute

“consumer”;

(b)   

in subsection (3)—

(i)   

for “section 8(2)” substitute “paragraph (a) of section 16B(1)”;

(ii)   

for “subsection” substitute “paragraph”.

40

(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

 
 

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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),

exempt agreements;”.

(5)   

In subsection (1) of section 158 of that Act (duty of credit reference agency to

5

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—

“(4A)   

In this section ‘consumer’ means—

(a)   

a partnership consisting of two or three persons not all of whom

10

are bodies corporate; or

(b)   

an unincorporated body of persons which does not consist

entirely of bodies corporate and is not a partnership.”

(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)”.

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(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”;

(b)   

for “the body corporate or bodies corporate” substitute “each person

within paragraph (b)”.

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(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

agreement” after “16” insert “, 16A or 16B”.

Statements to be provided in relation to regulated credit agreements

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6       

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

(1)   

The creditor under a regulated agreement for fixed-sum credit—

(a)   

shall, within the period of one year beginning with the day after

30

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

statements under this section at intervals of not more than one

year.

35

(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

preparation or the giving to him of a statement under this section.

(4)   

The creditor is not required to give the debtor any statement under this

40

section once the following conditions are satisfied—

 
 

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(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.

(5)   

Subsection (6) applies if at a time before the conditions mentioned in

subsection (4) are satisfied the creditor fails to give the debtor—

5

(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

the day after the day on which such a statement was last given

to him.

10

(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

during the period of non-compliance;

(b)   

the debtor shall have no liability to pay any sum of interest to

15

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

(apart from this paragraph)—

(i)   

would have become payable during the period of non-

20

compliance; or

(ii)   

would have become payable after the end of that period

in connection with a breach of the agreement which

occurs during that period (whether or not the breach

continues after the end of that period).

25

(7)   

In this section ‘the period of non-compliance’ means, in relation to a

failure to give a statement under this section to the debtor, the period

which—

(a)   

begins immediately after the end of the period mentioned in

paragraph (a) or (as the case may be) paragraph (b) of

30

subsection (5); and

(b)   

ends at the end of the day on which the statement is given to the

debtor or on which the conditions mentioned in subsection (4)

are satisfied, whichever is earlier.

(8)   

This section does not apply in relation to a non-commercial agreement

35

or to a small agreement.”

7       

Further provision relating to statements

(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

40

also information in the prescribed terms about the consequences of the

debtor—

(a)   

failing to make payments as required by the agreement; or

(b)   

only making payments of a prescribed description in prescribed

circumstances.”

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(2)   

In subsection (7) of that section for “(4) and (5)” substitute “(4) to (5)”.

 
 

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(3)   

In section 185 of that Act (agreement with more than one debtor or hirer) for

subsection (2) substitute—

“(2)   

Notwithstanding subsection (1)(a), where credit is provided under an

agreement to two or more debtors jointly, in performing his duties—

(a)   

in the case of fixed-sum credit, under section 77A, or

5

(b)   

in the case of running-account credit, under section 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 case may be) 78(4).

(2A)   

A dispensing notice given by a debtor is operative from when it is given

10

to the creditor until it is revoked by a further notice given to the creditor

by the debtor.

(2B)   

But subsection (2) does not apply if (apart from this subsection)

dispensing notices would be operative in relation to all of the debtors

to whom the credit is provided.

15

(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

be operative also in relation to any subsequent agreement which, in

relation to the earlier agreement, is a modifying agreement.”

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Default under regulated agreements

8       

OFT to prepare information sheets on arrears and default

At the beginning of Part 7 of the 1974 Act insert—

“Information sheets

86A     

OFT to prepare information sheets on arrears and default

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(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

and hirers who receive notices under section 86B or 86C.

(3)   

The default information sheet shall include information to help debtors

30

and hirers who receive default notices.

(4)   

Regulations may make provision about the information to be included

in an information sheet.

(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

35

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

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.”

9       

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

15

two payments which he is required to have made before that

time;

(d)   

that the creditor or owner is not already under 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

20

that time, that there is no sum still to be paid 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 the conditions mentioned in subsection (1) are satisfied,

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give the debtor or hirer a 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.

(3)   

The duty of the creditor or owner to give the debtor or hirer notices

under this section shall cease when either of the conditions mentioned

30

in subsection (4) is satisfied; but if either of those conditions is satisfied

before the notice required by subsection (2)(a) is given, the duty shall

not cease until that notice is given.

(4)   

The conditions referred to in subsection (3) are—

(a)   

that the debtor or hirer ceases to be in arrears;

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(b)   

that a judgment is given in relation to the agreement under

which a sum is required to be paid by the debtor or hirer.

(5)   

For the purposes of subsection (4)(a) the debtor or hirer ceases to be in

arrears when—

(a)   

no sum, which he has ever failed to pay under the agreement

40

when required, is still owing;

(b)   

no default sum, which has ever become payable under the

agreement in connection with his failure to pay any sum under

the agreement when required, is still owing;

 
 

 
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