Consumer Credit Bill

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Consumer Credit Bill

Consumer Credit Bill
15

(a)
on an application made by the debtor or by a surety;
(b)
at the instance of the debtor or a surety in any proceedings in
any court to which the debtor and the creditor are parties, being
proceedings to enforce the agreement or any related agreement;
or
5
(c)
at the instance of the debtor or a surety in any other proceedings
in any court where the amount paid or payable under the
agreement or any related agreement is relevant.
(3)
An order under this section may be made notwithstanding that its
effect is to place on the creditor, or any associate or former associate of
10
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)
An application under subsection (2)(a) may only be made—
(a)
in England and Wales, to the county court;
(b)
in Scotland, to the sheriff court;
15
(c)
in Northern Ireland, to the High Court (subject to subsection
(7)).
(6)
In Scotland such an application may be made in the sheriff court for the
district in which the debtor or surety resides or carries on business.
(7)
In Northern Ireland such an application may be made to the county
20
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
(b)
running-account credit on which the credit limit does not
exceed £15,000.
25
(8)
For the purposes of subsection (7)—
(a)
the definitions of ‘running-account credit’ and ‘fixed-sum
credit’ in subsection (1) of section 10 apply (with any
appropriate changes) in relation to a credit agreement which is
not a consumer credit agreement as if it were a consumer credit
30
agreement; and
(b)
subsection (3) of that section applies (with any appropriate
changes) for the purpose of determining whether running-
account credit is to be taken as not exceeding the sum
mentioned in paragraph (b) of subsection (7).
35
(9)
Without prejudice to any provision which may be made by rules of
court made in relation to county courts in Northern Ireland, such rules
may provide that an application made by virtue of subsection (7) may
be made in the county court for the division in which the debtor or
surety resides or carries on business.
40
(10)
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
proceedings.
(11)
If, in any such proceedings, the debtor or a surety alleges that the
45
relationship between the creditor and the debtor is unfair to the debtor,
it is for the creditor to prove to the contrary.”

Consumer Credit Bill
16

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
any agreement between an individual (the ‘debtor’) and any other
5
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—
(a)
references to the person to whom his rights and duties under
10
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)
The definition of ‘court’ in section 189(1) does not apply for the
purposes of sections 140A and 140B.
15
(4)
References in sections 140A and 140B to an agreement related to a credit
agreement (the ‘main agreement’) are references to—
(a)
a credit agreement consolidated by the main agreement;
(b)
a linked transaction in relation to the main agreement or to a
credit agreement within paragraph (a);
20
(c)
a security provided in relation to the main agreement, to a credit
agreement within paragraph (a) or to a linked transaction
within paragraph (b).
(5)
In the case of a credit agreement which is not a regulated consumer
credit agreement, for the purposes of subsection (4) a transaction shall
25
be treated as being a linked transaction in relation to that agreement if
it would have been such a transaction had that agreement been a
regulated consumer credit agreement.
(6)
For the purposes of this section and section 140B the definitions of
‘security’ and ‘surety’ in section 189(1) apply (with any appropriate
30
changes) in relation to—
(a)
a credit agreement which is not a consumer credit agreement as
if it were a consumer credit agreement; and
(b)
a transaction which is a linked transaction by virtue of
subsection (5).
35
(7)
For the purposes of this section a credit agreement (the ‘earlier
agreement’) is consolidated by another credit agreement (the ‘later
agreement’) if—
(a)
the later agreement is entered into by the debtor (in whole or in
part) for purposes connected with debts owed by virtue of the
40
earlier agreement; and
(b)
at any time prior to the later agreement being entered into the
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
45
a former associate of his.

Consumer Credit Bill
17

(8)
Further, if the later agreement is itself consolidated by another credit
agreement (whether by virtue of this subsection or subsection (7)), 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—
5
“140D
Advice and information
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—
10
“(7A)
Nothing in this section affects the application of sections 140A to 140C.”
(3)
Sections 137 to 140 of that Act (extortionate credit bargains) shall cease to have
effect.
(4)
In section 181 of that Act (power to alter monetary limits etc.)—
(a)
in subsection (1) before “155(1)” insert “140B(7),”;
15
(b)
in subsection (2) before “shall” insert “or 140B(7)”.
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—
20
“‘consumer credit business’ means any business being
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,
25
under regulated consumer credit agreements;”
(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—
30
(a)
the bailment or (in Scotland) the hiring of goods
by him, or
(b)
otherwise his being an owner,
under regulated consumer hire agreements;”.
24
Debt administration etc.
35
(1)
In subsection (1) of section 145 of the 1974 Act (types of ancillary credit
business) for the “or” after paragraph (d) substitute—
“(da)
debt administration,”.
(2)
After subsection (7) of that section insert—
“(7A)
Subject to section 146(7), debt administration is the taking of steps—
40

Consumer Credit Bill
18

(a)
to perform duties under a consumer credit agreement or a
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.”
5
(3)
In subsection (6) of section 146 of that Act (persons who are to be treated as not
carrying on types of ancillary credit businesses)—
(a)
after “an agreement if” insert “any of the following conditions is
satisfied”;
(b)
for paragraphs (a) and (b) substitute—
10
“(aa)
that he is the creditor or owner under the agreement,
or”;
(c)
at the beginning of each of paragraphs (c) to (e) insert “that”.
(4)
After that subsection insert—
“(7)
It is not debt administration for a person to take steps to perform duties,
15
or to exercise or enforce rights, under an agreement on behalf of the
creditor or owner if any of the conditions mentioned in subsection
(6)(aa) to (e) is satisfied in relation to that person.”
(5)
In subsection (3) of section 177 of that Act (saving for registered charges) and
in the subsection (3) applied by virtue of subsection (5) of that section for “a
20
business of debt-collecting” substitute “a consumer credit business, a
consumer hire business or a business of debt-collecting or debt
administration”.
(6)
In section 189(1) of that Act (definitions) after the definition of “debt-adjusting”
insert—
25
“‘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
business) before paragraph (e) insert—
30
“(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
individual; or
35
(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
that person himself if he is one) holds information relevant to
40
the financial standing of an individual;
(b)
to ascertaining the contents of such information held by such an
agency;

Consumer Credit Bill
19

(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
5
(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 so far as it comprises or relates
10
to 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
15
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),
20
exempt agreements.”
(3)
In section 151 of that Act (advertisements relating to ancillary credit
businesses)—
(a)
in subsection (2) for “or” substitute “to” and after “liquidation of debts”
insert “or to provide credit information services”;
25
(b)
in subsection (3) for “or debt-counselling” substitute “, debt-
counselling or the provision of credit information services”;
(c)
in subsection (4) after “advertisement” insert “(other than one for credit
information services)”.
(4)
In each of the following provisions of that Act for “or debt-counselling”
30
substitute “, debt-counselling or the provision of credit information services”—
(a)
section 152(1) (application of sections 52 to 54 to ancillary credit
businesses);
(b)
section 154 (prohibition of canvassing ancillary credit business off trade
premises);
35
(c)
section 156 (regulations about agreements entered into for ancillary
credit businesses).
(5)
In section 189(1) of that Act (definitions) after the definition of “credit
brokerage” insert—
“‘credit information services’ has the meaning given by section
40
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
45
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

Consumer Credit Bill
20

licensed to carry on a consumer credit business or a consumer hire
business (as the case may be) of a description which covers the
enforcement of the agreement.
(1A)
Unless the OFT has made an order under subsection (2) which applies
to the agreement, a regulated agreement is not enforceable against the
5
debtor or hirer 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
10
on a consumer credit business or a consumer hire business (as
the case may be) of a description which covered the making of
the agreement.
(2)
Where—
(a)
during any period a person (the ‘trader’) has made regulated
15
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 consumer
credit business or a consumer hire business (as the case may be)
of a description which covered the making of those agreements,
20

he or his successor in title may apply to the OFT for an order that the
agreements are to be treated for the purposes of subsection (1A) 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
25
that period” substitute “the regulated agreements in question”;
(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”.
30
(3)
In subsection (6) of that section after “This section” insert “(apart from
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
35
from enforcing it as a result of a prohibition or restriction mentioned in
subsection (6)(a) or (b).
(8)
This section (apart from subsection (1)) does not apply to a regulated
agreement made by a person if by virtue of section 21(2) or (3) he was
not required to be licensed to make the agreement.
40
(9)
Subsection (1) does not apply to the enforcement of a regulated
agreement by a person if by virtue of section 21(2) or (3) he is not
required to be licensed to enforce the agreement.”