Consumer Credit Bill

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Consumer Credit Bill

Consumer Credit Bill
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(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
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(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
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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;
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(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
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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.
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(8)
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.
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(9)
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.
(10)
If, in any such proceedings, the debtor or a surety alleges that the
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relationship between the creditor and the debtor is unfair to the debtor,
it is for the creditor to prove to the contrary.”
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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
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(1)
In this section and in sections 140A and 140B ‘credit agreement’ means
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.

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(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
the agreement have passed by assignment or operation of law;
(b)
where two or more persons are the creditor or the debtor,
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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.
(4)
References in sections 140A and 140B to an agreement related to a credit
agreement (the ‘main agreement’) are references to—
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(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);
(c)
a security provided in relation to the main agreement, to a credit
agreement within paragraph (a) or to a linked transaction
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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
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
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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
changes) in relation to—
(a)
a credit agreement which is not a consumer credit agreement as
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if it were a consumer credit agreement; and
(b)
a transaction which is a linked transaction by virtue of
subsection (5).
(7)
For the purposes of this section a credit agreement (the ‘earlier
agreement’) is consolidated by another credit agreement (the ‘later
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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
earlier agreement; and
(b)
at any time prior to the later agreement being entered into the
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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.
(8)
Further, if the later agreement is itself consolidated by another credit
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agreement (whether by virtue of this subsection or subsection (7)), then
the earlier agreement is consolidated by that other agreement as well.”

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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
The advice and information published by the OFT under section 229 of
the Enterprise Act 2002 shall indicate how the OFT expects sections
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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.”
(3)
Sections 137 to 140 of that Act (extortionate credit bargains) shall cease to have
effect.
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(4)
In section 181 of that Act (power to alter monetary limits etc.)—
(a)
in subsection (1) before “155(1)” insert “140B(7),”;
(b)
in subsection (2) before “shall” insert “or 140B(7)”.
Businesses requiring a licence and consequences of not being licensed
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Definitions of “consumer credit business” and “consumer hire business”
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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
carried on by a person so far as it comprises or relates
to—
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(a)
the provision of credit by him, or
(b)
otherwise his being a creditor,
under regulated consumer credit agreements;”
(b)
for the definition of “consumer hire business” substitute—
“‘consumer hire business’ means any business being
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carried on by a person so far as it comprises or relates
to—
(a)
the bailment or (in Scotland) the hiring of goods
by him, or
(b)
otherwise his being an owner,
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under regulated consumer hire agreements;”.
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Debt administration etc.
(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,”.
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(2)
After subsection (7) of that section insert—
“(7A)
Subject to section 146(7), debt administration is the taking of steps—
(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
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behalf of the creditor or owner,

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so far as the taking of such steps is not debt-collecting.”
(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”;
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(b)
for paragraphs (a) and (b) substitute—
“(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—
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“(7)
It is not debt administration for a person to take steps to perform duties,
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
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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”.
(6)
In section 189(1) of that Act (definitions) after the definition of “debt-adjusting”
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insert—
“‘debt administration’ has the meaning given by section
145(7A);”.
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Credit information services
(1)
In subsection (1) of section 145 of the 1974 Act (types of ancillary credit
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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
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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
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that person himself if he is one) holds information relevant to
the financial standing of an individual;
(b)
to ascertaining the contents of such information held by such an
agency;
(c)
to securing the correction of, the omission of anything from, or
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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
(ii)
does not provide it to another person.
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(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
to credit brokerage, debt-adjusting, debt-counselling, debt-
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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
credit agreements being, otherwise than by virtue of section
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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),
exempt agreements.”
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(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”;
(b)
in subsection (3) for “or debt-counselling” substitute “, debt-
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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”
substitute “, debt-counselling or the provision of credit information services”—
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(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);
(c)
section 156 (regulations about agreements entered into for ancillary
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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
145(7B).”
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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
a person acting in the course of a consumer credit business or a
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consumer hire business (as the case may be) if that person is not
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
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to the agreement, a regulated agreement is not enforceable against the
debtor or hirer if—

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(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
on a consumer credit business or a consumer hire business (as
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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
agreements in the course of a consumer credit business or a
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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,

he or his successor in title may apply to the OFT for an order that the
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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
that period” substitute “the regulated agreements in question”;
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(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
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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
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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.
(9)
Subsection (1) does not apply to the enforcement of a regulated
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agreement by a person if by virtue of section 21(2) or (3) he is not
required to be licensed to enforce the agreement.”
Applications for licences and fitness to hold a licence etc.
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Charge on applicants for licences etc.
(1)
After section 6 of the 1974 Act insert—
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“6A
Charge on applicants for licences etc.
(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.

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(2)
The amount of the charge payable by an applicant shall be determined
in accordance with provision made by the OFT by general notice.
(3)
The provision that may be made by the OFT under subsection (2)
includes—
(a)
different provision in relation to persons of different
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descriptions;
(b)
provision for no charge at all to be payable by persons of
specified descriptions.
(4)
The approval of the Secretary of State and the Treasury is required for
a general notice under subsection (2).”
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(2)
In section 6 of that Act (which contains provision relating to applications) after
subsection (2) insert—
“(2A)
The application must also be accompanied—
(a)
in the case of an application for a licence or for the renewal of a
licence, by the charge payable by virtue of section 6A;
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(b)
in any other case, by the specified fee.”
(3)
In section 189 of that Act (definitions) after subsection (1) insert—
“(1A)
In sections 36E(3), 70(4), 73(4) and 75(2) and paragraphs 14 and 15 of
Schedule A1 ‘costs’, in relation to proceedings in Scotland, means
expenses.”
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(4)
In section 191(1)(a) of that Act (special provisions as to Northern Ireland) after
“notices” insert “, charges”.
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Applications for standard licences
After section 24 of the 1974 Act insert—
“24A
Applications for standard licences
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(1)
An application for a standard licence shall, in relation to each type of
business which is covered by the application, state whether the
applicant is applying—
(a)
for the licence to cover the carrying on of that type of business
with no limitation; or
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(b)
for the licence to cover the carrying on of that type of business
only so far as it falls within one or more descriptions of
business.
(2)
An application within subsection (1)(b) in relation to a type of business
shall set out the description or descriptions of business in question.
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(3)
References in this Part to a type of business are references to a type of
business within subsection (4).
(4)
The types of business within this subsection are—
(a)
a consumer credit business;
(b)
a consumer hire business;
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(c)
a business so far as it comprises or relates to credit brokerage;
(d)
a business so far as it comprises or relates to debt-adjusting;
(e)
a business so far as it comprises or relates to debt-counselling;