Credit Agreements & Hire Purchase under consumer law

If you have taken out a cash loan or some other financial arrangement then you will probably have entered into a credit agreement.

This is an agreement that allows you to pay for something at a later date rather than now. Credit agreements are covered by a law which means that if you break the agreement you can sue or be sued.

The law is set out in the Consumer Credit Act 1974 and the Consumer Credit Regulations 2010.

It applies mainly to unsecured credit, (so does not include mortgages). It does not apply if the credit is more than £60,260.

If you have a credit card, charge card, cheque, coupon, voucher, etc., these are all types of credit agreements.

If you buy goods which you take away with you, but pay the price in instalments this will also be a form of credit agreement.

If you pay for the goods in instalments, but are not allowed to take the goods until the final payment then this is also a form of credit agreement.

Hire Purchase agreements are also credit agreements. This is where you pay by instalments to use the goods, but have an option to buy the goods if you want to after all the instalments have been paid.

If you have taken a loan from a friend or relative however, this is not a credit agreement protected under the Act.

The protection under such agreements include

1. Being able to withdraw from the agreement within 14 days of signing the agreement (or receiving a copy of the executed agreement or notification of the credit limit in the case of credit cards). If you have had the benefit of the credit card in the meantime you  must repay the credit plus any interest from the day the credit was used to when it is repaid.

2. You must be notified of any changes in the rate of interest payable  under the agreement.

3. If you have purchased goods or services using the credit then in certain circumstances you may be able to take up any issues with the creditor, where you cannot get a solution from the supplier. However, the goods or services must be more than £30,000 in value and the credit taken out must not be more than £60,260.

4. You have the right to settle the credit agreement early as well as to make partial early settlement.

5. You must be informed if your debt is sold or transferred to a third party and the arrangements for the debt changes.

6. If your application for credit is refused due to a credit check the creditor must tell you this and provide you with the details of the credit check agency used.

Consumer Credit Act 1974 - your consumer rights

Consumer Law