Credit Agreement for credit sales, hire-purchase, secured and unsecured loans
A Consumer Credit Agreement is an agreement under which credit is extended to an individual. Those agreements that are regulated agreements cover extensions of credit up to a statutory limit. These include credit sales, hire-purchase, secured and unsecured loans; they may be bipartite debtor-(involving or made by two separate parties) creditor agreements or tripartite (shared by or involving three parties) debtor-creditor-supplier agreements.
This means that if Customers / Debtors are borrowing money, they are receiving credit e.g. overdrafts, credit cards or loans. Credit agreements not only cover overdrafts, credit cards and loans, but also cover other types of borrowing. These include credit sale agreements, hire purchase agreements and conditional sale agreements.
The lender should typically provide a Customer / Debtor with a credit agreement explaining the details of the arrangement. Agreements covered by the Consumer Credit Act include the Customer / Debtors rights comprising of:
Both the Customer / Debtor and the lender must agree to the terms of the agreement to finalise the contract. However, there are types of credit agreements that the Consumer Credit Act does not cover, e.g. gas, electricity or water meter agreements, mortgages, credit union borrowing, and money borrowed from employers, to list a few.
Cancelling a Credit Agreement by a Customer / Debtor on a purchase will typically involve returning the goods or finding another way to pay for them. If the Customers / Debtors obtained credit for services, they are likely to have their money refunded to them when they cancel the credit agreement, if the Customers / Debtors have already made part of the payment, e.g. in the form of a deposit.
On certain types of borrowing covered by the Consumer Credit Act, the Customer / Debtor can make an early repayment, but they will have to give the lender written notice that the Customers / Debtors are going to do so. The lender will provide the Customer / Debtor with a settlement amount, which is the sum needed to pay off the debt early. The Consumer Credit Act also gives Customer / Debtor a statutory rebate for any interest or charges Customer / Debtor have made. It sets out ways to calculate this rebate, so that it is not decided on by the lender.
In the event a Customer / Debtor cannot make a payment and is therefore behind on payments, the lender is expected to give the Customer / Debtor an arrears notice and a Financial Conduct Authority (FCA) arrears information sheet. This is to let the Customer / Debtor know what the Customers / Debtors rights are and how they can get the support to manage the payment problem. We are FCA registered and conform with their regulations.
Defaulting on repayments may show up on a Customers / Debtors credit history. This information can be used by lenders to judge a Customers / Debtors creditworthiness when they apply for further credit e.g. a loan. This is also a tool by which we can influence a Customer / Debtor willingness to repay a debt.