Consumer Credit

Question 1

What is a consumer credit agreement?

Answer 1

s.8 of the Consumer Credit Act 1974:

Aa agreement between a debtor and creditor where the creditor provides the debtor with any amount of credit.

Question 2

What does s.159 provide?

Answer 2

That a consumer can apply to have any incorrect information corrected.

Question 3

What are the three forms of credit?

Answer 3

1. Lender Credit i.e. bank through standard security.
2. Vendor Credit, seller advanced credit by seller or owner to the buyer or hirer i.e. hire purchase.
3. Credit Cards, containing 3 contracts.

Question 4

What are the 3 contracts under credit cards?

Answer 4

1. Credit card company and retailer.
2. Credit card company and card-holder
3. Retailer and card-holder.

Question 5

Who is an individual under the 1974 act?

Answer 5

s.189:

1. partnership’s with 2/3 people, so long as not all are corporate bodies. (small firm)
2. Unincorporated bodies that aren’t all corporate bodies and are not partnerships. (clubs)

Question 6

What is credit?

Answer 6

s.9(1):

“a cash loan or any other form of financial accommodation”

Question 7

What are the different types of credit agreement? (3)

Answer 7

1. Fixed Sum and Running Account Credit.
2. Restricted and Unrestricted Use Credit.
3. Debtor-Creditor Agreements and Debtor Supplier Agreements.

Question 8

What is fixed sum credit under s.10?

Answer 8

There is an established amount of credit which doesn’t change.

Question 9

What is running account credit under s.10?

Answer 9

When the debtor can obtain cash, goods or services from the creditor from time-to-time. i.e. overdraft.

Question 10

Why is there a distinction between a fixed sum and running account?

Answer 10

The form of the agreements are different and it helps know if the agreement can be varied.

Question 11

What is a restricted use agreement under s.11(1)?

Answer 11

It is when the credit is used for a specific transaction i.e. hire purchase.

Question 12

What is an unrestricted use under s.11(2)?

Answer 12

This is when credit is advanced and the consumer can use it as they wish i.e. overdraft.

Question 13

Why is it important to distinguish a debtor-creditor agreement from a debtor-creditor supplier agreement? (s.12-13)

Answer 13

Because this has implications under s.75: the liability of a creditor for breached by a supplier.

In a three party agreement, the debtor who has a claim against the supplier in breach of contract, also has a claim against the creditor who is jointly and severally liable to the debtor.

Question 14

What differs for small agreements under the act?

Answer 14

That provisions relating to formalities and cancellation rights often don’t apply as it would be ‘unduly burdensome’.

Question 15

What is considered a small agreement?

Answer 15

Agreement’s not exceeding £50, s.17(1).

Question 16

What is the exception to small agreements?

Answer 16

A conditional sale or hire purchase agreement can never be considered a small agreement (s.17(1)).

Question 17

When do the formalities and cancellation rights not apply?

Answer 17

1. Small Agreements
2. Non-Commercial Agreements.

Question 18

What happens where there is a claim against the supplier and they disappear/go insolvent?

Answer 18

s.75A: The creditor is liable.

Question 19

What is the exception to creditor liability under s.75A?

Answer 19

S.75: it does not apply to non-commercial agreements or claims relating to a single item which the price is less than £100 or more than £30,000

Question 20

What are the different kinds of vendor credit?

Answer 20

1. Hire Purchase
2. Credit Sale and Conditional sale agreement

Question 21

What case held that there are 3 parties in credit transactions?

Answer 21

Re Charge Card Services (No. 2) [1989] Ch. 497

Question 22

Why is s.155 important?

Answer 22

It acts as a protection for consumers for fees charged by credit brokers. They cannot charge a substantial fee when the opportunity may not materialise.

Question 23

What does s.157 mean for a creditor who does not want to proceed with providing credit on the basis of credit information?

Answer 23

It provides that they must:

1. Inform the debtor that the conclusion was reached on information provided by the credit agency.
2. Provide the debtor with the name and address of the credit agency which they used to reach that conclusion.

Question 24

What right does the consumer have under s.158?

Answer 24

The consumer may write to the credit agency to request a file copy of the information provided to the creditor.

(s.159, they can request the information be changed if the information on file is incorrect).

Question 25

What regulates the advertisement of financial services?

Answer 25

Financial Services and Markets Act 2000 (s.21).

Question 26

What do the regulations provide generally in relation to advertisements?

Answer 26

That advertisements must use plain and clear language that is easily audible. They must also use the name of the advertiser.

Question 27

What are the rules in regards to advertisements for credit agreements?

Answer 27

It must be provided: 1. The amount of credit. 2. Amount payable by debtor 3. [mortgage only] Annual percentage must be shown prominently and must state if this is fixed or variable. 3. [mortgage only] a warning must be displayed [COME BACK TO REFERENCE]

Question 28

REMEMBER TO FINISH ADVERTISING CARDS

Answer 28

no answer, just setting reminder x

Question 29

What are antecedent negotiations?

Answer 29

pre-contractual negotiations between the debtor and creditor.

Question 30

What does s.55 provide in terms of antecedent negotiations?

Answer 30

A creditor must disclose information to the debtor that he would do if the agreement went ahead.

Question 31

What is the prescribed form under s.60?

Answer 31

The financial information must be fully stated and must be easily distinguishable.

Question 32

What is the prescribed content of the agreement?

Answer 32

[not expected to know them all]  A prominent heading on the first page stating that this agreement is regulated under the CCA 1974  Names and addresses of all parties  Cash price  Amount of any required deposit  Amount or limit of credit  APR and how it is calculated  Details of timing and amount of payments  Details of default charges  Details any security provided by the debtor or hirer  Details of rights, obligations and remedies under the Act

Question 33

What happens if there is non-compliance with the formalities in a credit agreement?

Answer 33

The terms are unenforceable.

Question 34

When can an agreement be cancelled under s.67?

Answer 34

When in the course of negotiations, there are oral representations made around the debtor and an agreement is signed on that basis.

Question 35

What is the exception to cancellation under s.67?

Answer 35

Where the creditor was on trade premises of the creditor.

Question 36

What is the implication of a cancellation?

Answer 36

Any sums payable cease to be so and any advances paid must be returned to the debtor.

Question 37

What is the consequence of information rights under CCA 1974?

Answer 37

s.78(1) a debtor has the right to request information to be provided on the following: 1. state of account 2. any amount payable by debtor 3. any due dates for those payable later These are required at intervals no longer than 12 months.

Question 38

When is early discharge available?

Answer 38

When the debtor serves notice and makes full payment of the amount due.

Question 39

How can a hirer terminate a consumer hirer agreement?

Answer 39

s.101: it must have been running for at least 18 months. This does not apply where the agreement is for more than £1,500 a year or where the goods are hired for business purposes.

Question 40

How can a debtor terminate a hire purchase or conditional sale agreement?

Answer 40

s.99: By returning the goods before the final payment (but they remain liable for the sums before giving notice). NOTE: There are often accelerated payment clauses i.e. one mis-payment leads to all sums being due.

Question 41

How can a creditor repossess under a hire purchase or conditional sale agreement?

Answer 41

Where the debtor defaults without seeking to terminate, they may repossess the goods through court order when the debtor has paid 1/3 of the amount. (s.90).

Question 42

What is the implications of a breach of s.90 by a creditor for a debtor?

Answer 42

S.91: The agreement is terminated and the debtor is entitled to any sums already paid under the agreement.

Question 43

What is the implications of s.87?

Answer 43

A creditor must serve default notice on a debtor in default in order to: terminate agreement demand earlier payments enforce securities.

Question 44

What powers does the court have under s.135?

Answer 44

To require a creditor to repay a sum paid by debtor set aside duties imposed on debtor alter terms of agreement

Question 45

What is the extent of the courts power to amend an agreement?

Answer 45

S.136, not very wide!

Question 46

Murie McDougall Ltd. v. Sinclair, 1994 SLT (Sh Ct) 74 discusses orders that can be made, what ones were they?

Answer 46

1. Enforcement orders 2. Time Orders 3. Return and Transfer Orders

Question 47

What is an enforcement order?

Answer 47

This is when an agreement is not property executed, the creditor has to obtain an order under s.127 to enforce the agreement. The court will have regard to ant prejudice, and may reduce or extinguish any sum payable by debtor.

Question 48

When can a time order be granted?

Answer 48

S.129: It can be granted of a court action has been taken against them to enforce agreement AND If the debtor has been served a default notice.

Question 49

What is Return and Transfer Orders?

Answer 49

S.133: they can be made if an application for an enforcement order has been made or the creditor brought an action to recover possession. RETURN ORDER: Return of goods to the creditor. TRANSFER ORDER: Part of the goods to be transferred to the debtor.

Question 50

How does the court assess an unfair relationship under s.140A-C?

Answer 50

They can assess: Terms of the agreement The way the creditor enforced rights Anything done or omitted by the creditor i.e. misleading behaviour.

Question 51

How does a court deal with unfair relationships?

Answer 51

1. Require the debtor to repay any sum to the debtor 2.Require the creditor to do or cease to do something in connection to the agreement 3.Set aside any duties 4. alter terms of the agreement.