Topic 22 (Consumer credit)

Question 1

What does consumer credit include?

Answer 1

Personal loans, hire, purchase, credit cards and store cards

Question 2

What are the two Consumer credit acts?

Answer 2

1974 - establishes the basic principles of consumer credit regulation
2006 - consolidated, expanded and brought up to date the earlier act

Question 3

What is APR?

Answer 3

Annual percentage rate

Question 4

What does the APR represent?

Answer 4

Represents a measure of the total cost of borrowing and it’s aim is to allow a fair comparison between different lenders, of the overall cost of lending

Question 5

What are the two main factors for calculating APR?

Answer 5

1. The interest rate- whether it is charge on a daily, monthly or annual basis
2. The additional costs and fees charged when arranging the loan

Question 6

What is the KEY result of APR?

Answer 6

The result is the APR is higher than the interest rate being charged on the loan

Question 7

What is Representative APR?

Answer 7

an APR that applies to 51% or more of successful applicants for the credit product

Question 8

What is credit intermediary?

Answer 8

It helps an individual to obtain credit

Question 9

Who took over the Consumer credit regulation in 2014?

Answer 9

The FCA

Question 10

What are Payday lenders?

Answer 10

Lenders who provide loans on what is intended to be a very short-term basis, for example to cover a short fall in funds between one payday and the next

Question 11

what authorities are covered by the FCA?

Answer 11

• Credit broking - Debt administration Debt collecting - Debt counselling - Lending that isn’t ‘limited permission’ - Credit information services -Credit reference agency services -P2P lending