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Consumer Credit Act 2006 - who can be exempt from the Act
Introduction
The Consumer Credit Act and its amendments affect all those who use credit to buy goods and or services, for example, on hire-purchase agreements or using a store credit card. The Act governs the licensing of, and other controls, on traders who supply credit, or goods and services on credit. It is therefore a valuable tool to have knowledge of how it works at your fingertips.
This article explains a recent change to Consumer Credit law – the CCA 2006. Specifically, it explains who can be exempt from the Act.
Exempt Agreements
Certain types of loan do not fall within the ambit of the Consumer Credit Act 1974. They are called Exempt Agreements. The details are as follows.
The purpose of the Consumer Credit Act 1974 is to regulate consumer rather than commercial transactions. In general, an agreement will only be regulated if the debtor is an individual (which will include partnerships but not limited companies) and the credit does not exceed £25,000.
Hire purchase, conditional sale, personal loans and credit card transactions are the most common instances of consumer credit agreements. Hire agreements will also be regulated where goods are hired to an individual for more than 3 months and involve payment of less than £25,000.
Creditor is a local authority
The Act does not regulate a consumer credit agreement where the creditor is a local authority, or a body specified, or of a description specified, in an order made by the Secretary of State, including:
- an insurer;
- a friendly society;
- an organization of employers or organization of workers;
- a charity;
- a land improvement company;
- a body corporate named or specifically referred to in any public general Act;
- a building society, or
- a deposit-taker.
Obviously the big exemption there, as regards secured loans, is for building societies.
Other descriptions
The Act shall not regulate a consumer credit agreement which is an agreement of one of the following descriptions, that is to say a debtor-creditor-supplier agreement being either:
- an agreement for fixed-sum credit under which the total number of payments
to be made by the debtor does not exceed four, and those payments are
required to be made within a period not exceeding 12 months beginning with
the date of the agreement; or
- an agreement for running-account credit which provides for the making of payments by the debtor in relation to specified periods and requires that the number of payments to be made by the debtor in repayment of the whole amount of the credit provided in each such period shall not exceed one;
- a debtor-creditor-supplier agreement financing the purchase of land being an agreement under which the number of payments to be made by the debtor does not exceed four; and in this sub-paragraph, "payment" means a payment comprising or including an amount in respect of credit or the total charge for credit (if any);
Other exempt agreements
·The Act shall not regulate a consumer hire agreement where the owner is a body corporate authorized by or under any enactment to supply electricity or water and the subject of the agreement is a meter or metering equipment used or to be used in connection with the supply of electricity or water, as the case may be.
·The Act shall not regulate a trade agreement with short repayment periods, where the number of repayments is four or more (unless it is a hire purchase or conditional sale agreement)
·The Act shall not regulate agreements where the whole of the credit for a period is repayable by a single payment, for example, charge cards, or milk bills. Hire purchase and conditional sale agreements are not exempt.
·The Act shall not regulate loans secured on land, for example, certain mortgages lending
·The Act shall not regulate credit given at less than commercial rates of interest, for example loans from credit unions or an employer.
·The Act shall not regulate small agreements where the credit does not exceed £50, and non-commercial agreements (e.g. a loan between friends) are also not covered by the Act.
·The Act shall not regulate certain consumer credit agreements having a connection with a country outside the United Kingdom
·The Act shall not regulate consumer credit agreements or consumer hire agreements where the debtor or hirer has a “high net worth”. (This exemption will come into force after 6-April 2008)
·The Act shall not regulate a consumer credit agreement made:
(a) in connection with trade in goods or services between the United Kingdom and a country outside the United Kingdom or within a country or between countries outside the United Kingdom, being an agreement under which credit is provided to the debtor in the course of a business carried on by him; or
(b) between a creditor and a debtor who is—
(i) a member of any of the armed forces of the United States of America;
(ii) an employee not habitually resident in the United Kingdom of any of those forces; or
(iii) any such member's or employee's wife or husband or any other person (whether or not a child of his) whom he wholly or partly maintains and treats as a child of the family.
The Consumer Credit Act and its amendments affect all those who use credit to buy goods and or services, for example, on hire-purchase agreements or using a store credit card. The Act governs the licensing of, and other controls, on traders who supply credit, or goods and services on credit. It is therefore a valuable tool to have knowledge of how it works at your fingertips.
This article explains a recent change to Consumer Credit law – the CCA 2006. Specifically, it explains who can be exempt from the Act.
Exempt Agreements
Certain types of loan do not fall within the ambit of the Consumer Credit Act 1974. They are called Exempt Agreements. The details are as follows.
The purpose of the Consumer Credit Act 1974 is to regulate consumer rather than commercial transactions. In general, an agreement will only be regulated if the debtor is an individual (which will include partnerships but not limited companies) and the credit does not exceed £25,000.
Hire purchase, conditional sale, personal loans and credit card transactions are the most common instances of consumer credit agreements. Hire agreements will also be regulated where goods are hired to an individual for more than 3 months and involve payment of less than £25,000.
Creditor is a local authority
The Act does not regulate a consumer credit agreement where the creditor is a local authority, or a body specified, or of a description specified, in an order made by the Secretary of State, including:
- an insurer;
- a friendly society;
- an organization of employers or organization of workers;
- a charity;
- a land improvement company;
- a body corporate named or specifically referred to in any public general Act;
- a building society, or
- a deposit-taker.
Obviously the big exemption there, as regards secured loans, is for building societies.
Other descriptions
The Act shall not regulate a consumer credit agreement which is an agreement of one of the following descriptions, that is to say a debtor-creditor-supplier agreement being either:
- an agreement for fixed-sum credit under which the total number of payments
to be made by the debtor does not exceed four, and those payments are
required to be made within a period not exceeding 12 months beginning with
the date of the agreement; or
- an agreement for running-account credit which provides for the making of payments by the debtor in relation to specified periods and requires that the number of payments to be made by the debtor in repayment of the whole amount of the credit provided in each such period shall not exceed one;
- a debtor-creditor-supplier agreement financing the purchase of land being an agreement under which the number of payments to be made by the debtor does not exceed four; and in this sub-paragraph, "payment" means a payment comprising or including an amount in respect of credit or the total charge for credit (if any);
Other exempt agreements
·The Act shall not regulate a consumer hire agreement where the owner is a body corporate authorized by or under any enactment to supply electricity or water and the subject of the agreement is a meter or metering equipment used or to be used in connection with the supply of electricity or water, as the case may be.
·The Act shall not regulate a trade agreement with short repayment periods, where the number of repayments is four or more (unless it is a hire purchase or conditional sale agreement)
·The Act shall not regulate agreements where the whole of the credit for a period is repayable by a single payment, for example, charge cards, or milk bills. Hire purchase and conditional sale agreements are not exempt.
·The Act shall not regulate loans secured on land, for example, certain mortgages lending
·The Act shall not regulate credit given at less than commercial rates of interest, for example loans from credit unions or an employer.
·The Act shall not regulate small agreements where the credit does not exceed £50, and non-commercial agreements (e.g. a loan between friends) are also not covered by the Act.
·The Act shall not regulate certain consumer credit agreements having a connection with a country outside the United Kingdom
·The Act shall not regulate consumer credit agreements or consumer hire agreements where the debtor or hirer has a “high net worth”. (This exemption will come into force after 6-April 2008)
·The Act shall not regulate a consumer credit agreement made:
(a) in connection with trade in goods or services between the United Kingdom and a country outside the United Kingdom or within a country or between countries outside the United Kingdom, being an agreement under which credit is provided to the debtor in the course of a business carried on by him; or
(b) between a creditor and a debtor who is—
(i) a member of any of the armed forces of the United States of America;
(ii) an employee not habitually resident in the United Kingdom of any of those forces; or
(iii) any such member's or employee's wife or husband or any other person (whether or not a child of his) whom he wholly or partly maintains and treats as a child of the family.
