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Total Charge for Credit
I think many of who have been working with the above for a while forget how difficult it was to get our heads around this in the beginning so what I have attempted to do here is an introduction to the subject.
I have found that incorrect TCCs can be responsible for a large percentage of agreement being incorrectly executed and, in many cases the cause of unenforceability, especially in older credit agreements.
When you repay a loan whether it be credit card, fixed sum, hire purchase or whatever you agree to pay it back in instalments over a period of time.
If you break down your repayments you will see that they fall int the following catagories
1) The amount you borrowed
2) Any charges that you had to pay in order to get the loan.
The sum of the above form the TAP (Total Amount Payable)
The last category consists of the Total Charge for credit.
TOTAL CHARGE for CREDIT is the sum of of any monies that you contractually agreed to pay in order to procure the loan. It Includes;
The consumer Credit Act 1974 section 9(4) says that,” (4). For the purposes of this Act, an item entering into the total charge for credit shall not be treated as credit even though time is allowed for its payment.”
So we see that if one of these items appeared as part of the Total Credit it would contravene the Act.
Unenforceability
The consequendies of this are severe, The Total Credit as you know is a prescribed term, and if missing or incorrect would render all agreements made before the 6th of April 2007 unenforceable.
If even one of the items listed above where to end up contained within amount loaned ( Total Credit) then that figure would be incorrect by that amount, and render the agreement unenforceable.
APR
Lastly I better mention the TCC in relation to the APR quoted on the agreement.
The perceived cost the loan can be calculated by using;
The amount you loaned,
The time taken to repay it and
The amount of interest you pay
This would give you the interest quoted in the agreement, however this would not include the total cost of the loan as it would leave out all the other charges that you have had to pay in order to get it.
The APR calculates its value by using the TCC instead of just the interest thus including all the charges and giving a truer picture of what the loan actually costs you
As you can imagine there are many other aspect to the TCC that I have not mentioned here but there are extremely good OFT pamphlets on the subject on there website and the full low-down is contained within the TCC regs 1980. I have not seen these available on line and had to buy mine maybe someone reading this knows a better source.
Best regards
Peter
I think many of who have been working with the above for a while forget how difficult it was to get our heads around this in the beginning so what I have attempted to do here is an introduction to the subject.
I have found that incorrect TCCs can be responsible for a large percentage of agreement being incorrectly executed and, in many cases the cause of unenforceability, especially in older credit agreements.
When you repay a loan whether it be credit card, fixed sum, hire purchase or whatever you agree to pay it back in instalments over a period of time.
If you break down your repayments you will see that they fall int the following catagories
1) The amount you borrowed
2) Any charges that you had to pay in order to get the loan.
The sum of the above form the TAP (Total Amount Payable)
The last category consists of the Total Charge for credit.
TOTAL CHARGE for CREDIT is the sum of of any monies that you contractually agreed to pay in order to procure the loan. It Includes;
- The interest
charged on the loan - Any setting up fees charged by the creditor
- Any insurance that was conditional on you getting the loan (if you didn’t buy they wouldn’t give you the loan)
- The final purchase element on a hire purchase agreement
- Any brokerage charges
- Any attached agreements necessary to the purchase of the loan
The consumer Credit Act 1974 section 9(4) says that,” (4). For the purposes of this Act, an item entering into the total charge for credit shall not be treated as credit even though time is allowed for its payment.”
So we see that if one of these items appeared as part of the Total Credit it would contravene the Act.
Unenforceability
The consequendies of this are severe, The Total Credit as you know is a prescribed term, and if missing or incorrect would render all agreements made before the 6th of April 2007 unenforceable.
If even one of the items listed above where to end up contained within amount loaned ( Total Credit) then that figure would be incorrect by that amount, and render the agreement unenforceable.
APR
Lastly I better mention the TCC in relation to the APR quoted on the agreement.
The perceived cost the loan can be calculated by using;
The amount you loaned,
The time taken to repay it and
The amount of interest you pay
This would give you the interest quoted in the agreement, however this would not include the total cost of the loan as it would leave out all the other charges that you have had to pay in order to get it.
The APR calculates its value by using the TCC instead of just the interest thus including all the charges and giving a truer picture of what the loan actually costs you
As you can imagine there are many other aspect to the TCC that I have not mentioned here but there are extremely good OFT pamphlets on the subject on there website and the full low-down is contained within the TCC regs 1980. I have not seen these available on line and had to buy mine maybe someone reading this knows a better source.
Best regards
Peter
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