Consumer Credit Bill published

United Kingdom

The Consumer Credit Bill has been published, on 16 December 2004. 

It amends the Consumer Credit Act 1974 (the "1974 Act"), and has in mind the need to extend to consumers the benefit of an ombudsman to hear complaints in connection with agreements regulated by the Act (similar to the Financial Ombudsman's role in relation to the operation of bank accounts).  It also aims to limit the injury done to consumers by rogue lenders.

The 1974 Act is the statute governing

· the licensing of, and other controls, on traders concerned with

· the provision of credit or the supply of goods on hire or hire-purchase to individuals and with

·  the regulation of transactions concerning that provision or that supply.

The BBA commented yesterday, 16 December 2004 "The existing Consumer Credit Act has served us well, but it is 30 years old and the consumer credit environment has changed dramatically during that period." (Ian Mullen, Chief Executive BBA).

The Bill aims to reform the 1974 Act to:

· provide for the regulation of all consumer credit and consumer hire agreements subject to certain exemptions;

·  make provision in relation to the licensing of providers of consumer credit and consumer hire and ancillary credit services and the functions and powers of OFT in relation to licensing;

·  enable debtors to challenge unfair relationships with creditors; and

·  provide for an Ombudsman scheme to hear complaints in relation to businesses licensed under the Act.

Short Background

In July 2001, the Secretary of State for Trade and Industry announced a review of the 1974 Act.

The review addressed the existing regulation of information disclosure, early settlement, unfair credit transactions, consumer credit licensing, the financial limit above which agreements are not regulated under the 1974 Act and consumer redress.  The review resulted in the White Paper "Fair, Clear and Competitive - The Consumer Credit Market in the 21st Century" December 2003.

The review also considered the problem of over-indebtedness in the United Kingdom, and the ways in which government, working with industry and consumer representatives and advisers, can tackle this issue. This led to the publication of the joint DTI and Department for Work and Pensions paper "Tackling Over-indebtedness - Action Plan 2004".

The Government's responses to these consultations may be found by clicking here.

Regulations and Orders have already been passed to deal with the issues of pre-contractual disclosure, advertising and early settlement.

The remaining proposals for reform (relating to unfair credit relationships, consumer credit licensing, the financial limit and consumer redress) require primary legislation to amend the 1974 Act and other legislation and are dealt with in this Bill.

Overview Of The Structure

The main areas covered by the Bill are:

·  the regulation of consumer credit agreements and consumer hire agreements;

· the provision of information to debtors and hirers after the agreement is made;

· unfair relationships between debtors and creditors;

· the licensing of consumer credit and hire businesses and ancillary credit businesses;

· the powers of OFT in relation to the licensing of consumer credit and hire businesses and ancillary credit businesses;

· appeals from decisions of OFT in relation to the licensing of consumer credit and hire businesses and ancillary credit businesses; and

· the extension of the jurisdiction of the Financial Ombudsman Service established under the Financial Services and Markets Act 2000.

The Bill also amends the following Acts:

· the Financial Services and Markets Act 2000 as a consequence of the extension of the jurisdiction of the Financial Ombudsman Service.

· the Bankruptcy (Scotland) Act 1985, the Insolvency Act 1986 and the Insolvency (Northern Ireland) Order 1989 as a consequence of the provisions in the Bill dealing with unfair relationships;

· the Criminal Justice and Police Act 2001 as a consequence of the provisions in the Bill concerning powers of OFT in relation to entry into premises;

·  the Tribunals and Inquiries Act 1992 as a consequence of the provisions in the Bill concerning the establishment of the Consumer Credit Appeals Tribunal; and

The Bill is available by clicking here.

Should you require further details or advice please contact Ruth Pedley on +44(0) 20 7367 2098 or at ruth[email protected] or Jean Price on +44(0) 20 7367 3353 or at [email protected]