FOOL'S EYE VIEW
The Vital Statistics of a Credit Agreement

By Jane Mack (TMFJane)
November 21, 2002

Back in July 2001, the government announced a review of the 1974 Consumer Credit Act. You'll not be surprised to hear that nearly a year and a half later it's still underway.

The main purpose of the review, called Tackling Loan Sharks... and more, can probably be found in the title but this article goes into more detail. The Government's latest report published in August indicated that some progress has been made but it'll be some time before any substantial changes to the Act will be made.

Bearing in mind that any changes are likely to be in favour of the consumer rather than the creditor, it's fair to assume that most of the individual's current rights will continue to be protected in the same way as they are now. For various reasons I've been mugging up on the Act using the Child Poverty Action Group's excellent Debt Advice Handbook and it's been good to be reminded of one's basic rights.

Did you know, for example, that quite a few mail order catalogue debts are unenforceable simply because there is frequently no written and signed credit agreement? I'm not suggesting for a minute that anyone who's got a debt problem with a catalogue company should try to get out of paying what they owe but if the company hasn't stuck to the rules then at least you'll know you can give them short shrift should they become heavy-handed.

The reason is because credit agreements under the Act are strictly regulated and if they're not made in accordance with the regulations then they're either unenforceable or can only be enforced with special permission of the Court. A couple of special rules apply to mail order catalogues but there are some general ones which apply to credit agreements across the board.

It is a statutory requirement that CCA-regulated agreements should be in writing and signed by the borrower and that they contain the following information:

• The amount of credit (or credit limit)
• The credit charges
• The rate of interest and whether it will vary throughout the course of the agreement
• A notice of cancellation (if it is a cancellable agreement)
• Details of the repayment schedule

If the agreement is not in accordance with the above requirements then it is unenforceable.

A credit agreement should also include the following (although if it doesn't then permission from the court will be required to enforce it):

• A prominent heading describing the type of agreement
• Names and addresses of the lender and borrower along with a signature box
• Details of any security offered for the loan
• Description of goods supplied if any
• Cash price of goods or services
• Amount of deposit
• Annual Percentage Rate (APR)
• Details of the consumer's rights ie: paying the account off early or termination rights etc.

To take the example of goods ordered on credit from a mail order catalogue, people often buy items via friends or door-to-door agents and it's this sort of instance where signed credit agreements often get forgotten. You have a right to ask for a copy of the signed agreement and details of your account showing how much has been paid and how much is still owed. If the company can't provide it, the agreement is unenforceable. The only exception is if less than five repayments were required but since, for more expensive mail order products, most people spread their payments over a longer period, the regulations apply.

As I said, this is not a way to avoid paying debts that are owed but it's a useful thing to know if you're being hassled by a creditor who is insisting on calling in the entire debt. In fact, any creditor who hasn't strictly followed the rules on the format of CCA-regulated agreements could find themselves without a leg to stand on when trying to enforce the debt. So if you're being hassled for repayment of debts, dig out the original paperwork and look very closely at it. You might find something that could persuade them to back off a little and be a bit more reasonable.

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