Making an application to validate agreements under sections 40(2), 148(2) or 149(2) of the Consumer Credit Act 1974('CCA')

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What is validation?

Regulated agreements made by a consumer credit or hire business whilst unlicensed cannot be enforced by the courts. Similarly, agreements for the services of a person carrying on ancillary credit business are unenforceable against the parties, including the debtor or the lender, if they were made while the ancillary credit business was unlicensed.

A validation order granted by the OFT makes these agreements enforceable by treating them as if they were made when the credit/hire business or ancillary credit business was licensed. This would allow the business to take steps to recover any fees owed, including court action.

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Who can apply?

You can apply by filling in the form below if you want to validate agreements that were entered into with consumers where you were the:

• unlicensed consumer credit or hire business (covered by s40(2) of the CCA) or
  
  
• unlicensed provider of an ancillary credit business (covered by s148(2) of the CCA- for example an unlicensed credit broker) or
  
  
• licensed consumer credit or hire business that has made agreements with consumers who were introduced by an unlicensed credit broker (covered by s149(2) of the CCA [see note 1]).

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How much does it cost?

Fees

The fees charged for a validation application depend on the number of agreements that you want to validate.

Number of agreements	Fee
Up to 20	£500
From 21 to 100	£1000
From 101 to 200	£1200
From 201 to 300	£1500

 

 

 

If you have more than 300 agreements to validate, we charge the above fee plus £250 per additional block (of up to 100 agreements) to a maximum of £20,000.

Here are a couple of worked examples:

Example 1
You have 750 agreements to validate.

Your total fee will be £2750, covering:
£1500 for 300
£250 for next hundred agreements up to 400
£250 for next hundred agreements up to 500
£250 for next hundred agreements up to 600
£250 for next hundred agreements up to 700
£250 for next 50 agreements, making the total 750

Example 2
You have 1500 agreements to validate.

Your total fee will be £4500, covering:
£1500 for 300
£250 for next hundred agreements up to 400
£250 for next hundred agreements up to 500
£250 for next hundred agreements up to 600
£250 for next hundred agreements up to 700
£250 for next hundred agreements up to 800
£250 for next hundred agreements up to 900
£250 for next hundred agreements up to 1000
£250 for next hundred agreements up to 1100
£250 for next hundred agreements up to 1200
£250 for next hundred agreements up to 1300
£250 for next hundred agreements up to 1400
£250 for next hundred agreements up to 1500

Please note that the validation application fee is charged to cover the administration costs of considering and processing the application, whether this results in a validation order or a refusal. Therefore, even if you decide to withdraw your application, you are unlikely to be considered eligible for a refund.

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Do I need to apply for validation?

Before completing the form, check whether you actually need to apply for a validation order. For example, a validation order is not required to validate an agreement resulting from an introduction to a licensed credit broker by an unlicensed broker, although the latter could be prosecuted for unlicensed trading.

A validation order will however be required if you entered into a credit or hire agreement or carried on an ancillary business when you did not hold a Consumer Credit Licence covering the relevant category of business (please see our booklet Do you need a credit licence? (pdf 205 kb)).

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What sort of agreements can be validated?

You should only apply for a validation order to cover agreements that are regulated under the Consumer Credit ACt 1974.

For example, you will need to ensure that the agreements:

• Were entered into with an individual for the purposes of the CCA (this includes those entered with consumers or sole traders and small partnerships. It does not include agreements entered into with limited companies, public companies or limited liability partnerships.
  
  
• Were for less than £25,000 (if made before 6 April 2008).
  
  
• Are regulated credit or hire agreements (unless they are for the sole purposes of an ancillary credit business). Some types of agreement that are not regulated include:
  
  - first charge mortgages
  - debtor-creditor-supplier agreements for fixed-sum credit, where the debtor is required to repay the credit in four payments or less within the year
  - low cost credit (certain types of non-commercial agreements made at rates below a given limit that are not offered to the general public)
  - some insurance policies (against loss or damage to buildings and contents, mortgage protection or indemnity insurance)
  - hire agreements that last for less than three months and/or that require hire payments exceeding £25,000* (*where made before 6 April 2008)

For more information, please see the Exempt Agreements page.

In addition, you will need to ensure that the agreements included in your application have not expired (if they are effectively concluded or otherwise paid up, there is nothing left to enforce, therefore nothing left to validate).

Think carefully about submitting your application and seek legal advice to ensure your agreements are eligible for validation.

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How can I apply for validation of my agreements?

Please complete and return this application form.

Notes

1. An order under section 148(2) may allow the broker to obtain payments due from (1) the consumer (2) the lender

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