Credit and hire agreements

The Consumer Credit Act requires certain credit and hire agreements to be contained in writing, set out in a particular way and to contain certain information.

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Agreements

The Consumer Credit Act 1974 lays down rules about how consumer credit agreements and consumer hire agreements must be documented. There are also rules about how and when copies must be given to the borrower or hirer.

The detailed rules on the documentation of agreements are set out in the Consumer Credit (Agreements) Regulations 1983, as amended in 2004 (the Regulations).

The 2004 regulations and further amendments can be found on the Office of Public Sector Information website.

In addition, there are rules about the information to be given to borrowers before entering into a regulated agreement - see pre-contract information - and during the lifetime of the agreement - see post-contract information.

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The Consumer Credit (Agreements) Regulations

The Regulations apply to all regulated consumer credit agreements and consumer hire agreements, including modifying agreements.

In particular, the agreement must contain certain financial and other information. This must be set out in a specified order, with sub-headings, and shown together as a whole. The information must be of equal prominence, and easily legible.

In the case of credit agreements, the required information is:

• nature of the agreement
• parties to the agreement
• key financial information (including the amount of credit or the credit limit, the duration of the agreement, the APR, the total amount payable, and the amounts and timing of repayments)
• other financial information (including a description and cash price of goods or services, any advance payments, the total charge for credit, the rate of interest, how and when interest charges are calculated and applied, the order of allocation of payments, and variable rates and charges)
• key Information (including default or other charges, any security provided by the borrower, and prescribed statements of the protection and remedies available to the borrower), and
• a signature box, and other form of consent where applicable.

Both the borrower and the lender must sign the agreement. A copy of the executed agreement must be given to the borrower, either when he signs it or within seven days. A further copy of the unexecuted agreement may also need to be provided. If the agreement is cancellable (because it was signed off trade premises), notice of cancellation rights must be included in the copy agreement, and must also generally be sent by post or email to the borrower within seven days.

If the above requirements are not met, the lender can only enforce the agreement against the borrower by getting a court order. Local authority trading standards services or the OFT can take enforcement action against the lender, using powers in Part 8 of the Enterprise Act 2002.

The Department for Business, Enterprise and Regulatory Reform (BERR) has issued guidance on the 2004 Regulations. Download the BERR guidance (pdf 64 kb).

If there are queries regarding interpretation of the Regulations these may be addressed to credit.guidance@oft.gsi.gov.uk. Consumer enquiries should be addressed to enquiries@oft.gsi.gov.uk.

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OFT Directions

Where it is impracticable for a person carrying on a regulated consumer credit or consumer hire business to comply with particular requirements of the Agreements Regulations, they may apply to the OFT for a Direction under Section 60(3) of the Act to waive or vary the requirements. The applicant must satisfy the OFT that it is impracticable to comply and that granting the Direction would not prejudice the interests of debtors or hirers.  The Direction may be made subject to conditions.

To apply for a Direction, download and complete forms CCD 30/83 and 31/83 (Word doc 113 kb).

In addition, a person carrying on a regulated consumer hire business can apply to the OFT for a Direction under Section 101(8) of the Act to vary the right to terminate a hire agreement, provided that this would be in the interests of hirers.
 
To apply for a Direction, download and complete forms CCD34/83 (Word doc 85 kb) and CCD35/83 (Word doc 101 kb).

You may wish to supply additional information (pdf 50 kb) in support of your application.

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