The Consumer Credit Act Explained

The Consumer Credit Act sets out how credit providers must behave towards consumers


Why paying with a credit card gives you valuable extra protection


Your right to pay less interest if you choose to pay off a loan early


Your Rights:


Buying on credit is something most of us do these days, even if we have the cash to pay for things we want.


The Consumer Credit Act is the main piece of legislation that governs how credit providers must treat consumers.


It contains important provisions, including your rights in relation to your credit files, and the extra protection you get when you pay for something with a credit card.


Section 75 covers items costing over £100 and up to £30,000, if at least a proportion has been paid on your credit card.


Extra shopping rights when you pay with a credit card:


If you buy something that's faulty, doesn't do what it is supposed to, or is not what you ordered, the seller will be in breach of contract and you could have the right to a refund, repair or replacement.


You have similar rights in relation to any goods supplied by the provider of a service or materials used during the provision of the service. This could include appliances supplied as part of a kitchen installation. The service provider can also be in breach of contract if the service element is not carried out properly, such as kitchen units being poorly fitted.


'Jointly and severally liable'


However, if you paid on credit card, the card company may be 'jointly and severally liable' under Section 75 of the Consumer Credit Act, which means it is equally responsible, along with the retailer or trader, for any breaches of contract or misrepresentations. This can be particularly useful if the company you bought from has gone bust or you can't contact them for another reason.


A credit provider is only liable for goods or services costing more than £100 but not more than £30,000.


However, a credit provider is liable under Section 75 even if you made only part of the payment, such as a deposit, on your credit card.


Section 75 applies only to credit cards and not to debit cards (such as Visa Delta) or charge cards (where all charges must be settled at the end of the month). However, you may be able to utilise protection available through Chargeback scheme.


Goods purchased overseas:


In a landmark ruling, the House of Lords has confirmed that Section 75 does apply to foreign transactions. In 2004 the High Court said the act didn't apply when people made purchases abroad. But that has since been overturned by the Court of Appeal.


The House of Lords confirmed the protection also applies if you buy goods for delivery to the UK from overseas by telephone, mail order or over the internet.


When the seller arranges finance for you:


Section 75 also applies if the trader has arranged credit for you to finance the goods or services you are buying from them. It won't apply though if you arrange the finance yourself, for example through a loan from your bank.


Your right to cancel a loan:


You have 14 days in which to change your mind and cancel a credit agreement. You will have to repay the amount borrowed along with any interest that’s accrued up to the point at which you cancel. There are some agreements that can't be cancelled e.g. where the amount of credit exceeds £60,260 and for agreements secured on land.


The 14 day cooling-off period runs from the day the agreement is concluded or if later, from when you receive a copy of the agreement or, notification of the credit limit on a credit card.


While the credit agreement can be cancelled the contract for the item or service itself won't be affected so if you used credit to finance the purchase of a car you would need to find some other way to pay for it unless you have some other right to cancel that main contract.


Your rights to your credit files:


When you apply for a loan or a credit card, the card company or credit provider may apply to a credit reference agency to check your credit history, and other details, for example, where you have lived in recent years. It will use this information when it decides whether to give you a card or a loan.


If you believe that you have been unfairly denied credit, you can ask the credit provider which credit reference agency or agencies they used.


You can then contact the agency or agencies to get a copy of your credit file, which they must provide for £2. There are three credit reference agencies: Equifax, Experian and CallCredit.


If you believe your file contains inaccurate or out-of-date information, you can ask for it to be amended, under the Consumer Credit (Credit Reference Agency) Regulations 2000.


Your right to pay less interest if you pay off a loan early:


If you decide to pay off all or part of a loan or other credit agreement earlier than the full term, you should not have to pay the full amount of interest in the agreement.


If you want to pay off some or all of a loan early, you should write to your credit provider and ask how much you must pay to clear the debt, or state how much you'd like to pay off.


If the credit provider hasn't answered your letter stating how much you will have to pay to clear some or all of the loan , or if you believe they may be trying to charge you too much, warn them that you will refer the matter to the Financial Ombudsman Service as you are being denied your right to settle the agreement early.


Protection for goods or services between £30,000 and £60,260
If the item or service you are buying costs more than £30,000 Section 75 wont apply. Depending on the circumstances, you may get the protection of Section 75A. The price of the item or service must be more than £30,000 and the amount of credit the seller has arranged for you mustn't be more than £60,260. The credit provider could be liable for a breach of contract as long as:


- You can't trace the seller
- You have contacted the seller but they have failed to respond
the seller has become insolvent
- You've taken reasonable steps to pursue the seller but you have not obtained satisfaction. This does not mean though that you must have taken the seller to court. If though the seller has offered you a replacement or compensation which you have accepted you can't claim under Section 75A.