The Consumer Credit Act 1974 regulates consumer credit and consumer hire agreements for amounts up to £25,000. Its protections apply to agreements between traders and individuals, sole traders, partnerships and unincorporated associations, but not agreements made between traders and corporate bodies such as limited companies.

The Act lays down rules covering:

• the form and content of agreements;
• credit advertising;
• the method of calculating the Annual Percentage Rate (APR) of the Total Charge for Credit;
• the procedures to be adopted in the event of default, termination, or early settlement;
• extortionate credit bargains.

The Act also requires that all traders who make regulated agreements obtain licences from the Office of Fair Trading. Credit brokers, debt advisors and others, may also require licences. 

Appeals can be made against decisions of the Office of Fair Trading (OFT) that a person is not fit to hold a consumer credit licence. Appeals under the Consumer Credit Act

Local trading standards departments and the Office of Fair Trading enforce the Act. The Office of Fair Trading also produces a series of booklets about the Act and its regulations. For further information contact local trading standards departments or the Office of Fair Trading.

The DTI published a Consumer Credit White Paper in December 2003 as part of an on-going review of the Act aimed at improving consumer credit regulation.

We use this page to post news about the review. Click here if you would like to be kept informed of changes to this page.

Credit Card Cheques

Consumer Credit Statutory Instruments (SIs)

The following statutory instruments implement the commitment made in the 2003 Consumer Credit White Paper to enable and facilitate the use of electronic communications for concluding and administering consumer credit agreements. They come into effect on 31st December 2004.

The Consumer Credit Act 1974 (Electronic Communications) Order 2004
The Consumer Credit (Enforcement, Default and Termination Notices) (Amendment) Regulations 2004
Regulatory Impact Assessment on provisions to enable electronic credit agreements
Guidance on provisions to enable electronic credit agreements

Consumer Credit (Miscellaneous Amendments) Regulations 2004 - laid on 8 October, this amending SI takes account of new regulations on distance marketing made in August 2004, and makes some technical corrections in three June 2004 consumer credit SIs.
Consumer Credit (Advertisements) Regulations 2004
Consumer Credit (Agreements) (Amendment) Regulations 2004
Consumer Credit (Disclosure of Information) Regulations 2004
Consumer Credit (Early Settlement) Regulations 2004

Consumer Credit SIs - Guidance

Guidance on Agreements and Disclosure of Information Regulations (Amended 20 Oct. 2004)
Guidance on Early Settlement Regulations (Amended 16 May 2005)

Consumer Credit SIs - Regulatory Impact Assessments (RIA)

Advertisements
Agreements & Disclosure of Information
Early Settlement

OFT FAQs

White Paper - "Fair, Clear and Competitive - The Consumer Credit Market in the 21st Century".

The White Paper (published December 8 2003) sets out the policies that the Government intends to pursue including measures to:

• strengthen the rules governing credit licences, putting debt management companies and rogue moneylenders under closer scrutiny;

• give the Office of Fair Trading the power to fine moneylenders and conduct surprise raids on debt companies;

• moneylenders will have to provide standard information when advertising financial products so consumers can compare like-for-like and find the best deal. Small print will have to be enlarged;

• set out fairer rules for people who pay back loans early. Around 70 per cent of all personal loans are settled early but often under the weight of heavy charges.

White paper (148 pages - 2.6 Mb) For the related consultation see below.

Distance Marketing of Consumer Financial Services Directive

The Treasury have published the Financial Services (Distance Marketing) Regulations 2004 which implement the Distance Marketing of Consumer Financial Services Directive. The DTI have issued initial guidance on the Regulations.

Financial Services (Distance Marketing) Regulations 2004.
Initial guidance by DTI on the Regulations (amended October 2004).

Consultation on Voluntary Termination of Hire Purchase and Conditional Sale Agreements Under the Consumer Credit Act 1974

Responses to consultation

Research Report on Interest Rate Ceilings

Research by Policis for DTI was published on 26 August. Policis examined the effects of interest rate ceilings in France, Germany and USA.

Research Report (49 pages)
Associated DTI Press Notice

White Paper Consultation (closed). Consultation on the draft regulations detailing the changes proposed for consumer credit advertising, the form and content of credit agreements, the early settlement of credit agreements and facilitating the conclusion of credit agreements over the internet. Published 8 December 2003.

White Paper Consultation (116 pages)

Responses to consultation

Research Report

Forms used by MORI in their research.

Consultation on the provision of Alternative Dispute Resolution (ADR) for disputes arising under the Consumer Credit Act 1974. The consultation paper set out the options for alternatives to the courts in resolving consumer credit disputes. Published 17 December 2003. Consultation closed March 2004.

ADR Consultation Paper.
Regulatory Impact Assessment.

Summary of responses. This document summarises the responses we received and sets out our policy decisions on the areas covered by the consultation.

Publication of Consumer Credit Awareness Poll. The findings of a MORI poll, commissioned by the DTI, where more than 1,000 consumers reveal their attitudes and use of consumer credit, ahead of the publication of the Government's consumer credit White Paper. Published 05 December 2003
Poll results (25 pages)
Associated tables (48 pages)

For earlier consultations, responses and reports please visit the Consumer Credit Review archive page.

The Consumer Credit Act implements the European Directive on Consumer Credit.

The 1987 Directive on consumer credit established the Community framework for consumer credit with a view to promoting the setting–up of a common market for credit and establishing minimum Community rules to protect consumers. Following a review of the legislation, the Commission concluded that the Directive no longer reflected the current situation on the consumer credit market and was in need of revision.

â Directive timeline

11 September 2002. The European Commission published a proposal for a new Directive on consumer Credit to update and expand the EU wide rules on consumer credit to take on board modern forms of consumer credit and to facilitate the internal market in this sector.  

Commission Press Release.
Proposal for a Directive of the European Parliament and of The Council on the harmonisation of the laws, regulations and administrative provisions of the Member States concerning credit for consumers.

20 April 2004. The European Parliament adopted its first reading position on the Consumer Credit Directive.  The European Parliament has substantially redrafted the Directive, in particular they have altered the scope of the Directive and the level of harmonisation. Whereas the Commission had proposed total harmonisation, the European Parliament prefers ‘optimum harmonisation’ which in effect means that Member State would retain the right to go further than the standards laid down in the Directive. However, the rules on APR would be subject to full harmonisation in order to facilitate the internal market.

European Parliament legislative resolution.

29 October 2004 - The European Commission adopted an amended proposal for a Directive. The amended proposal contains the European Commission's comments on the amendments adopted by the European Parliament in April 2004.

Amended proposal by the Commission.

Taking account of the amended proposal, the Presidency will now draft a text for discussion in the Council Working Group.

We would welcome any comments on the proposal. We are in consultation with consumer and industry organisations and would encourage members of such organisations to feed into the consultation process through their representatives.

25 February 2005  - Consultation on a proposed European Consumer Credit Directive.

The Commission adopted an amended proposal on 28 October 2004, which we consulted about in the Spring of 2005

Consultation document (137 pages).

10 June 2005  - Responses to above Consultation.

Summary of Responses (49 pages).

If you would like to be kept up-to-date about negotiations on the EC Consumer Credit Directive please inform us by responding to: hugh.rawson@dti.gsi.gov.uk

Note: Material on Over-indebtedness has been moved to its own page. 

Contact

The Department cannot give advice on general consumer complaints and enquiries. These should be taken to local Citizens Advice, local Trading Standards Departments or the Office of Fair Trading.

Consumer Credit Bill