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Early settlement

Under the Consumer Credit Act 1974 the borrower can settle a regulated consumer credit agreement early by giving notice to the lender and paying the amount due less a rebate. The borrower is also entitled to information about the amount needed to settle.

This has been extended from 1 February 2011 to provide a new right of partial early repayment. There are also new rules on withdrawal from and termination of a credit agreement.

The changes arise from implementation of the Consumer Credit Directive (CCD), and are contained in the Consumer Credit (EU Directive) Regulations 2010.

You can also see the Consumer Credit (Early Settlement) Regulations 2004, prior to the CCD amendments.

A summary of the CCD changes is in the BIS guidance on the implementing regulations (pdf).

The new provisions on early repayment are summarised in chapter 14 of the BIS guidance, and Appendix A includes worked examples for the rebate calculation and partial early settlement.

Chapter 11 of the BIS guidance deals with the new right of withdrawal from a credit agreement, within 14 days, and chapter 15 with termination of open-end agreements (that is, those of no fixed duration).

Back to: Consumer Credit Act

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