Consumer credit and Loan agreement
Consumer credit There are very strict rules about lending and borrowing and most of them are laid down in the Consumer Credit Act. They're there to protect you! Most of the rules in the Act apply to credit agreements, whatever the type of credit, where the amount you borrow (the amount of credit) is $15,000 or less. So most credit deals you're likely to take on in the future will be covered.
The consumer credit act:
*requires lenders of money to have a licence e.g. banks, finance houses, moneylenders, estate agents who arrange mortgages and TV rental companies
* requires lenders to show the buyer the true cost of credit
* gives protection against unfair deals, and asks the Court to reduce 'extortionate' rates of interest
* enables people to claim compensation if the goods are faulty
* gives a 'cooling off' period if you make a credit agreement at home. You usually have seven days and the good can be kept as security until the lender has repaid you. You cannot cancel agreements for loans less than $30, or loans arranged by post or telephone.
* ensures that if you pay off a loan early you get a rebate
If goods are faulty:
* The dealer who sells a faulty good is liable to compensate you. The buyer is protected by the Sale of Goods Act.
* If you borrowed money to pay for the good you could also claim against the finance company, which lent you the money.
* With hire purchase goods the dealer sells the goods to a finance company, which then hires or sells them to you, so the finance company is both the supplier and the lender and is responsible if the goods are faulty.
Before you get as far as taking out a credit agreement, the Consumer credit act protects you by having rules about: -
Licensing: The Act says that nearly everyone in the business of lending money, introducing their customers to credit deals or even hiring goods out for long periods, must have a special licence. These licences can only be granted by the Office of Fair Trading in London and then only if the Director General of Fair Trading is satisfied that the person or firm applying for one deserves it.
Advertising: Advertising can be very persuasive. Phrases like: - 'No Deposit' and "This could be yours for only $5 per month" can be very tempting. So it's a rule that anyone advertising credit must tell you the truth about the deal they're offering you. There is a specific warning statement that must be included if the loan is secured on your home. It should state "Warning. Your home may be at risk if you do not keep up the repayments due under this loan agreement". Look for it when comparing advertisements for cash loans and mortgages.
Another safeguard requires budget card advertisements to include a Total Amount Payable alongside the APR (if specified goods are shown). This information will help compare the full costs of various types of credit purchase.
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