Consumer Credit

Changes to Consumer Credit licensing, advertising and agreements

Date: April 2008

Licensing

The Office of Fair Trading (OFT) has introduced new forms for businesses to submit applications for consumer credit licences, apply to vary an existing licence or notify the OFT of changes to a licensee. Separate, shorter forms are now available for use by sole traders.

Applications for a new licence, or renewal of an existing licence, can be made online, or the forms can be downloaded as pdf files from the OFT website: http://www.oft.gov.uk/advice_and_resources/resource_base/credit-licence/forms

Information on fees, which must accompany the application, can be found at: http://www.oft.gov.uk/advice_and_resources/resource_base/credit-licence/fees

A guidance leaflet "Do You Need a Credit Licence?" can be downloaded from: http://www.oft.gov.uk/shared_oft/business_leaflets/credit_licences/oft147.pdf

Credit Advertising

Advertising of consumer credit and hire is regulated by the Consumer Credit (Advertisements) Regulations 2004, which can be found on the OPSI website:

http://www.opsi.gov.uk/si/si2004/20041484.htm

Minor amendments have been made to the Regulations by http://www.opsi.gov.uk/si/si2004/uksi_20042619_en.pdf and http://www.opsi.gov.uk/si/si2007/pdf/uksi_20070827_en.pdf

Other Guidance

The OFT has produced guidance on current credit issues, including advertising, credit and hire agreements, early settlement, which can be accessed from:

http://www.oft.gov.uk/advice_and_resources/resource_base/legal/cca/guidance

Businesses based in Aberdeen City can obtain further guidance from the Trading Standards Service on 523737

Credit - ten key questions

Get the answers to these questions before you sign:

How much will the credit cost you compared with other similar deals?
Compare the APRs. Usually the lower it is, the less you pay. But there may be other charges not included in the the APR, so find out what these are. You need to be sure how much you are paying in total.

Is your home being used as security?
If your home is used as security for a loan and you don't keep up repayments, you could lose it.

Is it the best deal and interest rate you can get?
Buying credit is like buying anything else – you shop around for the goods so do the same for the credit. The credit offered to you when you buy may not be
the best deal.

Do you fully understand the credit agreement form you're about to sign?
Don't be pressured into signing a deal at the till – if you don't understand it, take it away and get advice. Remember you can't change your mind if you sign in the shop.

Will the interest rate stay the same?
Ask if the interest rate is fixed or will change. Find out if the rate offered is an introductory rate.

Are there extra charges if you repay the debt early?
Some lenders charge an extra fee if you pay a loan off early.

What happens if you miss a payment?
There are often penalty fees if you miss a payment which can greatly increase how much you will have to pay back.

What do you have to pay each month and for how long?
It's important to look at how long you'll pay back as well as how much. For example Ł20 each month may be affordable but if it's for 10 years you're paying back a lot more than if it's for two years.

What's the total amount that you will pay back?
The longer the period of the loan the more you'll pay back. That's why it's important to pay off as much as you can each month on a credit card – the longer you take to pay back the more it will cost you.

Can you take the credit agreement away to consider at your leisure?
A credit agreement is a legal document – you need to read it carefully before you sign, but you should be given a “Pre-Contract Information” document before signing the agreement. You can take that away to compare with other offers.

What does APR mean?
The APR (annual percentage rate) is the easiest way to compare similar credit products. Usually the lower the APR is, the less you pay. The APR is based on the interest rate and certain charges. But there may be other charges not included in the APR - so find out what these are before you sign.

Aberdeen City Council, Trading Standards Service,
St. Nicholas House, Broad Street, Aberdeen, AB10 1BX
Telephone: (01224) 523737 Fax: (01224) 645786
Web: http://www.tradingstandards.gov.uk/Aberdeen/
E-Mail: tradingstandards@aberdeencity.gov.uk