Civil Litigation and Consumer Rights

Introduction to Consumer Credit

What is consumer credit?

Consumer credit is an agreement between an individual (the debtor) and any other person (the creditor) by which the creditor provides the debtor with credit of any amount which is regulated by the Consumer Credit Association (CCA).

  • ‘Credit’ includes a cash loan and any other form of financial accommodation. It is also assumed that the credit given is in Sterling.
  • There are two types of credit: Running Account Credit and fixed-sum credit.

Running Account Credit

Running account credit as the name suggests is a facility under a consumer credit agreement where the debtor can borrow money from a creditor on running bases or continuously and buys goods or services. An example of a running account credit would be an overdraft facility, credit card or similar system that allows customers to borrow up to a specified amount or re-borrow the sums which are previously repaid.

Fixed Sum Credit

  • Fixed sum credit is any facility other than a running account credit agreement where the debtor can borrow, obtain further credit either in one transaction or in instalments.

Restricted Use Credit

  • Restricted use credit is a credit agreement where the credit was given to be used for a specific purpose and the purpose has been agreed at the time of the contract. An example of this would be a career development loan, where the money has been given so that a person can further their career through education etc.

Unrestricted Use Credit

  • This is a credit agreement which is written in a way which allows the debtor to use the money in any way he chooses.
  • An example of this would be a bank overdraft. This is where one can use the overdraft as he/she sees fit up to the agreed limit.

Credit-token Agreement

A credit token can be a card, check, voucher, coupon, stamp, form, booklet or any other document or thing given to an individual by a person who is carrying on consumer credit transactions, and on the production of the tokens or check or coupon he will receive cash or goods.

Consumer Hire Agreements

A consumer hire agreement is an agreement made by a creditor with an individual (the hirer) for the bailment (the hirer gets possession of the goods but does not own them) of goods to the hirer.  An agreement would be a consumer hire agreement provided

  • the agreement is not a hire purchase agreement
  • is capable of subsisting for more than three months
  • and, the hirer is not a corporate body.

Small Agreements

A small agreement is a

  • the regulated consumer credit agreement for an amount that does not exceed £50 which is other than hire purchase or conditional sale agreement.
  • also, a consumer hire agreement which does not require the hirer to make payments that exceed £50.

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While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legallex does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.

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