Exempt Agreements under the Consumer Credit Act: What You Need to Know
The Consumer Credit Act, introduced in 1974, aims to protect consumers who borrow money from lenders. It sets out rules and regulations that govern how lenders can provide credit and how borrowers should be treated. However, not all credit agreements fall under the act’s jurisdiction. Some types of agreements are exempt from the Act’s provisions, and it is essential to understand what these agreements are and what they mean for borrowers.
What are Exempt Agreements?
Exempt Agreements are lending agreements that are not covered by the Consumer Credit Act. They are not subject to the act’s regulations and rules, and as such, lenders offering these types of agreements do not need to be licensed by the Financial Conduct Authority (FCA). Exempt agreements can include:
1. Business Credit Agreements
Business loans are not covered by the Consumer Credit Act. If you borrow money for business purposes, the lender is not required to be licensed by the FCA, and you will not be protected under the act.
2. High-Value Loans
If you borrow more than £60,260, the loan is not covered by the Consumer Credit Act. These loans are considered to be high value, and lenders are not required to comply with the act’s regulations and rules.
3. Hire Purchase Agreements for Commercial Vehicles
Hire purchase agreements for commercial vehicles, such as vans and lorries, are exempt from the act’s regulations. These agreements are considered to be business loans and are not covered by the act.
4. Hire Purchase Agreements for Land and Buildings
Hire purchase agreements for land and buildings are not covered by the Consumer Credit Act. These agreements are considered to be mortgages, and as such, they are regulated by the Financial Conduct Authority.
5. Credit Agreements with Family and Friends
If you borrow money from family or friends, the loan is exempt from the Consumer Credit Act. These agreements are considered to be informal agreements, and as such, they are not subject to the act’s regulations and rules.
What Do Exempt Agreements Mean for Borrowers?
If you borrow money under an exempt agreement, you will not be protected by the Consumer Credit Act. This means that you will not have the same rights and protections as borrowers who borrow money under a regulated agreement. You will not be able to complain to the Financial Ombudsman Service if you have a dispute with the lender, and you will not be able to take the lender to court for breaching the act’s regulations.
If you are borrowing money under an exempt agreement, it is essential to read the terms and conditions carefully. Make sure you understand the interest rate, fees, and charges, as well as any penalties for late payment. You should also consider seeking legal or financial advice before signing the agreement.
Conclusion
Exempt agreements under the Consumer Credit Act can be confusing, and it is important to understand which agreements are covered by the act and which are exempt. If you are considering borrowing money, make sure you understand the terms and conditions of the agreement and seek advice if you are unsure. Remember, if the loan is exempt from the act’s regulations, you will not have the same rights and protections as other borrowers, so it is essential to exercise caution when borrowing money under an exempt agreement.