Keenan and Riches’BUSINESS LAW

Chapter 13Credit

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1 What kinds of credit are likely to be used by:

(a)a typical family;

(b)a sole trader;

(c)a limited company?

2 What forms of credit would be available for the

following purchases:

(a)furniture;

(b)clothes;

(c)a car;

(d)a house?

What kinds of institutions would provide the credit?

3 What are the points of similarity between HP and

credit sale? What are the differences?

4 Using the terminology of the Consumer Credit Act

1974 contained in List A below, describe the credit

transactions in List B below.

List A:

(a)DCSA;

(b)DCA;

(c)restricted-use credit;

(d)unrestricted-use credit;

(e)fixed-sum credit;

(f )running-account credit;

(g)credit token agreement;

Consumer Credit Act

(i) regulated consumer hire agreement;

(j)small agreement;

(k)non-commercial agreement;

(l) exempt agreement.

List B:

(a)Arthur buys a suite of furniture from Matchstick

Furniture plc, paying 12 monthly instalments of

£50 each. Ownership of the furniture passes to

Arthur immediately.

(b)The Portland Bank plc allows Beryl to overdraw

her current account up to a limit of £1,000.

(c)Colin sees a new car that he wishes to buy in the

showrooms of Rattle Cars Co Ltd. The company

introduces him to Shady Finance Co Ltd, which

agrees to let Colin have the car on HP. Colin

pays a deposit of £1,500 and 24 monthly

instalments of £20 each.

(d)Doris uses her credit card (on which she has a

personal limit of £800) to buy a camera from

Snapshot Ltd.

(e)Evan has the Financial Timesdelivered to his

home every day. He pays the bill at the end of

each month.

Self-test questions/activities

European Consumer Credit Directive

In 2002 the European Commission published proposals

for revising the 1987 Consumer Credit Directive. The

UK government’s White Paper identifies the following

essential requirements of a revised directive to remove

barriers to a single market in consumer credit:

■cross-border exchange of data;

■common information requirements;

■common rules on calculation of the APR;

■licensing regime for lenders wishing to trade across

national borders;

■ADR systems to deal with cross-border disputes be-

tween lenders and consumers.

Agreement between the European Parliament and the

Council on a compromise text was reached in January

2008. The Consumer Credit Directive was adopted by
      the European Commission in May 2008. It must be
      implemented by member states by June 2010. BERR is
      planning to issue a consultation with draft regulations in
      April 2009.

Capital Finance Co Ltdv Bray(1964)

Bray had paid over a third of the HP price of a car when

he fell into arrears. A representative of the finance com-

pany took the car back without either Bray’s consent or

a court order. The company realised its mistake and

returned the car to Bray. When the repayments were still

not forthcoming, the company sued for possession of

the car. This was granted by the court, which further held

that Bray was entitled to recover everything that he had

previously paid to the finance company.