426 Chapter 16Credit transactions and intellectual property rights
If there are two or more debtors or hirers then a statement of high net worth must be made
in relation to each of them.Example
The following example illustrates how s. 16A might apply. John, who has retired early in May
2011, owns a house worth £2 million. John has little income until he claims his pension in
September 2012 when he reaches the age of 60. John wants to borrow £8,000 to live on. A
local business will lend John the money, at a favourable rate of interest, but does not want
the agreement to be regulated by the CCA 1974. So the business agrees to lend the money
if a high net worth exemption is made. John makes a declaration in the specified way that
he is giving up the protection and remedies afforded by the Act. A specified person (maybe
John’s accountant) makes a statement that John’s net assets were in the previous financial
year worth more than £500,000. The money is lent, probably secured against John’s house.
John will have to repay it on the terms agreed and will have no rights or remedies under the
Act, except those relating to unfair relationships between creditor and debtor.Section 16B makes a separate exemption in relation to business borrowing. It provides that
as regards agreements entered into on or after 6 April 2008 the Act does not regulate
n a consumer credit agreement by which the creditor provides the debtor with credit
exceeding £25,000; or
n a consumer hire agreement that requires the hirer to make payments exceeding
£25,000
if the agreement is entered into by the debtor or hirer wholly or predominantly for the
purposes of a business carried on, or intended to be carried on, by him.Formalities which must be complied with
If an agreement is a regulated agreement then certain formalities must be complied with
when the agreement is entered into. If these formalities are not complied with, the agree-
ment will be improperly executed and enforceable only by a court order.
The main requirement is that a document containing all the terms of the agreement must
be signed by both the debtor and the creditor. In addition, the debtor must be given a copy
of the agreement and written notice of the statutory right to cancel the agreement within a
specified period.Cancellation rights
A regulated agreement may be cancelled by the debtor or hirer if negotiations which took
place before the agreement was signed included oral (spoken) representations made in the
presence of the debtor or hirer. Negotiations will not be made in the presence of the debtor
or hirer if they are made entirely by telephone. There will be no cancellation rights if the
agreement is signed by the debtor or hirer at the business premises of either the creditor or
hirer. It is where the debtor signed, rather than where the negotiations took place, that is
important here.
If a debtor or hirer wishes to cancel a cancellable agreement, he must serve notice of
cancellation within a time period which cannot be longer than 12 days from the time when
the agreement was made.