Chapter 13Credit(a)Face-to-face contact– the rules are contained in the
Consumer Credit (Disclosure of Information) Regula-
tions 2004 (SI 2004/1481) which came into force on
31 May 2005. Debtors or hirers must be provided with
specified information before the regulated agreement is
concluded. The information, which is the same infor-
mation as required for the agreement itself (see below),
must be legible and of equal prominence and contained
in a document headed ‘Pre-contract information’. The
information must be made available and accessible to
the debtor or hirer, so that it can be taken away. If the
requirements are not observed, the agreement can only
be enforced with a court order.
(b)Contact at a distance– the relevant rules are contained
in the Financial Services (Distance Marketing) Regula-
tions 2004 (SI 2004/2095) which came into force on
31 October 2004. The rules apply to credit and other
agreements for financial services which are concluded at
a distance. The requirements are similar to those set out
in (a) above. The information must be provided in a clear
and comprehensible manner, and on paper or other
durable medium which is available and accessible to the
consumer. Breaches of some aspects of the regulations
are criminal offences. Enforcement authorities, which
include the OFT, local trading standards departments
and the FSA, can apply to the courts for an injunction.
2 The agreement (s 61).The agreement must:
(a) be readily legible;
(b) contain all the terms of the agreement (other than
implied terms);
(c) comply with the regulations as to its form and
content;
(d) in the case of a cancellable agreement, contain
details of debtor’s right to cancel;
(e) be signed personally by the debtor and by or on
behalf of the creditor.
3 Copies (ss 62 and 63).The debtor must receive either
one or two copies of the agreement depending on the
circumstances. He must always receive a copy at the
time of signing. However, the agreement is not normally
completed at this time as it is usually sent away for
acceptance by the creditor or owner. If this is the case,
the debtor must receive a second copy within seven days
of the agreement being concluded. If it is a cancellable
agreement, the second copy must be sent by post.
Failure to comply with the requirements as to formal-
ities renders the agreement improperly executed. This
means that it can be enforced against the debtor only by
order of a court (s 127).393
Wilsonv First County Trust Ltd(2003)W borrowed £5,000 from First County Trust (FCT) by
pawning her car. She was charged a £250 ‘document fee’,
which, because she was unable or unwilling to pay it
immediately, was added to her loan. W and FCT entered
into an agreement which stated the amount of the loan
and the fee, i.e. £5,250. W later brought proceedings
against FCT under s 127 of the Consumer Credit Act,
arguing that the agreement was unenforceable because
it did not correctly state the amount of the loan. The judge
at first instance rejected W’s claim, holding that the fee
was part of the credit and therefore the agreement con-
tained the prescribed terms including the amount of the
credit. The Court of Appeal overturned this decision,
finding that the ‘document fee’ was not credit and, as a
result, one of the prescribed terms was incorrect render-
ing the agreement unenforceable. The House of Lords
upheld the Appeal Court’s decision on this point. W was
entitled to keep her car, the amount she had been lent
and was relieved of paying interest on the loan.
Comment. The Court of Appeal declared that s 127 of
the Consumer Credit Act 1974 was incompatible with
Art 6 of the European Convention on Human Rights
because the section excludes all judicial remedies and
disproportionately affects the rights of the lender. The
House of Lords did not uphold the declaration of incom-
patibility. The human rights aspect of this case is dis-
cussed in Chapter 3.Cancellation
Sections 67–74 provide a limited right for debtors or
hirers to change their mind and withdraw from an agree-
ment they have signed. This cooling-off period applies
to regulated agreements signed off trade premises where
there has been some personal contact between the debtor
or hirer and the salesman.
The debtor or hirer may serve notice of cancellation
at any time between signing the agreement and five clear
days after receiving the second copy of the agreement.
If this right is exercised, the parties are returned to the
position they were in before the agreement was signed.
Any money received must be repaid, and if the debtor or
hirer has acquired goods, they must be made available
for return.