11.The 1974 Act sets out a framework for the regulation of the supply of consumer credit and the hiring of goods in the United Kingdom and provides that a licence under the Act is necessary to carry on a consumer credit business, a consumer hire business and an ancillary credit business (for definitions of these terms, please see paragraph 14 below). The 1974 Act regulates the supply of credit and the hiring of goods throughout the United Kingdom to “individuals” (which includes natural persons, unincorporated associations and partnerships of any size) where the credit provided or payments for hire do not exceed a specified limit (currently £25,000).
12.The 1974 Act imposes a system of trading control through regulating the general business activities of those traders that constitute the consumer credit and hire industry and it does this by licensing (Part 3 of the 1974 Act) and controlling the methods of seeking business (Part 4 of the 1974 Act). Control over agreements is done through the regulation of individual consumer credit or consumer hire agreements, that is entry into agreements (Part 5 of the 1974 Act), matters arising during the currency of agreements (Part 6 of the 1974 Act) and default under and termination of agreements generally (Part 7 of the 1974 Act).
13.The 1974 Act also regulates the giving of security in relation to agreements regulated under the Act and pawn broking (Part 8) and the licensing of ancillary credit businesses (Part 10).
14.These explanatory notes use key terms defined in the 1974 Act, as set out below, as well as, for convenience, certain abbreviated terms (which are marked with an asterisk). Where the term is one used in the 1974 Act and the 2006 Act amends it, the definition below is that used in and for the purposes of the 1974 Act prior to such amendment.
1974 Act: Consumer Credit Act 1974. *
2006 Act: Consumer Credit Act 2006.*
ancillary credit business: any business so far as it comprises or relates to credit brokerage, debt-adjusting, debt counselling, debt collecting or the operation of a credit reference agency.
commencement: the date or dates on which a provision of the 2006 Act commences (whether for all or specific purposes) in accordance with an order made by the Secretary of State under Section 71. *
consumer credit agreement: an agreement between an individual (the “debtor”) and any other person (the “creditor”) by which the creditor provides the debtor with credit not exceeding £25,000.
consumer credit business: any business so far as it comprises or relates to the provision of credit under regulated consumer credit agreements.
consumer hire agreement: an agreement made by a person with an individual (the “hirer”) for the bailment or (in Scotland) the hiring of goods to the hirer, being an agreement which is not a hire-purchase agreement, is capable of subsisting for more than three months and does not require the hirer to make payments exceeding £25,000.
consumer hire business: any business so far as it comprises or relates to the bailment or (in Scotland) the hiring of goods under regulated consumer hire agreements.
exempt agreement: a consumer credit or hire agreement which is not a regulated agreement under the 1974 Act by virtue of an exemption by or under section 16 of the 1974 Act.
FOS: the Financial Ombudsman Service. *
FSA: the Financial Services Authority. *
FSMA: Financial Services and Markets Act 2000. *
fixed-sum credit: any facility under a credit agreement, other than running account credit, whereby the debtor is enabled to receive credit (whether in one amount or by instalments).
group licence: a licence, issued by OFT (whether on an application by a person or on OFT’s own motion), which during such period as OFT thinks fit or, if it thinks fit, indefinitely, covers such persons and activities as are described in the licence.
individual: includes a partnership or any other unincorporated body of persons not consisting entirely of bodies corporate.
licence: a licence issued by OFT under the 1974 Act to carry on a consumer credit business, a consumer hire business or an ancillary credit business.
OFT: the Office of Fair Trading.
regulated agreement: a consumer credit or consumer hire agreement regulated by the 1974 Act.
running-account credit: a facility under a credit agreement whereby the debtor is enabled to receive from time to time (whether in his own person, or by another person) from the creditor or a third party, cash, good and services (or any of them) to an amount or value such that, taking into account payments made by or to the credit of the debtor, the credit limit (if any) is not exceeded (e.g. a credit card).
standard licence: a licence issued by OFT to a person named in the licence on an application made by that person, which, during the period of the licence’s duration, covers such activities as are described in the licence.