The Consumer Credit (Early Settlement) Regulations 2004

Prospective

Explanatory Note

(This note is not part of the Regulations)

These Regulations entitle the debtor under a regulated consumer credit agreement to a rebate where all or part of the amount payable to the creditor is paid before the date on which it is due. The Regulations replace the Consumer Credit (Rebate on Early Settlement) Regulations 1983 (“the 1983 Regulations”), subject to a saving in respect of agreements entered into before the commencement date.

Regulations 4-6 differ from equivalent provisions in the 1983 Regulations. Regulation 4 incorporates an actuarial formula to be used in calculating the amount of the rebate, in place of different formulae provided for in the 1983 Regulations in relation to different cases. The Schedule contains examples which illustrate the application of the new formula. Regulation 5 determines the settlement date to be used in calculating the rebate. It differs from the corresponding provision of the 1983 Regulations in that the relevant date under that provision was generally determined by reference to the date of the next instalment due under the agreement. Regulation 6 provides for the settlement date to be deferred by a month (or, at the option of the creditor, 30 days) in the case of agreements for a term of more than a year. The 1983 Regulations provided for a deferment of two months in the case of an agreement for a term of up to five years, and a deferment of one month in the case of an agreement for a term of more than five years.

These Regulations also amend the Consumer Credit (Settlement Information) Regulations 1983, which relate to the right of a debtor to a statement indicating the amount payable in order to settle a debt under a regulated consumer credit agreement. The settlement date assumed for the purpose of calculating this amount in a case where the credit is repayable in instalments becomes the date 28 days after the debtor’s request for a statement is received (as in cases where repayment is not in instalments), rather than the date of the first instalment due after 28 days have elapsed. The period within which the creditor must respond to a request for a statement is reduced from 12 to 7 days. There is also a consequential amendment related to the coming into force of the new provisions for calculating the rebate due on early settlement.

A full regulatory impact assessment of the effect that this instrument will have on the costs to business is available from the Consumer and Competition Policy Directorate of the Department of Trade and Industry, 1 Victoria Street, London SW1H 0ET.