Consumer Credit
“We need to drive out irresponsible lending, not only to protect consumers, but also to ensure that credible businesses can operate with confidence…” such were the words of Lord Sainsbury when the Consumer Credit Act 2006 was passing through Parliament.
The 2006 Act is the Government’s response to credit problems from a social responsibility point of view. The new Act amends the Consumer Credit Act 1974, which is the statute governing the licensing of, and other controls on, traders concerned with the provision of credit or hire purchase to individuals.
The new Act came about partly because of the rise in consumer credit agreements in the United Kingdom. It comes as a shock to most that there are now more credit cards than people in this country. It appears that high levels of debt and default have occurred simply because the public didn’t understand the consequences of failing to make regular payments. This may be a surprise to those of us who gravely note with fear that “your home may be at risk if you fail to keep up payments” popping up on adverts, letters and even cash point screens!
The new Act is all about protecting the vulnerable consumer. The most controversial protection being the power given to the Court to intervene when it is of the view that the relationship between the creditor and debtor is unfair. The new Act envisages such a broad range of unfairness that it is considered by some to allow Judges an enormous discretion to find unfairness in any circumstance they do not like the look of.
The Judge’s power to consider unfairness comes about when creditors take consumers to Court to enforce payment. If the Judge decides that there is unfairness he then has the power to rewrite the credit agreement to make it fair. It seems that the Government wanted to give Judges the power to make fair those credit agreements which prior to the new Act would have been created by over zealous or aggressive creditors or creditors who have little or no regard to the consumers ability to repay. To sum up, the Court now has the power to protect these consumers by changing the terms of the credit agreements they have entered into.
