Consumer Credit Act

The Consumer Credit Act (1974) empowers consumers and protects credit card purchases. Find out more about the Act and how it can help you.

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The Consumer Credit Act has been on the statute book since 1974, but many people remain ignorant of its existence.

Even if you don't know it, at one point or another you've probably used the Consumer Credit Act - it's one of the most important pieces of legislation for consumers ever enacted.

The Act requires most businesses that lend money to consumers or offer goods or services on credit or engage in certain ancillary credit activities to be licensed by the Financial Conduct Authority (FCA).Credit cards

Cancelling credit agreements off trade premises

Under the Consumer Credit Act, if you sign a credit agreement off trade premises, you have the right to cancel the agreement within a cooling off period of five days.

This part of the Act is designed to give consumers power when they make a deal that is perhaps rash or not thought through. Think temporary marketing stands in your local shopping centre trying to sell you broadband or TV contracts.

Under the Act, your cancellation rights must be included in the credit agreement and sent to you within seven days. You then have five days to cancel.

Right to withdraw from a credit agreement

Whether over the phone or online, you can find yourself agreeing to something that you know needs more research and thought

The Consumer Credit Act actually allows you to withdraw from a credit agreement within 14 days.

This period starts when the agreement is concluded or when you receive a copy of the agreement.

There are some agreements that can't be cancelled, for example where the amount of credit exceeds £60,260 and for agreements secured on land.

When it comes to credit cards, the 14-day cooling off period starts when you are told your credit limit.

Credit agreements at a distance

Credit agreements at a distance are the easiest (and quickest) to enter into. Whether over the phone or online, you can find yourself agreeing to something that you know needs more research and thought.

Fortunately, certain information has to be provided in 'good time' before you are bound by the contract. This information can include:How to make your credit card work harder for you

  • Name and address of the creditor
  • Description of the main characteristics of the credit agreement
  • Total price payable for the credit
  • Arrangements for payment
  • Information regarding a right of withdrawal

Protecting purchases

Section 75 of the Consumer Credit Act protects you when you buy a product on a credit card.

The Consumer Credit Act gives you the right to obtain a copy of your credit file for £2 if you think it might contain false information

So if you buy something faulty, credit card companies and retailers take joint responsibility and, if the retailer doesn't pay you the money back, the credit card company will.

This is why so many people choose to book holidays and other large purchases on a credit card - you've got peace of mind if anything happens to your holiday provider or airline.

Purchases between £100 and £30,000 are guaranteed, so bear that in mind if you're purchasing something bought for less than £100 from a questionable website.

Depending on the circumstances, though, Section 75(A) could cover you on product costs over £30,000. The item or price of service must be £30,000 and the amount of credit can't be more than £60,260.

If something goes wrong and the seller offers you a replacement or compensation you can't claim.

Section 75 doesn't cover payments made to a party that isn't the company providing the service or product.

In these cases, the credit card company usually says it didn't have a direct relationship with the supplier, so isn't equally liable.

Examples of this are PayPal, travel agents or group buying sites like Groupon and LivingSocial.

Remember that Section 75 doesn't apply to purchases made on a debit card. If you have paid this way, you may be entitled to compensation through a system known as chargeback - speak to your card provider about this.

Keep your credit file clean

When you apply for a loan or credit card the provider may apply to a credit reference agency to check your credit history and perhaps your recent address.

The contents of credit files held about you impact on your ability to obtain credit, and the Consumer Credit Act gives you the right to obtain a copy of your credit file for £2 if you think it might contain false information.How to improve a credit score

Any credit agency is bound by the Act to provide this. You can then ask for your credit file to be amended under the Act.

Honest advertisers

The Act ensures that all credit adverts adhere to a strict set of criteria before they're aired to the public. Advertising regulations apply to unsecured credit including loans, hire-purchase and credit cards.

If an interest rate is included on an advert then a representative APR must be shown. At least 51% of potential borrowers must be expected to get the advertised APR or better.

By Emily Bater