The Consumer Credit Bill Has Been Abandoned
All credit agreements in the UK are currently being regulated by the Consumer Credit Act 1974, which was, at its time, the most developed European piece of legislation on consumer credit, but that was only the initial period of the industry, when three companies used to offer credit services and only one credit card was available in the market. The credit industry excessively developed in the late 70s and 80s, and the Act quickly was found in a need of a serious reform for its failure to adequately regulate the credit industry. Since the start of the 90s reports and requests were made by various bodies in the UK asking the government to review the Consumer Credit Act, but the government did not respond. A couple of years ago, the DTI carried a great research on the credit market and made a proposition to the government to amend the Consumer Credit Act. The government finally took in the proposition and made a Consumer Credit Bill that was moving between the House of Lords and House of Commons for review. The Consumer Credit Bill featured great enhancement to the current system for the regulation of consumer credit in terms of licensing creditors, advertising for consumer credit, and the provision on extortionate credit bargains.
The Bill was almost at its final stages and was expected to become law by the end of the year 2005. My personal most astonishing feature of the act was the development of the extortionate credit bargains. The original 1974 Act enabled the court to actually open agreements between consumers and creditors that featured what was called then ‘extortionate credit bargains’. These are agreements in which consumers were made to pay massive amounts of payment. Under any form of contract, the court would usually not intervene to help a person that had a bad bargain, people that get a ‘bad deal’ cannot go to court to avoid the contract, but in consumer credit agreements, the court was given the power to reopen any agreements that features ‘extortionate payments’, and if the court does find an agreement that features this extortionate payment, it can reschedule the installments to be paid by the consumer, it can reduce the overall amount to be paid by the consumer, it can alter the APR, it can even set the whole contract if it wishes to.
Anyway, under the 1974 Act the requirement of an agreement to be extortionate was actually very hard to satisfy, in the last 30 years only 10 cases were successful. This is partially due to the requirement of extortionate credit, and the fact that almost nobody complained as in the last 30 years only 30 cases were heard.
The new Bill changed the requirement of extortionate to ‘unfair’. The bargain would not have to extortionate any more, but would have to be only unfair. This is a much more lenient that involves the way the credit made the consumer get into the contract and the status of the surrounding market as well. This should in theory make it so much easier to consumer to reopen agreements that feature unfair terms and payments to be made to credit lenders.
The Bill also was meant to establish an alternative dispute resolution scheme, where consumers would not have to the court to question the validity of their credit bargains, but instead go to a free ombudsman scheme that would do it for them.
All the consumer groups and involved associations were greatly excited about this new Bill, we at the uni spent more than a couple of weeks just studying the new provisions of the Bill and I even wrote an essay on extortionate credit bargains, but unfortunately due to the recent elections the Parliament changed and the Bill has now been abandoned. The Consumer Credit Act of 1974 would still be the main regulatory statute for consumer credit and consumers would have to persuade the government once again to amend it.
This was a recent example of the dynamic nature of what we study at uni, we’ll be studying something one day and the next week they will tell us that it is not valid any more, at times a case would be tried at the House of Lords changing the main rule regarding some topic and obviously it would not be found in any book because it was tried very recently. All the students that are doing the module on Consumer Law were sent an email saying that the exam will presume that the Consumer Credit Bill 2005 would still be valid…
