Properly executed agreements

Section 61(1) of the Consumer Credit Act 1974 defines what constitutes a properly executed agreement:

61 Signing of agreement.

(1) A regulated agreement is not properly executed unless—

(a) a document in the prescribed form itself containing all the prescribed terms and conforming to regulations under section 60(1) is signed in the prescribed manner both by the debtor or hirer and by or on behalf of the creditor or owner, and
(b) the document embodies all the terms of the agreement, other than implied terms, and
(c) the document is, when presented or sent to the debtor or hirer for signature, in such a state that all its terms are readily legible.

Prescribed terms

The agreement is not properly

executed unless it contains all the prescribed terms. See prescribed terms for reference.

The agreement should:

  • Be headed appropriately, i.e. “Credit Agreement regulated by the Consumer Credit Act 1974”;
  • Contain the name and address of both parties (debtor and creditor);
  • Set out the financial and related particulars of the agreement:
    • Description of goods, services, land etc.- applies to restricted use, fixed sum agreements;
    • Cash price – applies to restricted use, fixed sum agreements;
    • Amount of credit – applies to fixed sum agreements (i.e. loans);
    • Credit limit – applies to running account agreements (i.e. credit cards);
    • Total chargefor credit, rate of interest, etc. – applies to both fixed sum and running account agreements;
      • For fixed sum agreements, the total charge for credit
      • For both types – the rate of interest and the total amount of other charges
    • Total amount payable – applies to fixed sum agreements;
    • Timing of repayments – applies to both types of agreements;
    • Amounts of repayments – applies to both types of agreements, expressed as:
      • (a) a sum of money;
      • (b) a specified proportion of a specified amount (including the amount outstanding from time to time);
      • (c) a combination of (a) and (b) above; or
      • (d) in a case where the amount of any repayment cannot be expressed in accordance with (a), (b) or (c) above, a statement indicating the manner in which the amount will be determined.
      • APR
  • State your right to cancel the agreement within a certain period of time and details of when and how to do this;
  • Have a signature box with your signature and date*.

*For internet applications in or after January 2005, a tick box replaces the signature box. From January 2005, the creditor did not need to send a hard copy of the agreement to be signed by the debtor.

An online application made on or after January 2005 is likely to be enforceable since you would have agreed to the terms by ticking the box.

Form and content of agreements

Section 60 of the Act states that The Secretary of State shall make regulations as to the form and content of documents embodying regulated agreements:

60 Form and content of agreements.

(1) The Secretary of State shall make regulations as to the form and content of documents embodying regulated agreements, and the regulations shall contain such provisions as appear to him appropriate with a view to ensuring that the debtor or hirer is made aware of—

(a) the rights and duties conferred or imposed on him by the agreement,
(b) the amount and rate of the total charge for credit (in the case of a consumer credit agreement),
(c) the protection and remedies available to him under this Act, and
(d) any other matters which, in the opinion of the Secretary of State, it is desirable for him to know about in connection with the agreement.

(2) Regulations under subsection (1) may in particular—

(a) require specified information to be included in the prescribed manner in documents, and other specified material to be excluded;
(b) contain requirements to ensure that specified information is clearly brought to the attention of the debtor or hirer, and that one part of a document is not given insufficient or excessive prominence compared with another.

Regulations regarding form and content of agreements

The regulations regarding form and content of agreements are set out in the The Consumer Credit (Agreements) Regulations 1983:

SCHEDULE 1: INFORMATION TO BE CONTAINED IN DOCUMENTS EMBODYING REGULATED CONSUMER CREDIT AGREEMENTS OTHER THAN MODIFYING AGREEMENTS

Nature of the agreement

(1) A heading in one of the following forms of words shown prominently on the first page of the document:

(a) “Hire-Purchase Agreement regulated by the Consumer Credit Act 1974”;
(b) “Conditional Sale Agreement regulated by the Consumer Credit Act 1974”; or
(c) “Credit Agreement regulated by the Consumer Credit Act 1974”, as the case may require.

2) Where the document and a pawn-receipt are combined, the words “, and Pawn-Receipt,” shall be inserted in the heading after the word “Agreement”.

(3) Where the document embodies an agreement of which at least one part is a credit agreement not regulated by the Act, the word “partly” shall be inserted before “regulated” unless the regulated and unregulated parts of the agreement are clearly separate.

Parties to agreement

(1) The name and a postal address of the creditor.
(2) The name and a postal address of the debtor.

Financial particulars
  • Description of goods, services, land etc. – Applies to restricted-use debtor-creditor-supplier agreements for fixed-sum credit to finance a transaction comprising the acquisition of goods, services, land or other things specified in the agreement or identified and agreed on at the time the agreement is made:
    • A list or other description of the goods, services or other things
  • Cash price – Applies to restricted-use debtor-creditor-supplier agreements as above:
    • The cash price in relation to each list or other description of goods, services, land or other things, and the total cash price.
  • Advance payments – Applies wherever any advance payment is to be made by the debtor:
    • The amount of the advance payments to be made by the debtor and, in the case of a cancellable agreement, the nature of such payments.
  • Amount of credit – Applies to restricted-use debtor-creditor-supplier agreements:
    • The amount of the credit to be provided under the agreement, namely the difference between the total cash price and the total of any advance payments.
  • Credit limit – Applies to agreements for running-account credit (such as credit cards):
    • The credit limit expressed as:
    • (a) a sum of money;
    • (b) a statement that the credit limit will be determined by the creditor from time to time under the agreement and that notice of it will be given by him to the debtor;
    • (c) a sum of money together with a statement that the creditor may vary the credit limit to such sum as he may from time to time determine under the agreement and that notice of it will be given by him to the debtor; or
    • (d) in a case not falling within head (a), (b) or (c) above, either a statement indicating the manner in which the credit limit will be determined and that notice of it will be given by the creditor to the debtor or a statement indicating that there is no credit limit.
  • Total charge for credit, rate of interest, etc. – Applies to agreements for fixed-sum credit:
    • The total charge for credit (with or without a list of its constituent parts).
  • Total amount payable – Applies to agreements for fixed-sum credit:
    • The total amount payable
  • Timing of repayments – Applies to all types of agreements:
    • The timing of repayments to be made under the agreement expressed by reference to one or more of the following
    • (a) the dates on which each repayment is to be made;
    • (b) the frequency and number of the repayments and the date of the first repayment or a statement indicating the manner in which that date will be determined;
    • (c) a statement indicating the manner in which the dates of the repayments will be determined.
  • Amounts of repayments:
    • The amount of each repayment to be made under the agreement expressed as:
    • (a) a sum of money;
    • (b) a specified proportion of a specified amount (including the amount outstanding from time to time);
    • (c) a combination of heads (a) and (b) above; or
    • (d) in a case where the amount of any repayment cannot be expressed in accordance with head (a), (b) or (c) above, a statement indicating the manner in which the amount will be determined
  • APR – Applies to all types of agreements:
    • The APR in relation to the agreement or a statement indicating that the total amount payable under the agreement is not greater than the total cash price of the goods, services, land or other things, the acquisition of which is to be financed by credit under the agreement.
  • Variable rates or items – Applies to agreements under which the rate or amount of any item included in the total charge for credit will or may be varied (other than a variation in consequence of an event which is certain to occur):
    • A statement indicating that in calculating the APR no account has been taken of any variation which may occur under the agreement of the rate or amount of any item entering into that calculation.
    • A statement indicating the circumstances in which any variation referred to in paragraph 18 above may occur and, where that information is ascertainable at the time at which the document referred to in section 61(1) of the Act is presented or sent to the debtor for signature, the time at which any such variation may occur.
Improper execution

Section 65 of the Consumer Credit Act states that an improperly executed agreement can only be enforced by a court:

5 Consequences of improper execution.

(1) An improperly-executed regulated agreement is enforceable against the debtor or hirer on an order of the court only.

The Court’s powers to enforce an an improperly executed agreement are limited by Section 127 of the Act.

S.127(3) was repealed with effect from April 2007, meaning the court has discretion to enforce any agreements entered into AFTER that date.

127 Enforcement orders in cases of infringement

(1) In the case of an application for an enforcement order under—

(a) section 65(1) (improperly executed agreements), or
(b) section 105(7)(a) or (b) (improperly executed security instruments), or
(c) section 111(2) (failure to serve copy of notice on surety),
or
(d) section 124(1) or (2) (taking of negotiable instrument in contravention of section 123),

the court shall dismiss the application if, but (subject to subsections (3) and (4)) only if, it considers it just to do so having regard to—

(i) prejudice caused to any person by the contravention in question, and the degree of culpability for it; and
(ii) the powers conferred on the court by subsection (2) and sections 135 and 136.

(2) If it appears to the court just to do so, it may in an enforcement order reduce or discharge any sum payable by the debtor or hirer, or any surety, so as to compensate him for prejudice suffered as a result of the contravention in question.

(3) The court shall not make an enforcement order under section 65(1) if section 61(1)(a) (signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner).

(4) The court shall not make an enforcement order under section 65(1) in the case of a cancellable agreement if—

(a) a provision of section 62 or 63 was not complied with, and the creditor or owner did not give a copy of the executed agreement, and of any other document referred to in it, to the debtor or hirer before the commencement of the proceedings in which the order is sought, or
(b) section 64(1) was not complied with.

(5)Where an enforcement order is made in a case to which subsection (3) applies, the order may direct that the regulated agreement is to have effect as if it did not include a term omitted from the document signed by the debtor or hirer.

The prescribed terms for enforceability under s127(3) are given in Schedule 6 of the Consumer Credit (Agreements) Regulations 1983; and can be found here.

Provisions regarding disclosure of the APR

Schedule 7 of the Consumer Credit (Agreements) Regulations 1983 deals with the APR stated on the agreement:

SCHEDULE 7 – PROVISIONS RELATING TO DISCLOSURE OF THE APR

Permissible tolerances in disclosure of the APR

1. For the purposes of these Regulations, it shall be sufficient compliance with the requirement to show the APR if there is included in the document—

(a)a rate which exceeds the APR by not more than one; or

(b)a rate which falls short of the APR by not more than 0.1; or

(c)in a case to which any of paragraphs 2 to 5 below applies, a rate determined in accordance with the paragraph or such of them as apply to that case.

Tolerance where repayments are nearly equal

2. In the case of an agreement under which all repayments but one are equal and that one repayment does not differ from any other repayment by more whole pence than there are repayments, there may be included in the document a rate found under any of Regulations 7, 9 and 10 of the Total Charge for Credit Regulations as if that one repayment were equal to the other repayments.

Tolerance where interval between relevant date and first repayment is greater than interval between repayments

3. In the case of an agreement under which:—

(a)three or more repayments are to be made at equal intervals; and

(b)the interval between the relevant date and the first repayment is greater than the interval between the repayments,

there may be included in the document a rate found under any of Regulations 7, 9 and 10 of the Total Charge for Credit Regulations as if the interval between the relevant date and the first repayment were shortened so as to be equal to the interval between the repayments.

Tolerance where Consumer credit tables do not exactly apply

4. (1) In a case where, in relation to any agreement, the charge per pound lent, the flat rate or the period rate of charge, as the case may be, is not exactly represented by an entry in a table contained in the Consumer credit tables, there may be included in the document a rate found by applying the next greater entry appearing in those tables for the purposes of calculating that rate.

(2) In sub-paragraph (1) above “charge per pound lent”, “flat rate” and “period rate of charge” have the meanings assigned to them by the relevant Introduction or Instructions contained in the Consumer credit tables and “Consumer credit tables” means tables contained in Parts 1 to 15 of “Consumer credit tables” published in 1977 by Her Majesty’s Stationery Office as modified by Correction Slips so published in December 1978 (being tables calculated in accordance with the principles set out in the Total Charge for Credit Regulations).

Tolerance where period rate of charge is charged

5. In the case of an agreement to which Regulation 7(1) of the Total Charge for Credit Regulations (agreements under which a period rate of charge is charged) applies, there may be included in the document a rate, being the APR determined as if no account were taken of any amount by which the total amount of the charges included in the total charge for credit in relation to each period is varied so as to bring that amount to the nearest whole penny, one half-penny being for this purpose expressed to the next higher whole penny.

Online applications from January 2005

The Consumer Credit Act 1974 (Electronic Communications) Order 2004 deals with online applications. The Order removes the need for the creditor to send a hard copy of the agreement for signature if the agreement was entered into online.

Amendments to the Consumer Credit (Agreements) Regulations 1983

4. (1) The Consumer Credit (Agreements) Regulations 1983(1) shall be amended as follows:

(2) In regulation 6 (signing of agreement)—

(a)In subsection (2) for “colour of the paper” substitute “background medium upon which the information is displayed”; and

(b)After subsection 4 insert—

“(5) Where an agreement is intended to be concluded by the use of an electronic communication nothing in this Regulation shall prohibit the inclusion in the signature box of information about the process or means of providing, communicating or verifying the signature to be made by the debtor or hirer.”.

(3) In Column 2 of paragraph 2 of Schedule 1 (information to be contained in documents embodying regulated consumer credit agreements other than modifying agreements), for “and a postal address” in each place where it occurs substitute “, postal address and, where appropriate, any other address”.

(4) In Column 3 of Form 3 of Part 1 of Schedule 2 (forms of statement of protection and remedies available under the Consumer Credit Act 1974 to debtors under regulated consumer credit agreements)—

(a)for “by post” substitute “[by post]2;”; and

(b)at the end insert—

“2 Creditor to replace words in square brackets with a description of the form of electronic communication agreed with the debtor in accordance with section 176A of the Act where the agreement is intended to be concluded by the use of an electronic communication.”.

(5) In Column 2 of paragraph 2 of Schedule 3 (information to be contained in documents embodying regulated consumer hire agreements other than modifying agreements), for “and a postal address” in each place where it occurs substitute “, postal address and, where appropriate, any other address”.

(6) In Column 3 of Form 2 of Schedule 4 (forms of statement of protection and remedies available under the Consumer Credit Act 1974 to hirers under regulated consumer hire agreements)—

(a)for “by post” substitute “[by post]1; and

(b)at the end insert—

“Note

1 Owner to replace words in square brackets with a description of the form of electronic communication agreed with the hirer in accordance with section 176A of the Act where the agreement is intended to be concluded by the use of an electronic communication.”.

(7) In Column 2 of paragraph 2 of Part I of Schedule 8, for “and a postal address”, in each place where it occurs, substitute “, postal address and, where appropriate, any other address”.

(8) In Column 2 of paragraph 2 of Part II of Schedule 8, for “and a postal address”, in each place where it occurs, substitute “, postal address and, where appropriate, any other address”.

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