Credit Licensing
Businesses that carry out any of the above activities will require a licence to do so. The business must be licensed in each category of credit activity it undertakes eg lending, brokering, hiring, debt adjusting.
Credit licences are obtained from the Office of Fair Trading website (External link) and can be completed on-line. Licences are only issued to applicants who are deemed “fit and proper” to hold them.
Anyone who undertakes a licensable activity without a valid licence commits an offence and any resulting agreements will not be enforceable without an order from the Director General of Fair Trading.
It is important that the information held by the Office of Fair Trading is kept up to date. You should therefore inform the Office of Fair Trading of changes in names, partners, directors and address. Forms to do this are available to complete on-line.
Advertisements
A consumer credit advertisement is any advertisement which indicates that credit is available to consumers.
Consumer credit advertisements are categorised by regulations as either simple, intermediate or full. Each type of advertisement is defined in terms of the information it may, must and must not include.
It is an offence not to comply with these requirements. It is also an offence to publish a credit advertisement which is misleading. Trading standards routinely monitor advertisements to ensure they comply with the law.
The Agreement
The form and content of most agreements and the process of signing them and the provision of copies is controlled by law. Breaking any of these rules will have the effect of making the agreement unenforceable against the debtor without a court order.
Content of The Agreement
The agreement must contain:-
- a heading showing the nature of the agreement eg Hire Purchase Agreement.
- name and address of each party to the agreement.
- financial and other details of the transaction.
- statement of debtor’s rights.
- signature boxes.
To be properly made or “executed” the completed form must be and signed by both parties.
A Copy of the Agreement
Customers should be given a copy of the agreement at the time they sign it. If the agreement is not signed by the lender at the same time, then the customer should be sent a further copy within seven days of it being signed by the lender.
Cancellable Agreements
Cancellable agreements are those where a trader discusses either the goods or the credit arrangements face to face with the customer and the customer subsequently signs the agreement off trade premises eg in his home. The trader should then give or send to the customer a statement of their cancellation rights. The customer will have a period of five days from the receipt of this statement in which they can cancel the agreement.
Withdrawal
It is important to note however, that with all agreements, the customer may withdraw from the prospective agreement at any time before it is “executed” ie completed. This has the same effect as cancellation. Any “linked transaction” such as the purchase of a car, is also cancelled and the customer and trader should revert to square one with any deposit or part exchange being returned.
Therefore, the whole contract only becomes binding when the creditor and customer have both signed the agreement, thereby executing it.
Further Help and Guidance
The Office of Fair Trading has produced a range of trader guidance booklets which give detailed advice on each of the areas discussed above. If you would like to receive a free copy of any of these, please contact trading standards at the address below.
Office Of Fair Trading Publications
- Consumer Credit Licensing
- Credit Advertising
- Consumer Credit Agreements
- Consumer Hire Agreements
- Matters Arising During the Lifetime of an Agreement
- Credit Reference Agencies
This leaflet is intended for general guidance only and should not be taken as being definitive. For specific advice on any of the matters covered by this leaflet, please contact your local trading standards department.
