What is a Regulated Consumer Credit Agreement?
What is a Regulated Consumer Credit Agreement?

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • What is a Regulated Consumer Credit Agreement?
  • What is a regulated consumer credit agreement?
  • Classification of consumer credit agreements
  • Hire purchase and conditional sale
  • Fixed-sum versus running account
  • Restricted use versus unrestricted use
  • Borrower-lender versus borrower-lender-supplier
  • Exempt consumer credit agreements
  • FCA mortgage contracts
  • The business purposes exemption
  • more

What is a regulated consumer credit agreement?

There are several factors to consider when deciding whether a consumer credit agreement is regulated by the Consumer Credit Act 1974 (CCA 1974) or not. There are a large number of detailed exemptions which are contained in the Financial Services and Markets Act (Regulated Activities) Order 2001, SI 2001/544 (RAO). The exemptions apply depending on the type of consumer credit agreement and its main features. It is, therefore, important to understand how to recognise the different types of consumer credit agreements envisaged by CCA 1974. This Practice Note explains the scope of the CCA 1974 with regard to the type of credit agreements that fall within its regulation and the interplay with the most commonly used exemptions.

Classification of consumer credit agreements

The CCA 1974 only regulates agreements entered into by borrowers who are 'individuals.' Individual is defined in s189(1) CCA 1974 as including a partnership of two or three persons (not all of whom are companies) and an unincorporated body which does not consist entirely of companies (such as certain charities). An 'individual' can also therefore include sole traders acting for business purposes as well as individual consumers acting in their personal capacity. The CCA 1974 never regulates lending to companies as they do not fall within any limb of