Those dealing with businesses may well think that consumer credit law is not applicable to the finance they provide. However the Consumer Credit Act 2006 amended the Consumer Credit Act 1974 (CCA 1974), by abolishing the upper limit for consumer credit regulation and making various other changes relevant to businesses.

As a result CCA 1974 applies to credit transactions where the debtor is a sole trader or a partnership of two or three partners or an unincorporated body such as a club (unless in each case all the partners or participants are bodies corporate), as well as to individual consumers. (It still does not apply where the debtor is a company or another body corporate).

There are various CCA exemptions which may apply or can be made to apply if the relevant steps are taken, so it is as well to check the position before providing finance of any sort to anyone in the above categories.

Further changes are now being made to the consumer credit regime by means of regulations which can be found on the Office of Public Sector Information website (www.opsi.gov.uk).

The Consumer Credit (EU Directive) Regulations 2010 make various changes to CCA 1974 and its associated regulations to implement the EU Consumer Credit Directive. Annex A to the related explanatory memorandum explains the new requirements which will apply to business lending arrangements covered by CCA 1974.

Other regulations replace existing regulations made under CCA 1974:

  • Consumer Credit (Total Charge for Credit) Regulations 2010;
  • Consumer Credit (Advertisements) Regulations 2010;
  • Consumer Credit (Disclosure of Information) Regulations 2010;
  • Consumer Credit (Agreements) Regulations 2010.

As a result this is a good time to review agreements and procedures if finance is being provided which may fall within the consumer credit regime.