Q & A Uniform Credit Code
Frequently Asked Questions by Consumers
- What should I get before signing a Credit Contract?
- What should I get before signing a goods lease?
- Does the Code protect me if I buy goods on finance?
- I have heard about a comparison rate, what is it?
- What should I get after the Credit Contract is signed?
- Can I get out of a loan after I have signed it?
- If I want to pay out my loan, how can I find out how much it will cost?
- What if the Credit Provider wants to change the contract? Can I arrange to have it changed?
- What if I have to go to Hospital or lose my job?
- I have been asked to provide a guarantee, will the Code apply to me?
- Can I get out of a guarantee after I have given it?
- What if I think the Credit Provider is charging too much?
- Can the credit provider claim any fees and charges from me as well as interest?
- Who should I see if I think the Code is broken?
- I have been told that there are special penalties if the credit provider does not comply with the Code, is this correct?
- What if I'm late in repaying and the Credit Provider threatens legal action?
- What happens if the Credit Provider or Lessor attempts to take back the goods?
- What if I've borrowed money with my partner and we've split up?
What should I get before signing a Credit Contract?
Protecting your interest
How can you be sure that you are getting a good deal? The Consumer Credit Code ensures that you get the information you need to compare different credit schemes and make an informed choice.
It does this by making credit providers give the following information in all credit contracts:
- the amount of credit that is to be provided
- the annual percentage rate or rates
- how the interest is calculated and when it is charged
- the total amount of interest if the contract is to be paid out within seven years
- the credit fees and charges to be paid
- how you are to be informed about changes to the contract
- any default rate of interest and how this is calculated (eg. from a published reference rate)
- the frequency of account statements
- details of relevant commission charges
- information about whether a mortgage or guarantee applies
- details of credit related insurance financed under the contract.
This information must be presented in the Precontractual Statement which gives details about fees and charges and the Information Statement which outlines your rights and obligations. You may find that these two statements are combined with the credit contract or are issued separately. You should take the time to read both of these statements before you sign the contract.
What should I get before signing a goods lease?
Better protection for hiring goods
If you pay to hire goods for any period over four months without having the right to buy them, then your lease has to include:
- a clear description or identification of the goods hired
- the amount of any deposit or any other thing of value needed before goods are hired
- the amount of any stamp duty or other Government charges to be paid
- any fees or charges not included in the normal rental charge
- the amount of each rental payment
- the date when the first rental payment is due
- when rental payments are due - specific dates or the time between payments
- the number of rental payments due
- the total amount of rent to be paid
- a statement of the conditions under which a lease can be terminated
- a statement of any liabilities incurred if a lease is terminated.
Does the Code protect me if I buy goods on finance?
Yes. You may be able to terminate a sale contract to buy goods or services if you cannot find finance to pay for them (provided you make it known to the supplier of those goods or services that you require finance). In some cases you could also get out of a loan contract if the sale contract is terminated.
If you have problems with goods bought on finance in some cases you may have rights to recover compensation against a credit provider as well as the supplier. Of course, where the person supplying you with the goods and the credit provider are in fact the same person, the Code's rules specifically affecting credit contracts apply.
I have heard about a comparison rate, what is it?
A comparison rate is a special calculation which may be provided to assist consumers compare the cost of credit. It takes into account things such as fees and charges which make up the cost of credit, in addition to the interest charge. Under the Code it will generally be possible for credit providers to charge a range of fees and charges so long as they are disclosed and authorised by the contract.
Credit providers do not have to use comparison rates, but if they do, the Code requires that they be calculated in accordance with a special formula. New legislation making the use of comparison rates compulsory commenced on 1 July 2003.
What should I get after the Credit Contract is signed?
After the credit contract is made
You are still protected by the Code after you sign the credit contract. Credit providers are required to give you regular account statements that include:
- all fees and charges
- details of each amount of credit provided during the statement period
- the name of the supplier in any credit card purchases
- interest charges, including when they were charged
- the annual percentage rate, including any changes during the statement period
- the opening and closing balances of the statement period
- the dates on which the statement period begins and ends
- payments and transfers to and from other accounts
- the minimum payment owed and the due date for that payment
- insurance payments made, including the name of the insurer and any commission paid
- any corrections to previous accounts.
Aside from your regular account statement you are entitled to ask your credit provider about any details concerning payments in and out of your account.
Note: Credit providers are not required to send account statements if your contract only provides fixed rates and payments or if you have no outstanding debt and your account hasn't been accessed during the statement period.
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Can I get out of a loan after I have signed it?
Generally if you have accepted a loan offer from a credit provider you will be bound by it. However if you have not obtained the credit or attempted to obtain credit (by for example using a credit card), you can terminate an agreement after it has been made in this way by giving the credit provider notice in writing.
If you have only signed an offer to borrow you can withdraw that offer before the credit provider accepts it.
If I want to pay out my loan how can I find out how much it will cost?
Under a contract which is regulated by the Code, the debtor or guarantor always has the right to pay out a contract early. The best way to find out about how much it will cost to pay out your contract is to request a statement of pay out figure. The credit provider must give this to you within 7 days of your making a request in writing for a pay out figure. You can ask for this figure as at any date you specify.
If you have requested a statement of pay out figure and have not received an answer within 7 days you can apply to the court which will itself decide a pay out figure. You may want to seek advice before doing this.
What if the Credit Provider wants to change the contract? Can I arrange to have it changed?
Changes to a contract may happen in several ways. For example, in relation to credit contracts, changes may occur as follows:-
- Changes by the credit provider alone ("unilateral changes")
The credit provider can itself make a change to the credit contract (for example, a change which may vary the interest rate, or fees and charges which apply) so long as the contract allows the credit provider to do so and the credit provider follows the requirements for giving notice laid down in the Code.
Depending on what is being changed, different procedures apply as to how the debtor is to find out about the change. For example, if the credit provider wants to change the amount of a fee or charge or the frequency or time for its repayment or wants to change the way in which interest is calculated or applied under the contract, at least 30 days written notice to the debtor is required before the change takes effect (unless the change reduces your obligations).
If the credit provider wants to change the interest rate, generally they are required to notify you not later than the day on which the change takes effect.
If the credit provider wants to change the amount, frequency or method of calculation of repayments they must give you at least 20 days' written notice before the change takes effect (again, unless the change reduces your obligations).
- Changes by agreement with the credit provider
You can always come to an agreement with your credit provider to change the terms of your agreement. Unless the change is a short term agreement which defers or reduces your obligations for less than 90 days, the credit provider must give you a notice showing details of the agreed change.
- Changes on the grounds of hardship
You may not be able to meet your obligations under your contract because you are suffering hardship, for example you may have been sick or unemployed or there may be some other reasonable cause. So long as you reasonably believe you will be able to meet your obligations if the contract is changed for example by making smaller payments over a longer period or postponing payment, you can ask the credit provider to change your contract on the grounds of hardship. If the credit provider does not agree to the change you may be able to apply to the court for an order varying your contract. You should ask your Government Consumer Agency which court you need to go to in order to make this application.
What if I have to go to Hospital or lose my job?
If you are unable to make repayments due to temporary hardship, such as illness or unemployment, you are obliged to first talk to your credit provider and try to come to some sort of written arrangement to repay your debt. If you are unable to come to any arrangement, you have the right to apply to a court to order changes to the contract. The court may decide that your circumstances deserve a more lenient arrangement and may order your credit provider to make changes to your contract. This does not mean that the debt is reduced or cancelled. You have a right to apply
for changes where the credit amount does not exceed a set amount. Please refer to the Hardship Threshold section of What's New for the relevant amount
I have been asked to provide a guarantee, will the Code apply to me?
If you provide a guarantee you will be agreeing to pay if a person borrowing money under another contract (the debtor) does not comply with their agreement. If that contract is caught by the Code, then any guarantee you provide may also be caught.
This will mean that before you enter into the guarantee you should be given a copy of the credit contract or proposed credit contract and an information document called "Things You Should Know About Guarantees". View a copy by going to Form 5A in the Regulations (under Schedules).
After the guarantee is signed you should get copies of the guarantee and the contract as made.
The Code protects guarantors in a number of ways, for example ensuring that a guarantor will only be liable to the same extent as the debtor (although they may also have to pay reasonable enforcement expenses of enforcing the guarantee), and ensuring that a guarantor will only be liable for any additional loans to the debtor if they are told about these loans and provide a written acceptance of the extension of the guarantee.
Can I get out of a guarantee after I have given it?
If credit has not yet been provided to the debtor you can withdraw by giving a written notice. If you find a material difference between the copy of the proposed credit contract given to you before you gave the guarantee and the contract in the form it was made you can withdraw at any time by giving written notice to the credit provider.
You may also be able to withdraw from your guarantee by written notice to the credit provider, before credit is first provided, in certain circumstances. You should seek appropriate advice about this.
What if I think the Credit Provider is charging too much?
You should always check your contract to make sure that the amount you are being charged is the same as the contract said you would be charged.
If you think that a particular entry in your statement of account is wrong you should write to your credit provider as soon as possible telling them that you are disputing a particular entry in your statement and requiring them to give you an explanation in reasonable detail. If you do not get any response or if you disagree with the response given you may be able to go to court to have the matter determined.
The Code also restricts credit providers from using a method to calculate interest in excess of a certain amount. You may need to get further advice to work out whether or not your contract complies with this requirement.
Can the credit provider claim any fees and charges from me as well as interest?
Again you should always check your contract to make sure that the amount you are being charged is the same as agreed to by the contractor. Generally the credit provider must give you information before you enter the contract and in the contract document itself about the amount of any fees and charges. Some contracts may allow credit providers to introduce new fees and charges after the contract is made, but the Code requires that notices be given showing information about those fees and charges before they take effect (see below).
The Code also contains rules which protect against credit providers charging establishment, early termination, or prepayment fees which are unfair.
The same rules also protect against unfair changes to the interest rate under a contract.
Who should I see if I think the Code is broken?
If you have any dispute with your credit provider or you feel one of the requirements under the Code has been broken and have not been able to resolve it yourself, you should seek independent advice and/or raise the matter with your local Consumer Affairs/Fair Trading agency.
I have been told that there are special penalties if the credit provider does not comply with the Code, is this correct?
Yes. Criminal penalties apply to most breaches of the Code. Also many breaches of the Code have a "civil effect" which means usually that a person suffering loss or in some cases persons simply "affected" by the breach may obtain relief.
There is also a special type of penalty called a "civil penalty" which may apply where the credit provider's documents do not disclose all the information which the Code says they must disclose.
What if I'm late in repaying and the Credit Provider threatens legal action?
The credit provider will usually have to serve a default notice on you before they commence enforcement proceedings against you. This default notice will give you some time (30 days from the date of the notice) to catch up in your payments or seek further advice (you may for example be able to apply to the credit provider for a change to your contract on the grounds of hardship).
You must make sure if you want to keep the contract going that you meet any other payments which fall due during the 30 day period as well.
What happens if the Credit Provider or Lessor attempts to take back the goods?
Before a credit provider or lessor can repossess or take back goods, they have to give you 30 days notice and, in some circumstances, obtain a court order. Remember, if your goods are repossessed and sold, your debt may not be cancelled. If you have been notified of repossession and are not sure where you stand, you should contact your local consumer affairs or fair trading agency.
What if I've borrowed money with my partner and we've split up?
If you and your partner are "co-borrowers" you will generally be jointly liable for the whole of the amount borrowed. You may be protected under the Code if the contract can be shown to be unjust, as the court has the power to "reopen" these contracts. This protection from unjust contracts applies to people who borrow money on their own as well.
You may have signed a document nominating your partner as the person who can receive notices on your behalf when you took out the loan. However, you should still receive a separate notice if any legal action is going to be commenced by the credit provider even if you have signed this document. If you have signed a nomination, it is a good idea to write to the credit provider making it clear that you wish to cancel your nomination, as this will ensure that you receive your own copy of notices and can keep informed about the status of the loan.
You should seek further advice as to your position.