Thread: 2006 CCA Important Date - October 1st '08

If this has already been covered somewhere else within CAG then apologies (I couldn’t find it) and I thought it is important enough to have its own thread.

On the 1st October 2008 the final parts of the 2006 CCA are implemented. These largely focus on Post Contract Information and the act now includes minimum standards for creditors.

The reforms apply to both new and existing contracts and cover fixed sum and running accounts, with some variations between each. Most importantly the sanctions for creditors failing to comply with these regulations are severe.

Perhaps most importantly the OFT also considers that the term ‘creditor’ refers to both original creditors with whom the agreement was made and DCA’s who have assigned/purchased debts.

As with all laws particularly for the layman they are lengthy and complicated. I have tried to provide a ‘detailed summary’ here from what I have researched at length and the professional advice I have sought. If there are any errors or omissions then please accept my apologies and make your corrections below.

I believe that these amendments provide the consumer with valuable information on the status of their accounts and severe sanctions for those organisations who simply cannot be bothered ensure that they are 100% compliant. Used correctly it can be another powerful tool for consumers to ensure that, in the words of Simon Brown QC in the Rankine judgment, these ‘highly sophisticated financial institutions whose systems and programmes have long since been well geared to the mechanics of the Consumer Credit Act’, uphold the standards that are required of them in order for it to be lawful for them to collect money from debtors.

I have only copied snippets of the act for space and clarity the full text of the amendments is here http://www.opsi.gov.uk/acts/acts2006/ukpga_20060014_en_1

I hope you find it useful and/or interesting.

Statements to be provided in relation to fixed-sum credit agreements
After section 77 of the 1974 Act insert—
“77A Statements to be provided in relation to fixed-sum credit agreements
(1) The creditor under a regulated agreement for fixed-sum credit— A Personal Loan
(a) shall, within the period of one year beginning with the day after the day on which the agreement is made, give the debtor a statement under this section; and
(b) after the giving of that statement, shall give the debtor further statements under this section at intervals of not more than one year.
(2) Regulations may make provision about the form and content of statements under this section.
(3) The debtor shall have no liability to pay any sum in connection with the preparation or the giving to him of a statement under this section.
(4) The creditor is not required to give the debtor any statement under this section once the following conditions are satisfied—
(a) that there is no sum payable under the agreement by the debtor; and
(b) that there is no sum which will or may become so payable.
(5) Subsection (6) applies if at a time before the conditions mentioned in subsection (4) are satisfied the creditor fails to give the debtor—
(a) a statement under this section within the period mentioned in subsection (1)(a); or
(b) such a statement within the period of one year beginning with the day after the day on which such a statement was last given to him.
(6) Where this subsection applies in relation to a failure to give a statement under this section to the debtor—
(a) the creditor shall not be entitled to enforce the agreement during the period of non-compliance;
(b) the debtor shall have no liability to pay any sum of interest to the extent calculated by reference to the period of non-compliance or to any part of it; and
(c) the debtor shall have no liability to pay any default sum which (apart from this paragraph)—
(i) would have become payable during the period of non-compliance; or
(ii) would have become payable after the end of that period in connection with a breach of the agreement which occurs during that period (whether or not the breach continues after the end of that period).
(7) In this section ‘the period of non-compliance’ means, in relation to a failure to give a statement under this section to the debtor, the period which—
(a) begins immediately after the end of the period mentioned in paragraph (a) or (as the case may be) paragraph (b) of subsection (5); and
(b) ends at the end of the day on which the statement is given to the debtor or on which the conditions mentioned in subsection (4) are satisfied, whichever is earlier.
(8) This section does not apply in relation to a non-commercial agreement or to a small agreement.”

A reform to amend the wording of this coming into force on 20th October will allow a period of 30 days grace from the period of 12 months.

In summary this means that the creditor must;

Provide you with a statement of account (form and content as prescribed) no less than 12 months (+30 days) after the start of the account or for existing agreements no less than 12 months after the legislation comes into effect and annually thereafter.

You cannot be charged for the production of the statement

Failure to provide the statement as prescribed will render the account unenforceable for the period the non-compliance continues.

IMPORTANT – No interest or default charges will be chargeable for the period that the agreement is unenforceable. This means that automatically computer calculated interest will have to be recalculated (possibly manually) to take into account the period the account was not enforceable. This has implications for the accuracy of future statements and enforcement actions such as default notices if it is not done correctly. If interest is not correctly recalculated then further balances moving forward will also be incorrect as it will have been compounded on an incorrect figure in the first place.

86b Notice of sums in arrears under fixed-sum credit agreements etc. &

1) This section applies where at any time the following conditions are satisfied—
(a) that the debtor or hirer under an applicable agreement is required to have made at least two payments under the agreement before that time;
(b) that the total sum paid under the agreement by him is less than the total sum which he is required to have paid before that time;
(c) that the amount of the shortfall is no less than the sum of the last two payments which he is required to have made before that time;
(d) that the creditor or owner is not already under a duty to give him notices under this section in relation to the agreement; and
(e) if a judgment has been given in relation to the agreement before that time, that there is no sum still to be paid under the judgment by the debtor or hirer.
(2) The creditor or owner—
(a) shall, within the period of 14 days beginning with the day on which the conditions mentioned in subsection (1) are satisfied, give the debtor or hirer a notice under this section; and
(b) after the giving of that notice, shall give him further notices under this section at intervals of not more than six months.
(3) The duty of the creditor or owner to give the debtor or hirer notices under this section shall cease when either of the conditions mentioned in subsection (4) is satisfied; but if either of those conditions is satisfied before the notice required by subsection (2)(a) is given, the duty shall not cease until that notice is given.
(4) The conditions referred to in subsection (3) are—
(a) that the debtor or hirer ceases to be in arrears;
(b) that a judgment is given in relation to the agreement under which a sum is required to be paid by the debtor or hirer.
(5) For the purposes of subsection (4)(a) the debtor or hirer ceases to be in arrears when—
(a) no sum, which he has ever failed to pay under the agreement when required, is still owing;
(b) no default sum, which has ever become payable under the agreement in connection with his failure to pay any sum under the agreement when required, is still owing;
(c) no sum of interest, which has ever become payable under the agreement in connection with such a default sum, is still owing; and
(d) no other sum of interest, which has ever become payable under the agreement in connection with his failure to pay any sum under the agreement when required, is still owing.
(6) A notice under this section shall include a copy of the current arrears information sheet under section 86A.
(7) The debtor or hirer shall have no liability to pay any sum in connection with the preparation or the giving to him of a notice under this section.
(8) Regulations may make provision about the form and content of notices under this section.
(9) In the case of an applicable agreement under which the debtor or hirer must make all payments he is required to make at intervals of one week or less, this section shall have effect as if in subsection (1)(a) and (c) for ‘two’ there were substituted ‘four’.
(10) If an agreement mentioned in subsection (9) was made before the beginning of the relevant period, only amounts resulting from failures by the debtor or hirer to make payments he is required to have made during that period shall be taken into account in determining any shortfall for the purposes of subsection (1)(c).
(11) In subsection (10) ‘relevant period’ means the period of 20 weeks ending with the day on which the debtor or hirer is required to have made the most recent payment under the agreement.
(12) In this section ‘applicable agreement’ means an agreement which—
(a) is a regulated agreement for fixed-sum credit or a regulated consumer hire agreement; and
(b) is neither a non-commercial agreement nor a small agreement.”

86C Notice of sums in arrears under running-account credit agreements

(1) This section applies where at any time the following conditions are satisfied—
(a) that the debtor under an applicable agreement is required to have made at least two payments under the agreement before that time;
(b) that the last two payments which he is required to have made before that time have not been made;
(c) that the creditor has not already been required to give a notice under this section in relation to either of those payments; and
(d) if a judgment has been given in relation to the agreement before that time, that there is no sum still to be paid under the judgment by the debtor.
(2) The creditor shall, no later than the end of the period within which he is next required to give a statement under section 78(4) in relation to the agreement, give the debtor a notice under this section.
(3) The notice shall include a copy of the current arrears information sheet under section 86A.
(4) The notice may be incorporated in a statement or other notice which the creditor gives the debtor in relation to the agreement by virtue of another provision of this Act.
(5) The debtor shall have no liability to pay any sum in connection with the preparation or the giving to him of the notice.
(6) Regulations may make provision about the form and content of notices under this section.
(7) In this section ‘applicable agreement’ means an agreement which—
(a) is a regulated agreement for running-account credit; and
(b) is neither a non-commercial agreement nor a small agreement.”

Both require creditors to send notices of arrears if agreements meet certain criteria. The sanction for non-compliance is that the debt is unenforceable and no interest or charges may be applied. Automated interest will need to be recalculated for the period that the account is not enforceable and compounded forward to ensure an accurate balance is quoted on all future correspondence.

Also arrears notices must be accompanied by an OFT information leaflet as prescribed by the legislation. Again the form and content of these arrears notices is set out in legislation.

For the DCA’s in particular, dealing with perhaps many hundreds of thousands of accounts all in arrears this is sure to provide a logistical and administrative headache, add considerable additional cost without a return (not what they want). More importantly from a consumer protection perspective, failure to adhere to these regulations will render accounts unenforceable and the additional (not inconsiderable) headache of interest recalculations to ensure that the account balance is accurate moving forward.

So in summary, with effect from 1st October 2008 creditors and DCA’s will be required to send out statements of accounts and arrears notices for both fixed sum and rolling agreements for both new and existing agreements which if they fail to do so will render the account unenforceable and add the headache of reversing automated interest.

If you require confirmation that the OFT considers the terms creditor to cover both the original creditor and the DCA I would recommend writing to the OFT for your own peace of mind. It is however covered in their publication OFT1002 http://www.oft.gov.uk/shared_oft/business_leaflets/consumer_credit/oft1002.pdf It actually explains everything very well and far better than I have! J

1.3 For simplicity, we refer to creditors and debtors throughout, although a number of the requirements also apply to consumer hire agreements. Note that a creditor would include a person who has acquired the debt or to whom the original creditor's rights and duties under the agreement have passed

It is also worth noting that 77A, 78(4A), 86B and 86C all refer to agreements, whenever made. The clock starts ticking on 1st October regardless of when the agreement was made.

I think the final parts of the 2006 CCA are certainly a very powerful tool for the consumer and a rather large headache for the DCA’s in particular, many of who have millions of accounts in management all of which will be rendered unenforceable if they fail to abide by the above.

I hope its helpful.FF

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interesting, subbing.

I do hope that everyone is not going to write to each of their creditors and DCA's on October 2nd asking when we might expect to receive our statement in line with the new legislation.

That would be terribly wrong & could possibly completely wreck their mail-rooms.

....12 days and counting.

Sub

Wow! lots to take in!

Originally Posted by TheChancellor

I do hope that everyone is not going to write to each of their creditors and DCA's on October 2nd asking when we might expect to receive our statement in line with the new legislation.

That would be terribly wrong & could possibly completely wreck their mail-rooms.

....12 days and counting.

For existing agreements you have to wait 12 months (+ 30 days) after the legislation comes in. New agreements will be 12 months (+30days) after the start of the agreement. So sorry nothing for at least a year and 12 days.

Originally Posted by enamae

For existing agreements you have to wait 12 months (+ 30 days) after the legislation comes in. New agreements will be 12 months (+30days) after the start of the agreement. So sorry nothing for at least a year and 12 days.

Thanks for re-affirming that enamae. I would recommend anyone who intends to use this has a good read through of the OFT guidance.

The 12 months only applies to fixed sum accounts (loans etc). For running accounts (credit accounts) section 78 4(a) applies which has different requirements. Which I'm still trying to get my head aorund tbh.

The requirements for arrears notices is interesting though. As soon as you have missed 2 payments then they are required to send an arrears notice. I am not 100% sure how this applies to DCA's who buy a debt. If the agreement has been terminated then the whole balance is payable and each month that this remains outstanding then would a notice be due? If the agreement has not been terminated then monthly payments will fall due and an arrears notice would be due otherwise the debt becomes unenforceable.

I wonder how many dca's are geared for this kind of operation (esp. the smaller ones?) I don't think this will pose to much of a headache for the likes of Cap1 and MBNA for example, they will just amend the 'rules' in their systems. The biggest question is how will the DCA's cope, what is expected of them and how does one interpret some of the regs once a debt has been sold on to a DCA?

It is still early days and I don't think people should be demanding arrears notices and statements just yet. Like other areas of legislation if we educated ourselves then the consumer is prepared if needs be.

Bumping my own thread as I personally feel it is important that people are aware of this.