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s16 CCA-"Exempt Agreement

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If an agreement is made under one of the circumstances listed in s16, does this render the entire CCA Act not applicable?

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If an agreement is made under one of the circumstances listed in s16, does this render the entire CCA Act not applicable?

yes the Act does not apply, however if there are any protections within the contract which are protections afforded by the Act, then they become contractual protections, see Rankine v.MBNA Court of Appeal ruling

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and the provisions of section 140 (unfair relashionships)may well apply to exempt agreements also




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General effect

The section - and ss 16A and 16B - provides that certain consumer credit and consumer hire agreements

shall be 'exempt agreements' (see also the CCA 1974, ss 8(3) and 15(2)). The effect is to exempt such

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agreements from most of the controls imposed by the Act, which, generally speaking, applies only to

regulated agreements (but see in particular sub-s (7) and the CCA 1974, ss 137-140). Further, a creditor or

owner who enters only into exempt agreements is not carrying on a consumer credit or consumer hire

business within the meaning of the CCA 1974, s 189(1) and (2) and is not, therefore, subject to the licensing

provisions of the CCA 1974, Pt III.

Note that a further category of exempt agreements is to be introduced at some stage before 1 October 2008;

namely, agreements relating to investment - or buy-to-let - properties. The removal of the financial limits had

the unintended consequence of affording the protection of regulation to those purchasing investment

properties with credit. As a result, the Secretary of State for Business, Enterprise and Regulatory Reform has

acted to prevent this. It is proposed to lay an Order before Parliament pursuant to the Legislative and

Regulatory Reform Act 2006, s 14(1) for approval by resolution of each House of Parliament. The text of the

proposed Order - which has been published in draft as the Legislative Reform (Consumer Credit) Order 2008

- proposes that a new s 16C be inserted into the CCA 1974. In broad terms, the new section is intended to

provide that any agreement relating to investment properties is to be exempt from regulation.

The draft Order defines agreements 'relating to investment properties' as any consumer credit agreements

under which sums due are secured by a land mortgage on either (a) land outside the United Kingdom, or (b)

land within the United Kingdom of which less than 40% is used, or is intended for use, as or in connection

with a dwelling by the debtor or a person connected with the debtor or by an individual who is the beneficiary

of a trust or a person connected with such an individual.

It is to be noted that this definition corresponds with the definition of 'relevant agreements' in SI 2008/831,

Sch 2, such relevant agreements being those in relation to which the removal of the financial limit has been

delayed until 1 October 2008. Indeed, it appears that this delay in the commencement of CCA 2006, s 2 was

designed to allow some time for the Secretary of State to introduce the new exemption by s 16C.


Exemption is provided by the section itself or by order of the Secretary of State pursuant to the section. The

current order is the Consumer Credit (Exempt Agreements) Order 1989, at III[11.81]. There are two types of


1 Exemption by status

Certain exemptions are conferred by reference to the identity of the creditor or owner, although the type of

agreement must also fall within the specified range:

(a) Local authority loans of a type falling within sub-s (2);

(b) 'Named body' loans, ie agreements being (i) made by a creditor specified by order under

sub-s (1) (as to which see the Schedule to the Consumer Credit (Exempt Agreements) Order

1989) and (ii) of a type specified in the relevant paragraph of art 2 of that Order. Note that the

range of agreements specified in art 2 is narrower than that set out in sub-s (2), since the

Secretary of State has exercised his discretion under sub-s (4) to limit the range of exempt


© Loans made by building societies authorised under the Building Societies Act 1986 and

authorised institutions (or their subsidiaries) under the Banking Act 1987, being loans of a type

specified in the Exempt Agreements Order, art 2.

(d) Consumer hire agreements made by corporate bodies authorised by or under statute to

supply electricity, gas or water and relating to the use of metering equipment in connection with

that supply. This exemption is made pursuant to sub-s (6) by the Exempt Agreement Order, art


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2 Exemption by content

These are exemptions which apply regardless of the identity of the creditor or owner.

(a) Exemption of certain types of consumer credit agreements is made by reference to the

number of payments to be made (see sub-s (5)(a) and the Exempt Agreements Order, art 3).

Note that certain agreements are specifically excluded from this exemption by art 3(2): these

are purchase-money loans relating to land (as to which see the note 'Exemption by status'),

hire-purchase and conditional sale agreements and agreements secured by a pledge (other

than a pledge of documents of title or bearer bonds).

(b) Exemption of certain 'low rate' consumer credit agreements is made under sub-s (5)(b)

and the Exempt Agreements Order, art 4.

© By virtue of sub-s (5)© and the Exempt Agreements Order, art 5(a), consumer credit

agreements are exempt agreements if made in connection with trade in goods or services

between the United Kingdom and another state or in or between other states and the credit is

provided to the debtor in the course of a business carried on by him. (As to the question of the

governing law of an agreement with a foreign element, see notes to CCA 1974, s 8.)

(d) By the Exempt Agreements Order, art 5(b), exemption is conferred upon consumer credit

agreements between American Federal Credit Unions, and US armed forces personnel and

their immediate families.

Scope of exemptions

Because of the width of the definitions of 'credit' and 'consumer credit' (see the CCA 1974, ss 8 and 9) the

exemptions provided under sub-s (5) (see above) are of considerable significance. Not only do they exempt

short-term credit and credit provided at a low rate of charge, but they serve also to ensure that 'informal'

traders' credit is exempted from the provisions of the Act (eg postponement of immediate payment for

household supplies by a shopkeeper's 'slate').

There is some theoretical difficulty in analysing the exemptions, however, particularly those relating to the

financing of land purchases. It will be observed that the section refers to 'debtor-creditor-supplier' and

'debtor-creditor' agreements and, in the case of sub-s (2)© to 'linked transactions'. The definitions of these

terms relate to 'regulated agreements' (see the CCA 1974, ss 12, 13 and 19). This is unfortunate since if the

agreements referred to, for example, in sub-s (2) are to be exempt they cannot be described as

'debtor-creditor-supplier' or 'debtor-creditor' agreements, since this assumes them to be regulated. There is

even more difficulty in applying the term 'linked transaction' in sub-s (2)© since that expression cannot, by

definition, apply where the transaction relates to an agreement which is itself exempt. To give effect to the

section and to the exemptions made under it, it is necessary therefore to apply these expressions as if they

were, for these purposes, to be applied in relation to agreements other than regulated agreements.

Orders under this section

The current principal order is the Consumer Credit (Exempt Agreements) Order 1989. This revoked and

consolidated various earlier orders. The principal order is amended from time to time, often merely to alter

the list of 'named body' lenders who may obtain exemption, but also to amend its substance. The précis of

the order in the notes above is based on the amended order: see III[11.81].

Building Societies

Subsections (1) and (3) were amended by the Building Societies Act 1986, s 120, Sch 18, para 10 with effect

from 1 January 1987 (SI 1986/1560). Building societies were removed from the general exemption conferred

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by the opening clause of sub-s (1) and are now governed by the Exempt Agreements Order, art 2(2) referred

to below (see note 'Exemptions').

Authorised institution

Subsection (1)(h) was added by the Banking Act 1987, s 88 with effect from a day to be appointed, and

refers to banks and other deposit taking institutions authorised by the Bank of England under that Act, s 8 ff.

The reference to authorised institutions is now to have effect as if it included a reference to European

deposit-takers: Banking Coordination (Second Council Directive) Regulations 1992, reg 82(1), Sch 10.

Housing authorities and other housing bodies

Subsection (1)(ff) (and the consequential amendment to sub-s (3)(d)) together with sub-ss (6A) and (6B)

were added by the Housing and Planning Act 1986, s 22, and amended (as indicated by the double square

brackets) by Sch 23 of the Housing (Scotland) Act 1987. Subsection (1)(ff) formerly referred also to the

Housing Act 1985, s 444(1); this reference was repealed, with effect from 24 September 1996, by s 227 and

Sch 19, Housing Act 1996 and by the Housing Act 1996 (Consequential Amendments) (No 2) Order 1997, SI

1997/627, art 2, Sch, para 2.

Organisation of employers or organisation of workers

The CCA 1974 does not define these terms. Definitions of the terms 'trade union' and 'employers'

association' were to be found in the old Industrial Relations Act 1971, ss 61(1) and 62(1), and in the Trade

Union and Labour Relations Act 1974, ss 28 and 30 and were considered in: Midland Cold Storage Ltd v

Steer [1972] Ch 630, [1972] 3 All ER 941; Frost v Clark and Smith Manufacturing Co Ltd [1973] IRLR 216;

Greig v Insole [1978] 3 All ER 449, [1978] 1 WLR 302; General Aviation Services (UK) Ltd v TGWU [1985]

ICR 615, [1976] IRLR 224. For the current definition of 'employers' association' see the Trade Unions and

Labour Relations (Consolidation) Act 1992, Sch 2, para 21(b).

Subsection (3)(b)

The words omitted from this provision were repealed by the Employment Protection Act 1975, s 125(3) and

Sch 8.

Financial Services Authority

This reference was substituted for a reference to the Bank of England by the Bank of England Act 1998, s 23

and Sch 5.

Subsection (6)

Words in square brackets were substituted by the Telecommunications Act 1984, s 109, Sch 4, para 60.

Northern Ireland Department

The department referred to in sub-s (9) replaces the former ministries of the Government of Northern Ireland:

see Northern Ireland Constitution Act 1973, s 7(5).


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Consumer credit agreement: CCA 1974, ss 8, 189(1).

Consumer hire agreement: CCA 1974, ss 15, 189(1).

Credit: CCA 1974, ss 9, 189(1).

Debtor-creditor agreement: CCA 1974, ss 13, 189(1).

Debtor-creditor-supplier agreement: CCA 1974, ss 12, 189(1).

Building society, charity, creditor, debtor, friendly society, insurance company, land improvement company,

land, land mortgage, local authority, owner, payment: CCA 1974, s 189(1).


The above is what Goode Consumer Credit law and practice says on the exemption in s16 of the Act.

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