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Cca & Overdrafts Advice Pls

Valdez is Coming

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Am l correct in believing that the CCA DOES apply to bank overdrafts?

I'm sure l have seen this on the forum but can't locate the thread now.


I have a bank telling me they do not need to provide a copy of an agreement as the CCA regulations only apply to LOAN AGREEMENTS and the account in question is not a loan.


I think they are wrong, but need chapter and verse for reference.


Any help/pointers much appreciated....thanks.....Valdez

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You may wish to read this CCA and Overdrafts - The Final Word?


Overdrafts are exempt from s61(1) of The Consumer Credit Act under s74, but are not completely exempt from the Act. That means an agreement for an overdraft would look different from other credit agreements and does not need to be executed (signed and dated) by the debtor. Also the terms of the agreement are different.


An overdraft credit agreement only needs to show:

The credit limit (if any);

The annual rate of credit and any charges applicable, and the conditions under which these may be varied;

The procedure for terminating the agreement.


The above information must be confirmed in writing.


Some examples pertaining to overdrafts are shown below:


From the Consumer Credit Act 1974:


Facts. The manager of the C Bank agrees orally with D (an individual) to open a current account in D’s name. Nothing is said about overdraft facilities. After maintaining the account in credit for some weeks, D draws a cheque in favour of E for an amount exceeding D’s credit balance by £20. E presents the cheque and the Bank pay it.

Analysis. In drawing the cheque D, by implication, requests the Bank to grant him an overdraft of £20 on its usual terms as to interest and other charges. In deciding to honour the cheque, the Bank by implication accept the offer. This constitutes a regulated small consumer credit agreement for unrestricted-use, fixed-sum credit. It is a debtor-creditor agreement, and falls within section 74(1)(b) if covered by a determination under section 74(3).


Facts. F (an individual) has had a current account with the G Bank for many years. Although usually in credit, the account has been allowed by the Bank to become overdrawn from time to time. The maximum such overdraft has been is about £1,000. No explicit agreement has ever been made about overdraft facilities. Now, with a credit balance of £500, F draws a cheque for £1,300


Analysis. It might well be held that the agreement with F (express or implied) under which the Bank operate his account includes an implied term giving him the right to overdraft facilities up to say £1,000. If so, the agreement is a regulated consumer credit agreement for unrestricted-use, running-account credit. It is a debtor-creditor agreement, and falls within section 74(1)(b) if covered by a direction under section 74(3). It is also a multiple agreement, part of which (i.e. the part not dealing with the overdraft), as referred to in section 18(1)(a), falls within a category of agreement not mentioned in this Act.


Facts. Under an oral agreement made on 10th January, X (an individual) has an overdraft on his current account at the Y bank with a credit limit of £100. On 15th February, when his overdraft stands at £90, X draws a cheque for £25. It is the first time that X has exceeded his credit limit, and on 16th February the bank honours the cheque.

Analysis. The agreement of 10th January is a consumer credit agreement for running-account credit. The agreement of 15th-16th February varies the earlier agreement by adding a term allowing the credit limit to be exceeded merely temporarily. By section 82(2) the later agreement is deemed to revoke the earlier agreement and reproduce the combined effect of the two agreements. By section 82(4), Part V of this Act (except section 56) does not apply to the later agreement. By section 18(5), a term allowing a merely temporary excess over the credit limit is not to be treated as a separate agreement, or as providing fixed-sum credit. The whole of the £115 owed to the bank by X on 16th February is therefore running-account credit.


Facts. The G Bank grants H (an individual) an unlimited overdraft, with an increased rate of interest on so much of any debit balance as exceeds £2,000.

Analysis. Although the overdraft purports to be unlimited, the stipulation for increased interest above £2,000 brings the agreement within section 10(3)(b)(ii) and it is a consumer credit agreement.






Please note opinions given by rory32 are offered informally as a lay-person in good faith based on personal experience. For legal advice, you must always consult a registered and insured lawyer.

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