What is credit?
Credit can be defined as the financial accommodation that is â€˜the provision of a benefit (cash, land, goods, services or facilities) for which payment is to be made by the recipient in money at a later dateâ€™. The Consumer credit Act 1974 s.9(1) defines credit as including â€˜a cash loan, and any other financial accommodationâ€™.
Types of credit
Credit arrangements can be classified in two ways which are loan credit and sales credit.
Loan credit involves an advance of money; sales credit involves a deferent of a payment obligation under a supply contract.
A loan payment of money by a creditor to a debtor as a means of benefiting and enriching the debtor, ...view middle of the document...
The CCA is also radical in that it extends its protection into fields hitherto uncovered, like licensing of all credit-granters, restricting of canvassing and on second mortgages.
In another sense the CCA is traditional. Such as the 1893, was intended to embody the common law concepts by codifying them, the CCA merely assumes the basic common law concepts, so whilst coherent pattern of law largely discarded, with the CCA the reader must constantly bear in mind the underlying common law, to which the Act makes often detailed changes.
The justification for selecting consumer credit for special treatment over other areas of consumer protection is said to be that it is particularly prone to abusers from which consumers co do little to protect themselves following the white paper an elaborate licensing system was established for creditors and owners in part 3 of the CCA, with special licensing provisions for ancillary credit business.
The CCA, s21 provides thatâ€™ a licence is required to carry on a consumer credit business or consumer hire business. How this would protect consumers would be that the initial introduction of licensing should act as a sieve though which unwanted traders are then got rid of from the system because they do not apply for a license, and could be argued that many business will strive to comply with the law in order to obtain a license. More over licensing provides an effective means of controlling rouge traders in that, instead of incompetent threat of an occasional prosecution, the offender runs the risk of being denied the right to continue in business. An important aspect to the licensing system is that accurate and regular information becomes available to the Office of fair trading and emergent credit practices, both good and bad can be monitored. However it can be argued that that a corrupt lender may realise all too well that he will not obtain a license and so he may simply pursue illegal lending practises in the first place. Under s25(1) a license shall be granted on the application if he is a fit person to engage in activities covered by the licence.
Consumers are constantly bombarded with a seemingly never ending stream of credit advertisements, whether it be through television advertising, web-based advertisements, flyers in shops, telephone marketing or the steady arrival of junk mail offering loans and credit cards on apparently favourable terms. Given the occurrence of credit advertising and the reliance that consumers place on them, it is clearly important to ensure that such advertisements are both complete and accurate, for the consumer protection.
Part 4 of the CCA s43-47 seek to control of advertisement of credit facilities as the above mentioned can play tricks on consumers minds, which is why they need protecting.
The objective of the control in the CCA is to ensure that, when they are seeking business, traders provide...