Exempt credit agreements
Certain forms of credit are not covered under the CCA 1974. They are often referred to as ‘exempt agreements’ and include:
•Buy Now Pay Later finance;
•charge cards (these are not credit cards - see below);
•debts to individuals (including family and friends);
•debts to local government – eg, council tax and benefit overpayments;
•debts to unlicensed lenders – eg, loan sharks;
•mortgages;
•some credit union loans;
•agreements which include limited companies;
•certain types of business debts;
•agreements where the creditor is a local authority;
•an agreement that is for a fixed sum credit that the client is required to repay in four payments or less within the year.
Key terms for exempt agreements
Charge cards
This is a running-account credit agreement which provides for the making of payments in relation to specified periods and requires that the entire credit be repaid in one instalment.
Mortgage
Certain agreements secured by land mortgages made by a local authority, authorised bank or building society. It can also apply to certain secured loans on the property, regulation for this is found in the FCA’s Mortgage conduct of business regulation sourcebook (MCOB).
Low-cost agreement
A client-creditor agreement where the creditor is a credit union and the rate of the total credit charged (that is, the APR) does not exceed 26.9 per cent. A client-creditor agreement which is of a type offered to a particular class of individuals and not offered to the public generally – eg, a loan by an employer to an employee.
High-net-worth exemption
CCA 2006 allows ’high-net-worth’ clients to opt out of CCA 1974 regulation. This applies where the client’s net income is £150,000 a year or more, or where their assets are £500,000 or more (excluding their home and pension.) (The client must sign a ’high-net-worth’ declaration which must be certified by an accountant – banks can certify in-house.)
Agreements for business purposes
The CCA 2006 introduced a business-related exemption, it does not regulate a consumer credit agreement by which the creditor provides credit exceeding £25,000, or a consumer hire agreement requiring the hirer to make payments exceeding £25,000, provided in each case that the agreement is entered into by the client or hirer wholly or predominantly for a business carried on, or intended to be carried on, by them.
Buy-to-let agreements
The CCA does not regulate certain consumer credit agreements relating to investment properties – typically ’buy to let’ agreements.