Cancelling a consumer credit contract
In most circumstances, when both parties have signed a consumer credit agreement it becomes legally binding on both parties.
The right to cancel is also known as the ‘right to withdraw’. This should not be confused with ‘withdrawal from agreements’ (see above).
Cancellation can be done verbally (if time is short) or (preferably) in writing, either by post or email. It is good practice to follow a call to a creditor to cancel a credit agreement in writing, either by post or by email using the contact details provided in the agreement.
Cancellation of consumer credit contracts is governed by sections 67 to 73 of the CCA 1974.
There is an extended cooling-off period for credit cards and loans. For agreements made on or after 1 February 2011, the client can withdraw from it within 14 days without giving any reason.1Reg 25 The Consumer Credit (Agreements) Regulations 2010 This applies to all regulated agreements except those: •for credit of more than £60,260;
•secured on land.
The 14-day cooling-off period starts from the day the agreement is executed or, if later, from the day the client receives a copy of the agreement. Withdrawal can be made verbally or in writing.
In addition:
•the client must repay the credit and any accrued interest within 30 days;
•withdrawal from the agreement also includes withdrawal from any supplementary agreement – eg, PPI;
•the effect of withdrawal is as if the credit agreement had never been entered into.