Debt and Money Advice
Sometimes it is necessary to purchase goods and services by using credit cards or loans. When forming a credit agreement always read the small print and ask questions if you do not understand any of the terms. Once you sign the contract you may find it difficult to cancel or withdraw from it.
Trading Standards enforce the law that sets standards for credit advertising offering unsecured loans to consumers and the agreements consumers sign. There are strict requirements that the lender must comply with. Please see the information below for further explanations for credit advertisements and agreements.
If you know of a loan shark who is operating in your area...
Trading Standards can help stop Loan Sharks. These lenders are unlicensed, are operating illegally, and will lend you money when you think nobody else will. Loan Sharks charge extortionate rates of interest and sometimes use threats of violence to intimidate those who cannot pay the money back on time. Loan Sharks particularly prey on vulnerable people like the unemployed or lone parents. You might be forced to get a second loan to pay off the first, and so on and so on, so your debts become even more out of control. You may be forced to hand over your Social Security benefit claim books as security against loans. Please tell us about a Loan Shark to help us stop them and protect other people. You do not have to leave your name or contact details, we will still be happy to receive any useful information.
Making a complaint or getting advice
If you wish to make a complaint about an advert for unsecured credit or to get further advice on how to resolve any issue you may have with a particular credit agreement please see our Advice to Consumers webpage.
Secured Loans
Trading Standards do not enforce the law relating to advertisements for secured credit such as first mortgages. These adverts, often for major banks or building societies, are regulated by the Financial Services Authority.
Managing Your Money
In order to help you avoid getting in to debt or to solve a problem you might have regarding money you can get advice from the Citizens Advice Bureau.
Credit unions offer low rates of interest, especially for small, short term loans. Some credit unions may require you to save before you can borrow. For more details visit the website for the Association of British Credit Unions or call them on 0161 832 3694.
Consumer Credit Advertisements
Advertising offering unsecured loans to consumers often target people with poor credit history or those who have County Court Judgements (CCJ’s) against them. Below are the general areas in which consumer credit adverts must comply:
- Layout: The text of the advert must be legible. For example, the ‘small print’ should not be so small it cannot be read by the average person and any information in a radio advert should be clearly audible. The advert should be in plain and intelligible language and the name of the advertiser must be specified.
- Content: When an advert contains an APR figure it must also contain the following: Frequency, number and amount of repayments; any other charges; the total amount payable to the debtor. These items must be shown with equal prominence and located together, as a whole. The advert must also feature a postal address.
- APR: An advert must state a “typical APR” if; it includes those items listed in ‘Content’ above; it gives an incentive to apply for credit, for example, “interest free for the first year”; if it implies that credit is available to those who would otherwise have restricted access, for example, “no checks necessary”. The APR must be of greater prominence than other text in the advert. APR must be shown as “X% APR”. Where the APR is subject to change it should also be accompanied by the word “variable”.
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Restricted expressions: A credit advert must not state:
- “overdraft”
- “interest free” (except where the total amount payable does not exceed the cash price)
- “no deposit” (except where no advance payments are made)
- “loan guaranteed” or “pre approved” (except where there are no conditions regarding the credit status of the debtor)
- the expressions “gift” or “present”.
Consumer Credit Agreements
There are different kinds of consumer credit agreements that you might encounter, below are a few examples:
- Credit Sale Agreement: A credit sale is one where the purchase of goods is financed by a loan, which is repayable over a fixed period of time. Often, domestic household goods are sold this way, such as washing machines and TV’s. The retailer arranges the finance for you with a finance company, and the goods become your property immediately. The goods cannot be repossessed if you fall behind with your payments.
- Hire-Purchase Agreement: An agreement often associated with cars. With this type of agreement the customer makes regular payments but does not obtain legal ownership until the end of the agreement when they exercise their 'option to purchase'. The customer cannot usually exercise this option to purchase until all the payments have been made. You can hand the goods back at any stage of an HP agreement, although the creditor is entitled to claim up to 50% of the agreement price and any arrears. The creditor has a right to repossess the goods if any payments are missed any time up until one-third of the payments have been made. After this time the creditor must obtain a court order to repossess the goods.
- Conditional Sale Agreement: The customer does not obtain legal title to the goods until a specific time or event has occurred. It may be a specific number of payments or specific requirements of the agreement (e.g. repairs to a car). The condition will be spelt out in the agreement. Once the condition has been met, the consumer obtains legal ownership of the goods.
To help you gain a clearer understanding, some of the most frequently used language in consumer credit agreements are explained below:
- Creditor and Debtor: The creditor is the person providing the credit e.g. a bank or finance house. The debtor is the customer who takes the credit.
- Interest and APR: APR is the Annual Percentage Rate. This is the interest charge per year for taking the loan. The APR is the best way of comparing the cost of different loans. You may see other rates of interest such as 'flat rates' but always look for the APR. For example, 'Loans - interest 10%, APR 20.2%'. By law the APR must be the most prominent of all interest rates quoted in an advertisement or leaflet.
- Secured Credit: A loan for which the debtor must provide security to the creditor. The most common secured loan is a mortgage, the security for which is a home. Other examples are cars and jewellery. If the debtor fails to pay then the creditor can repossess the goods provided. Make sure you know whether security is required before you sign the agreement.
- Unsecured Credit: The debtor is not required to provide physical security for the loan e.g. their house. If the debtor defaults the creditor can only sue for the outstanding money
- Default: This is the term used when a debtor does not make the required payments or breaks another part of the contract. If a debtor is in default then the creditor is entitled to take certain action. If you find yourself in default you should receive a 'default notice' from the creditor.
- Arrears: This is an unpaid debt. If a debtor falls behind with payments this is known as being in arrears.
Further Information
For more detailed information and an explanation of your rights concerning consumer credit, please read the advice leaflet from the Trading Standards Institute website or for further information visit the Money and Credit website of the Office of Fair Trading.
Further advice from the Trading Standards Institute is found below (the external websites will open in new window):
Shopping at home - your guide to the Distance Selling Regulations
Credit - early settlement explained
A guide to choosing and using storecards
Remortgaging - what you need to know
Credit terminology. What does it all mean?
Your rights when buying on credit
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