4â Formalities

4â Formalities

The CCA 1974 outlines the formalities that must be complied with when making a regulated agreement. The purpose of these formalities is to ensure that the debtor is fully aware of the nature and content of the transaction he is about to enter into and that the written agreement gives him a clear account of his rights and obligations.

The relevant sections specify that the regulated agreement is not properly executed unless the document is signed by the debtor or hirer and on behalf of the creditor or owner;97 the document includes all the terms of the agreement;98 and all of the terms are readily legible.99 The Act also contains provisions as to copies, stipulating those points in the contractual process at which the debtor/ hirer is entitled to receive a copy of the agreement.100 A failure to provide the relevant copies at the relevant times will make the contract unenforceable.101

The Act also imposes a duty to give notice of cancellation rights.102 These requirements apply to regulated agreements but not to any non-commercial agreement.103

Furthermore, a regulated agreement must comply with the requirements of the Consumer Credit (Agreements) Regulations 2004, which require the insertion of the names and address of the parties to the consumer credit agreement;

94SI 1980/51. See also F. Bennion, ‘Consumer credit: the narrowing of “linked transactions” in relation to the total charge for credit’ (1986) Journal of Business Law (July) 294 and S. Bone and L. Rutherford, ‘Consumer credit, defects in the linked transactions Regulations’ (1985) Journal of Business Law 209.

95 Macleod, above n. 3, at 283.â 96â SI 2010/1011.

97CCA 1974, s.61(1)(a). For a general commentary on s.61 of the Act see Brophy v. HFC Bank [2011] EWCA Civ 67 and in particular the statement by Clarke LJ in Watchtower Investments

(Disclosure of Information) Regulations 2004,114 and the Financial Services (Distance Marketing) Regulations 2004.115 The Consumer Credit (Disclosure of Information) Regulations 2004 apply to face-to-face advice situations and apply to all consumer credit agreements with the exception of distance agreements and contracts secured on land. The Regulations specify that a creditor must provide the debtor with the same type of information as required in the credit agreement so the debtor can consider the information before entering into the agreement. If the Regulations are not complied with, the creditor is permitted to enforce the agreement against the debtor by obtaining a court order. Furthermore, local authorities or the OFT are able to initiate enforcement proceedings against the creditor under Part 8 of the Enterprise Act 2002. The Financial Services (Distance Marketing) Regulations 2004 apply to financial services contracts and credit agreements agreed at a distance, that is to say, without any face-to-face communications. These Regulations stipulate that explicit information must be provided to the consumer prior to entering into the agreement. If it relates to a consumer credit agreement the information must include the name and address of the creditor, the main characteristics of the credit, the total price payable for the credit, the collection of payment, and information relating to the cancellation or termination of the agreement. Importantly, the Regulations allow a right of cancellation where the contract is entered into at a distance and the fourteen-day period of cancellation is from the conclusion of the contract or from the date on which the consumer obtained the terms and conditions.

Further amendments were introduced by the Consumer Credit (Disclosure of Information) Regulations 2010, which apply to unsecured credit including loans, hire-purchase, credit cards and overdrafts.116 These Regulations provide that certain information must be revealed to the borrower ‘in good time’ prior to entering into the credit agreement.117 In the vast majority of instances this will be communicated via the pre-contract credit information form. If these Regulations are not complied with the agreement is unenforceable. Furthermore, the 2010 Regulations also provide that creditors must provide an adequate explanation to the borrower pre-contract. This is to allow the borrower to evaluate the proposed agreement. The explanation must include:

•any features of the credit which may make it unsuitable for particular types of use;

•how much the borrower will pay periodically and in total;

•features which may have a significant adverse effect in a way that the borrower is unlikely to foresee;

•the principal consequences of failure to make repayments, including legal proceedings and repossession where applicable;

•the right of withdrawal and how/when this can be exercised.