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Overview

Consumer Credit Act 2006

There has been a Consumer Credit Act since 1974, which required most businesses with an involvement in consumer credit to hold a licence issued by the Office of Fair Trading. The new 2006 Act does not change that, but it does change a number of things, not the least of which is that all licence holders must comply with new complaints rules from 6th April 2007, or they will be committing a criminal offence.

The new rules require licence holders to

Have written complaints procedures
Make their customers aware of the Financial Ombudsman Service
Keep to very tight deadlines in handling complaints
Tell complainants that they have the right to refer their complaints to the FOS if they are not satisfied
Pay the FOS case fees (£400 for each referral after the first two each year)
Pay the FOS levy (about £150 collected with the OFT licence fee)
Pay any awards made by the FOS (up to £100,000 per complaint)

There is no right of appeal from a decision of an Ombudsman. If an award is made against the licence holder, it must be paid.

These are extremely onerous requirements. Some firms without adequate insurance will undoubtedly become insolvent as a result of them. Most firms receive complaints (and the number of complaints is likely to increase as these rules become better known), and although most will involve a lot less than the £100,000 maximum award, a series of small awards could still prove very damaging.

It is therefore essential that the new law is complied with and that complaints are handled in accordance with the rules, as amended on 1st November 2007. Not only will this help keep firms away from a prosecution, but it should also reduce the number of referrals to the FOS and therefore save case fees and reduce the risk of damaging awards.

Visit our Services section now to see how we can help, for surprisingly little cost.

If you are a consumer, please visit our Services section to download our Guidance on Bringing a Consumer Credit Complaint, free of charge.