Buying on credit is a form of borrowing. It includes paying by credit or store card, 'hire purchase', and other credit agreements including 'interest-free' credit where you 'buy now pay later'. Before buying on credit it's important to make sure you are able to afford the repayments and to compare deals.
New rules that give consumers greater freedom and protection when taking out credit have come into force. The changes to the Consumer Credit Act also make sure that lenders act more responsibly.
New consumer credit rules
Under the new rules which came into force on 1 February 2011, customers have:
- Up to 14 days to cancel new loan agreements (excluding loans over £60,260, loans secured on land or loans to purchase land)
- The option to make partial early repayments on loans – previous rules meant borrowers were only able to pay the full amount off early
Lenders will now have greater responsibility towards consumers and must:
- Give borrowers standardised pre-contractual information to help them compare different loans
- Ensure borrowers understand the detail of their particular loan
- Carry out a thorough check on borrowers’ creditworthiness before any loan is agreed
Credit cards
Goods and services purchased using a credit card and totalling in excess of £100, results in you having an equal claim against the finance company even if only the deposit has been paid using credit as provided by section 75 of the Consumer Credit Act 1974 (as amended) - (equal liability). Similarly if the goods or services as purchased above are found to be defective, this means you may have an equal claim for compensation against both retailer and finance company. Section 75 does not apply to charge cards such as American Express as these are debit cards.
Items purchased at home or abroad using a credit card and totalling over £100 allow for you to have an equal claim against the finance company for the total value of the contract in the event the goods are faulty and the trader has since ceased trading.
Interest free credit
Interest-free credit deals allow you to 'buy now pay later'. But if you don't make the payment by the due date, you end up paying interest - usually at a high rate - on the whole amount.
Beware of being tempted to buy goods simply because you get interest-free credit. Many credit companies rely on the fact that you won't be able to make the full payment on time. If you decide to buy this way, keep a note of all your payments and the date you made them.
Hire purchase
With hire purchase (HP), you make monthly payments (which include interest) for the item you buy, but you don't own it until you've paid back all the money you owe. The HP company can claim the goods back if you don't make your payments.
It can be easier to get credit from an HP company than a bank or credit card company, but it's usually a more expensive way to borrow. Always shop around for the best hire purchase deals.
The Government's Office of Fair Trading (OFT) provides a guide to choosing and using HP, including points to look out for in the contract and how to shop around.
Pawnbroking
Pawnbrokers will loan monies in exchange for an item of security (the pawn). A pawn receipt is issued from the broker and is required to redeem the pawn. Redemption is normally within six months after which time the broker can sell or keep the item. Interest charges tend to be above normal bank / building society rates.
Credit and debt
Spreading the cost of purchasing goods and services involves entering into a credit agreement. Credit agreements contain "small print" that explain your rights and obligations and should always be read before signing. Beware of loan sharks or unlicensed traders as they often charge exorbitant interest rates and are trading illegally. For further information see dealing with loan sharks on the Directgov website.
Debt
If you fall into debt never ignore the problem as it will not go away. Agencies such as your local Citizens Advice Bureau, will provide guidance and help on how you should approach your creditors.
For further information on basic debt advice contact Citizens advice bureau. For further information regarding money lending and obtaining credit visit the Directgov website for your consumer rights. If you wish to contact Waltham Forest Trading Standards Service, please telephone 020 8496 3000 or email trading.standards@walthamforest.gov.uk
Contact
Environmental Health and Trading Standards
Environment and Regeneration
Waltham Forest Council
Sycamore House
Forest Road
Walthamstow E17 4JF
Tel 020 8496 3000
Email wfdirect@walthamforest.gov.uk
