scots law
basic advice from govan law centre

consumer credit agreements


  • The Consumer Credit Act 1974 regulates many credit agreements in the UK. Some categories of agreement are exempt – for example; trade credit on terms of payment within 30 days; a running-credit account (such as credit cards, where the whole of the credit is repayable in one instalment); a low interest agreement (not exceeding an annual percentage rate of 1 per cent above  the highest base rate of an English or Scottish bank); non-commercial agreements; and small agreements (defined under s.17 of the 1974 Act).

  • When an individual enters into a ‘consumer credit agreement’ or ‘hire-purchase agreementwhich is not signed on the premises of the lender or owner, they may have an opportunity to change their mind, and cancel it. This is know as the ‘cooling-off period’ (cancellation provisions are set out in ss.67-73 of the 1974 Act).

  • The ‘cooling-off’ period begins when the debtor or hirer signs the agreement – it ends 7 days after the copy or second statutory notice is received by the debtor or hirer. If you decide to cancel your agreement this must be done in writing – obtain legal advice from a solicitor or help from an advice agency advisor if you are in doubt.

  • When you enter into a consumer credit agreement regulated by the 1974 Act, the agreement must be in the proper prescribed form (as set out in the Consumer Credit (Agreement) Regulations 1983, SI 1983/1553). This requirement is designed to protect the debtor, as the prescribed form contains important information and details of debtor protections and remedies under the 1974 Act.

  • The agreement must also be properly signed by both parties. You are legally entitled to a copy of the agreement (ss.62-63 of the 1974 Act).

  • If your agreement is not in the proper prescribed form or was improperly executed (signed) it may only be enforced by order of the sheriff court (s.65(1), 1974 Act); it may be that the agreement is not enforceable at all (subject to the discretion of the court).

  • Companies that lend or collect money must be licensed by the Office of Fair Trading (OFT). If you have a complaint about the way a lender or debt collector has treated you – contact the OFT at: The OFT website also contains advice on consumer credit and details of how to get in contact with the OFT.

  • Early settlement – You are entitled to complete your payments under a consumer credit agreement at any-time (s.94, 1974 Act) – this is known as early settlement. You may be entitled to a rebate on the interest payable – see the Consumer Credit (Rebate on Early Settlement) Regulations 1993 (SI 1983/1562) as amended by SI 1989/596.

  • Default – Where you are in default of a consumer credit agreement the creditor cannot take any action against you until he/she has served a ‘default notice’, and the period of time in that notice has past. This is in a prescribed form, and will tell you what the breach is (the default ground) and what you need to do to remedy it. In other words, the default notice gives you a chance to rectify the problem. If you do not rectify the default notice, the agreement can be treated as ‘terminated’ in law. This means the creditor can now enforce the agreement by court action.

  • It is important to remember that debtors are entitled to make 'time orders' under section 129 of the Consumer Credit Act 1974. This means you can ask the court to allow you time to pay back the debt. In deciding whether to make a time order, the sheriff must consider whether it is just to do so, taking into account whether the sum offered is reasonable having regard to the means of the debtor. If you want time to pay - you should obtain assistance from a law centre, local firm of solicitors, or advice agency as soon as possible.  On this site you can download a time order application (under the 1974 Act), leading Scottish caselaw and further practical assistance.

  • If you receive a default notice and are in arrears of payment, you can get free money/debt advice from a local law centre or money advice agency. It is always better to obtain assistance as soon as possible.