Birmingham motor traders who offer credit to customers could be caught out by the provisions of the new Consumer Credit Act 2006, warns a leading local solicitor.
Tim Langley, a partner in the specialist automotive unit at solicitors Blakemores, says finance companies and dealers need to be very careful to ensure the provisions of the new Act are observed so as to avoid being left with agreements which are unenforceable or rewritten by the courts.
He said: "This new Act significantly alters some of the most fundamental aspects of the law in this area. At present the Consumer Credit Act 1974 regulates most credit agreements where the amount of credit does not exceed £25,000, but the new Act will abolish this financial limit for individuals. The effect will be drastically to widen the number of agreements which will be regulated."
Under the new Act, the court will have power to rewrite any finance agreement where the relationship between the finance company and the customer is "unfair".
Stringent provisions govern the form and content of advertising material, pre-contract information and the written credit agreements themselves. The Act will also make it easier and cheaper for consumers to complain. Not only will it be free for a consumer to refer a complaint to the Financial Ombudsman Service, the finance company will have to pay a fee to the FOS to deal with the dispute.
Mr Langley is concerned that the lack of a definition of what constitutes an "unfair relationship" is likely to generate uncertainty for the foreseeable future.
"Businesses are very much at risk when even a minor omission or mistake in the documentation can render an agreement unenforceable. Consumers are becoming more and more aware of their rights and are not afraid to exercise them."
