A large amount of law exists to protect consumers who apply for, or take out credit.

The main controls are in the Consumer Credit Act 1974 (CCA) and the Financial Conduct Authority’s (FCA) Handbook. The following is a summary of the main areas of concern to consumers. If you need further advice, contact Consumerline on 0300 123 6262.

Credit Lending

Any person offering credit or financing to customers must be authorised by the Financial Conduct Authority (FCA), unless they qualify for an exemption or an exclusion. This can include non-profit organisations. These would need to meet the threshold conditions set out in the Financial Services and Markets Act to be authorised.

Firms must follow rules in the FCA Handbook, including the ‘Perimeter guidance’ rules about terms in sales contracts, and the Consumer Protection from Unfair Trading Regulations 2008. Firms that are providing regulated consumer credit agreements or consumer hire agreements must also comply with the provisions of the CCA. A firm needs FCA authorisation to carry out regulated consumer credit activities such as:

  • selling goods or services on credit (including hire purchase);
  • hiring or leasing out goods for more than 3 months;
  • lending money;
  • issuing credit cards;
  • arranging credit for other people;
  • collecting or purchasing consumer credit debts; and
  • helping people with debt problems or advising on their credit standing.

Credit Reference Agencies

Credit Reference Agencies (CRAs) collect information on the financial standing of individuals. There are three main CRAs: Callcredit, Equifax and Experian, and they keep information about almost every adult in the UK. They work with building societies, banks, mobile phone companies and other major retailers to help those businesses make a quick and accurate decision about whether the person applying for credit is likely to pay it back.

If you are refused credit, a lender has to give you the name and address of any CRA they have used if they receive a written request from you within 28 days of you having dealt with them. Failure to do so is a criminal offence.

But you do not have to wait to be refused credit before asking to see what information CRAs hold about you on their files. You have the right to ask them at any time for a copy of your file. You are entitled to receive a copy if you make your request in writing and send a fee of £2. The CRA commits a criminal offence if it fails to give you a copy of your file in response to your request.

Once you have received a copy, if you think any information on the file is wrong and is likely to harm your credit rating, you can ask for that information to be removed or changed. You may also want your file changed if it contains information about other people with whom you have no financial connection.

The CRA commits criminal offences if it fails to correct files. For more information contact Consumerline on 0300 123 6262.

Find out more about your rights on information held by CRAs by contacting the Information Commissioner.