New guide should point consumers in right direction

THE Consumer Credit Act, which finally came into effect last Monday may well be the single largest piece of consumer legislation ever to be passed. And because it consolidates existing legislation and provides for everything from consumer credit, hire purchase, leasing, housing loans, moneylending, pawnbroking and, bank charges, it is also a very hefty document.

The Office of the Director of Consumer Affairs, which has the responsibility of policing this Act has put out A Rough Guide to the Consumer Credit Act 1995 which addresses, in its view, "the most important issues arising".

The Annual Percentage Rate, or APR, is one of the central planks on which the Consumer Credit Act is built since it allows consumers to shop around for the best lending rate. "The Act requires that the APR be shown prominently in consumer credit agreements and advertisements. No other rate of interest may appear."

This is a significant development since mortgage lenders have always given prominence to the lower, nominal rate of interest in their advertisements.

The Act also lays down standard requirements for the way in which all lenders work out the APR according to the guide and provides a mathematical method for the calculation of APR in an appendix to the Act.

The guide points out that consumers can expect advertisements also include: "details of any charges additional to payment of capital and interest, a statement of any security which may be required, a clear indication of any restrictions on the availability of credit and the cash price of goods and services; the total cost of credit, the number, amount and timing of instalments, the amount of any deposit and number of instalments which must be paid before delivery of goods."

The guide also details the specific information and terms that must be contained in various credit agreements, such as cash loans, credit sales, credit cards and running accounts, hire purchase agreements.

Of considerable interest to many consumers will be the enforceability of contracts that do not meet the conditions of the new Act. The new guide states: "In general if [the above requirements are not complied with the agreement will be unenforceable by the credit. In limited circumstances, however, a court may decide that the contract will be legally enforceable; these circumstances are where the infringement was not deliberate, the consumer has not been prejudiced and the court considers that is just and equitable that the contract should be enforceable."

Other practices which are outlawed under the Act, states the guide include "inertia selling", where consumers have to indicate, usually by ticking off a box or by writing back to the company, that they do not "wish to obtain credit, purchase or hire any goods or avail of any service to the agreement" and the linking of credit with the purchase of any other goods or services. This should finally put paid to the dubious practice by mortgage lenders of withholding a loan until the buyer agrees to also buy an insurance product, from which the lender can earn commission.

Under the new Act, the issuing of moneylending licences and the policing of their activities is transferred to the Director of Consumer Affairs. "The Act places an onus on moneylenders to provide their customers with detailed agreements which show the total cost of credit and the rate of interest plus collection charge (if applicable)," states the guide. "The customer must also be issued with a repayment book ... the moneylender must keep and maintain detailed records in respect of each agreement. There is also a prohibition on collecting repayments at certain times, e.g. a moneylender cannot visit or telephone a customer between 9 p.m. and 10 a.m. on a weekday or at any time on a Sunday or public holiday."

Considerable new provisions apply to housing loans under the Act and the guide points out the main thrust of its powers, specifically about the publication of APR rates, requirements concerning the insuring of property, how the costs of legal investigation of the title must be borne by the lender, how the lender must make mortgage protection insurance available to borrowers but how borrowers are free to arrange their own and the banning of conditional lending. Health warnings must also be attached to information documents and there are new regulations about the disclosure of fees, commissions, etc paid in respect of endowment loans. The Consumer Affairs Office will be publishing a separate guide to mortgage finance soon.

A copy of the Rough Guide to, the Consumer Credit Act 1995 is available from the Office of the Director of Consumer Affairs at the new address of 4-5 Harcourt Road, Dublin 2. Tel. 402 5500, Fax.402 5501.