The Consumer Credit Act Fixed Sum Loan Agreement Explained

If you are considering a loan, it is important to understand the terms of the agreement you are entering into. This is especially true for fixed sum loan agreements that are governed by the Consumer Credit Act (CCA).

The CCA is a UK law that was enacted to protect consumers who borrow money. It requires lenders to disclose important information about the loan and sets out certain rights for borrowers.

So, what is a fixed sum loan agreement? Simply put, it is a loan where a fixed amount is borrowed and repaid over a set period of time. This type of loan is different from a revolving credit agreement, like a credit card, where the amount borrowed can vary from month to month.

Under the CCA, all lenders who provide fixed sum loans must give the borrower a pre-contract information document that explains the key terms of the loan. This document should include:

– The amount being borrowed

– The duration of the loan

– The interest rate and any fees

– The total amount payable

– The borrower’s right to cancel

The lender must also give the borrower a statement of account after each payment is made. This document should show the amount paid, the amount outstanding, and any charges or fees that have been added.

One of the most important rights that the CCA gives to borrowers is the right to cancel the loan within 14 days of signing the agreement. This is known as the cooling-off period. During this time, the borrower can cancel the loan without any penalty and without having to give a reason.

If the borrower decides to cancel the loan, they must inform the lender in writing. The lender must then refund any money that has been paid and cancel any security that was taken for the loan.

If the borrower has already received the money and wants to cancel the loan, they must repay the borrowed amount plus any interest that has accrued up to the date of cancellation.

In summary, a fixed sum loan agreement is a loan where a fixed amount is borrowed and repaid over a set period of time. The CCA provides important protections for borrowers, including the right to receive key information before signing the agreement, the right to cancel the loan within 14 days, and the right to receive a statement of account after each payment is made. Understanding these protections is essential when considering a loan.