What is Consumer Credit Act 1974?

The Consumer Credit Act 1974 is a set of rules put in place by the government to regulate all areas of consumer borrowing and financial transactions between consumers and companies. Before the introduction of the Consumer Credit Act there was very little legislation in force and the small amount there was only covered specific areas such as Hire Purchase Agreements and Moneylenders.

In 1965 the Crowther Committee was formed to analyse the state of consumer credit law in the UK and was chaired by Lord Crowther. In 1971 they reported to the government that a reform of consumer credit law was required to improve regulation and fair trading between consumers and companies, so a bill was generated and passed to Parliament and it finally came into force on 31st July 1974.

What is it for?
The Consumer Credit Act regulates all aspects of financial transactions between consumers and companies. It helps protect consumers from being mis sold products or services and brings greater regulation to companies trading in the financial and credit industries, such as licensing and a strict advertising protocol for specific sectors of the financial markets. An example of such licensing would be the Consumer Credit License, which must be obtained from the Office of Fair Trading by any company wanting to trade in the financial sector.