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COMMERCIAL LAW - Essay Example
The development of the credit phenomenon is equivalent to money lending in that exorbitant rates of interest may be charged to consumers for the privilege of paying for services through the use of credit rather than cash. The Credit Act of 1974 is significant in that it seeks to…
However, in protecting the interests of consumers, the Act does not go to the other extreme of compromising the interests of lenders. Since one of the requirements of the Act is that lenders and businesses offering credit are to seek a license before they can enter the business of credit, therefore the Act also protects the interests of genuine lenders by enforcing the repayment of debts that consumers may incur, which cannot be easily escaped.
One of the notable provisions of the Consumer Credit Act of 1974 which has often been questioned is Section 127(3) which allows for certain agreements t be completed nullified if they are considered extortionate. This is one of the radical reform measures being undertaken through the new Consumer Credit Act of 2006, which does away with this provisions and introduces some fresh measures for the protection of lenders, such as allowing a wider range of small businesses to also enjoy the protection afforded to individuals. However, the scrutiny and screening of lenders and donors of credit has also increased considerably through the enhanced powers that are provided to the OFT under the new Act of 2006.
The Consumer Credit Act of 1974 is specifically formulated to regulate all consumer credit and consumer hire arrangements that deal with amounts that are less than 25,000 pounds (www.dti.gov.uk). Therefore at the outset, by regulating such low cost transactions, it works to the benefit of average low and middle income consumers rather than targeting the rich and wealthy who are few in number. The Act also lays out a definition of the range of individuals who are to be protected by the Act .
One of the ways in which the Act protects consumers is by laying down the form and contents which agreements are to be composed of, providing redressal procedures that must be adopted in case there is a default or a termination of the credit arrangement by either party and by disallowing extortionate credit bargains. For ...