THE Consumer Credit Act, 1995 has been on the statute books since July, 1995. It comes into operation later this month and from then it will be the only piece of legislation in Ireland regulating consumer credit.

The delay in bringing the Act into force has given industries affected by it an opportunity to adjust their operations and business practices to bring them in to line with the new provisions.

Who is affected?

All persons and companies involved in the business of giving credit to consumers are covered by the Act. The Act also covers hire purchase agreements, consumer hire agreements, moneylending agreements and housing loans. But certain types of credit transactions are excluded.

These include credit union loans, pawnbroking, certain housing loans by local authorities and credit advanced by an employer to an employee where the employee receives terms more favourable than generally offered to the public.

Keeping consumers informed

The purpose of the Act is to ensure transparency in credit agreements. It is aimed at ensuring that consumers understand exactly what they are taking on when receiving a credit advance.

To this end, the Act provides that credit agreements must be in writing and must explain clearly the credit terms including the cash and credit price, the amount and number of repayments and the annualised percentage rate (APR).

There is a serious downside for creditors who breach these obligations. The Act provides that a credit agreement, or any guarantee or security given in respect of it, will not be enforceable where these requirements have not been observed.

The Act specifies similar compliance obligations for hire purchase agreements, consumer hire agreements, moneylending agreements and housing loans.

Credit advertisements are regulated to ensure that the consumer is not enticed by misleading "rosy" advertising of favourable credit terms.

"Cooling off" period

An important change in the law is the introduction of a 10 day "cooling off" period. This allows the consumer to terminate an agreement within 10 days of receiving it by giving written notice to this effect to the creditor, or owner, as the case may be, unless he has separately waived this right in writing.

In practical terms, businesses supplying goods on credit may seek to delay delivery for 10 days. This cooling off period does not apply to housing loans, credit card or overdraft transactions.

Restrictions on creditors

"Bullying" tactics by creditors are prohibited. Restrictions are introduced prohibiting creditors from visiting or telephoning a consumer at his place of work and from calling on the consumer between the hours of 9.00 p.m. at night and 9.00 a.m. in the morning, or on Sundays or public holidays without his consent. Strict limits are also imposed on the sending of written communications to the consumer's place of work.

Reductions in cost of credit

The Act provides that a consumer is entitled to a reduction in the total cost of credit in two situations: where the amount owed in the credit agreement or any sum becomes payable before the time fixed by the agreement and where a consumer discharges its obligations before the time fixed for the termination.

Mortgage lenders

The Act introduces new provisions regulating housing loans by "mortgage lenders" and also the conduct of "mortgage agents" and "mortgage intermediaries".

The following are the most important provisions:

. A borrower can make early repayment of the whole or part of a housing loan without being liable to pay any early redemption fee. This does not apply where the loan agreement provides that the rate of interest is fixed at the time of redemption.

. A warning must appear in documents relating to a housing loan to the effect that the property is at risk in the event of default.

. Mortgage lenders have to bear the costs in respect of the legal investigation of title of the property secured.

Provisions affecting financial institutions

The Act introduces a number of provisions into Irish law, the effect of which is to give substantial protection to the consumer over the period of the credit agreement and these changes may affect securitisations also contemplated by financial institutions.

Where rights under an agreement are assigned by a creditor or owner to a third party, for example, in a sale or in an assignment by way of security of a lease or loan portfolio, consumers who are customers of the creditor can now exercise rights of set off against the assignee.

This is the position whether or not these rights arise before or after notice of the assignment has been given to them. The practical effect of this is that consumers can deduct from payments due by them to the assignee of the portfolio such things as claims for faulty goods.

Where a consumer has issued a cheque or promissory note to a creditor, and the creditor transfers it to a third party, the consumer can exercise rights of set off against the third party.

Moneylending

The Act repeals existing legislation on moneylenders. All moneylenders are required to hold a moneylender's licence and the Act outlines the procedural requirements for obtaining such a licence. Moneylenders have to supply a repayment book to the consumer which contains prescribed information.

This includes details of the amount of credit being advanced, the amount and number of repayments and the rate of interest charged and the amount of each collection charge, if any.

Moneylenders are prohibited from charging a consumer in respect of expenses relating to the negotiation or granting of the loan. Director of Consumer Affairs

The Director of Consumer Affairs is given a watchdog role under the Act and has general responsibility for overseeing its operation. He may apply to the High Court for a declaration that the total cost of credit and any charge provided for in a credit agreement, other than one advanced by a bank or mortgage lender, is excessive.

The court has power where it is decided that the total cost of credit or any charge is excessive to vary the agreement so as to do justice between the parties.

This new legislation introduces further protections for consumers in the vast majority of situations where credit is extended to them, and It clearly will affect business practices of those involved in extending credit to individuals in their personal capacity.