1.—(1) This Order may be cited as the Consumer Credit (Exempt Agreements) Order 1989 and shall come into force on 19th June 1989.
(2) In this Order—
“the Act” means the Consumer Credit Act 1974;
“business premises” means premises for occupation for the purposes of a business (including any activity carried on by a body of persons, whether corporate or unincorporate) or for those and other purposes;
and references to the total charge for credit and the rate thereof are respectively references to the total charge for credit and the rate thereof calculated in accordance with the Consumer Credit (Total Charge for Credit) Regulations 1980(1).
(3) The Orders specified in Schedule 2 to this Order are hereby revoked.
2.—(1) The Act shall not regulate a consumer credit agreement which falls within section 16(2) of the Act, being an agreement to which this paragraph applies.
(2) Where the creditor is a body specified in Part I of Schedule 1 to this Order, or a building society authorised under the Building Societies Act 1986(2), or an authorised institution under the Banking Act 1987(3) or a wholly-owned subsidiary of such an institution, paragraph (1) above applies only to—
(a)a debtor-creditor-supplier agreement falling within section 16(2)(a) or (c) of the Act;
(b)a debtor-creditor agreement secured by any land mortgage to finance—
(i)the purchase of land; or
(ii)the provision of dwellings or business premises on any land; or
(iii)subject to paragraph (3) below, the alteration, enlarging, repair or improvement of a dwelling or business premises on any land;
(c)a debtor-creditor agreement secured by any land mortgage to refinance any existing indebtedness of the debtor, whether to the creditor or another person, under any agreement by which the debtor was provided with credit for any of the purposes specified in heads (i) to (iii) of sub-paragraph (b) above.
(3) Head (iii) of sub-paragraph (b) of paragraph (2) above applies only—
(i)where the creditor is the creditor under—
(a)an agreement (whenever made) by which the debtor is provided with credit for any of the purposes specified in head (i) and head (ii) of that sub-paragraph; or
(b)an agreement (whenever made) refinancing an agreement under which the debtor is provided with credit for any of the said purposes,
being, in either case, an agreement relating to the land referred to in the said head (iii) and secured by a land mortgage on that land; or
(ii)where a debtor-creditor agreement to finance the alteration, enlarging, repair or improvement of a dwelling, secured by a land mortgage on that dwelling, is made as a result of any such services as are described in section 4(3)(dd) of the Housing Associations Act 1985(4) which are certified as having been provided by—
(a)a local authority;
(b)a housing association within the meaning of section 1 of the Housing Associations Act 1985 or Article 114 of the Housing (Northern Ireland) Order 1981(5);
(c)a body established by such a housing association for the purpose of providing such services as are described in the said section 4(3)(dd);
(d)a charity;
(e)the National Home Improvement Council; or
(f)the Northern Ireland Housing Executive.
(4) Where the creditor is a body specified in Part II of Schedule 1 to this Order, paragraph (1) above applies only to an agreement of a description specified in that Part in relation to that body and made pursuant to an enactment or for a purpose so specified.
(5) Where the creditor is a body specified in Part III of Schedule 1 to this Order, paragraph (1) above applies only to an agreement of a description falling within Article 2(2)(a) to (c) above, being an agreement advancing money on the security of a dwelling-house.
3.—(1) The Act shall not regulate a consumer credit agreement which is an agreement of one of the following descriptions, that is to say—
(a)a debtor-creditor-supplier agreement being either—
(i)an agreement for fixed-sum credit under which the total number of payments to be made by the debtor does not exceed four, and those payments are required to be made within a period not exceeding 12 months beginning with the date of the agreement; or
(ii)an agreement for running-account credit which provides for the making of payments by the debtor in relation to specified periods and requires that the number of payments to be made by the debtor in repayment of the whole amount of the credit provided in each such period shall not exceed one;
not being, in either case, an agreement of a description specified in paragraph (2) below; and in this sub-paragraph, “payment” means a payment comprising an amount in respect of credit with or without any other amount;
(b)a debtor-creditor-supplier agreement financing the purchase of land being an agreement under which the number of payments to be made by the debtor does not exceed four; and in this sub-paragraph, “payment” means a payment comprising or including an amount in respect of credit or the total charge for credit (if any);
(c)a debtor-creditor-supplier agreement for fixed-sum credit to finance a premium under a contract of insurance relating to any land or to anything thereon where—
(i)the creditor is the creditor under an agreement secured by a land mortgage on that land which either is an exempt agreement by virtue of section 16(1) of the Act or of article 2 above, or is a personal credit agreement which would be an exempt agreement by virtue of either of those provisions if the credit provided were not to exceed £15,000;
(ii)the amount of the credit is to be repaid within the period to which the premium relates, not being a period exceeding 12 months; and
(iii)there is no charge forming part of the total charge for credit under the agreement other than interest at a rate not exceeding the rate of interest from time to time payable under the agreement mentioned in head (i) above,
and the number of payments to be made by the debtor does not exceed twelve; and in this sub-paragraph “payment” has the same meaning as it has in paragraph (1)(b) above; and
(d)a debtor-creditor-supplier agreement for fixed-sum credit where—
(i)the creditor is the creditor under an agreement secured by a land mortgage on any land which either is an exempt agreement by virtue of section 16(1) of the Act or of article 2 above, or is a personal credit agreement which would be an exempt agreement by virtue of either of those provisions if the credit provided were not to exceed £15,000;
(ii)the agreement is to finance a premium under a contract of life insurance which provides, in the event of the death before the credit under the agreement referred to in head (i) above has been repaid of the person on whose life the contract is effected, for payment of a sum not exceeding the amount sufficient to defray the sums which, immediately after that credit has been advanced, would be payable to the creditor in respect of that credit and of the total charge for that credit; and
(iii)there is no charge forming part of the total charge for credit under the agreement other than interest at a rate not exceeding the rate of interest from time to time payable under the agreement referred to in head (i) above,
and the number of payments to be made by the debtor does not exceed twelve; and in this sub-paragraph, “payment” has the same meaning as it has in sub-paragraph (1)(b) above.
(2) The descriptions of agreement referred to in sub-paragraph (a) of paragraph (1) above and to which accordingly that sub-paragraph does not apply are—
(a)agreements financing the purchase of land;
(b)agreements which are conditional sale agreements or hire-purchase agreements; and
(c)agreements secured by a pledge (other than a pledge of documents of title or of bearer bonds).
4.—(1) The Act shall not regulate a consumer credit agreement which is an agreement of one of the following descriptions, that is to say—
(a)subject to paragraphs (2), (3) and (4) below, any debtor-creditor agreement in respect of which the rate of the total charge for credit does not exceed the rate referred to in paragraph (5) below;
(b)subject to paragraph (4) below, a debtor-creditor-supplier agreement for fixed-sum credit where—
(i)the creditor is the creditor under an agreement secured by a land mortgage on any land which either is an exempt agreement by virtue of section 16(1) of the Act or of article 2 above, or is a personal credit agreement which would be an exempt agreement by virtue of either of those provisions if the credit provided were not to exceed £15,000;
(ii)the agreement is to finance a premium under a contract of life insurance which provides, in the event of the death before the credit under the agreement referred to in head (i) above has been repaid of the person on whose life the contract is effected, for payment of a sum not exceeding the amount sufficient to defray the sums which, immediately after that credit has been advanced, would be payable to the creditor in respect of that credit and of the total charge for that credit; and
(iii)there is no charge forming part of the total charge for credit under the agreement other than interest at a rate not exceeding the rate of interest from time to time payable under the agreement referred to in head (i) above,
and in respect of which the rate of the total charge for credit does not exceed the rate referred to in paragraph (5) below;
(c)subject to paragraph (4) below, a debtor-creditor agreement in respect of which the only amount included in the total charge for credit is interest which cannot under the agreement at any time exceed the higher of the following, that is to say—
(i)the sum of one per cent and the highest of any base rates published by the banks named in paragraph (6) below, being the latest rates in operation on the date 28 days before any such time; and
(ii)13 per cent;
and for the purposes of this sub-paragraph, “interest” means interest at a rate determined in accordance with the formula set out in paragraph (1) of regulation 7 of the Consumer Credit (Total Charge for Credit) Regulations 1980(6), and in that formula as applied by this paragraph “period rate of charge” has the meaning assigned to it in paragraph (2) of that regulation.
(2) Subject to paragraph (3) below, sub-paragraph (a) of paragraph (1) above does not apply to agreements which provide for an increase in, or permit the creditor to increase, the rate or amount of any item which—
(a)is included in the total charge for credit; or
(b)would fall to be so included, apart from the operation of regulation 14 of the Consumer Credit (Total Charge for Credit) Regulations 1980,
after the relevant date of the agreement within the meaning of regulation 1(2) of those Regulations.
(3) Sub-paragraph (a) of paragraph (1) above does apply to agreements—
(a)in relation to which the debtor, or any one of two or more debtors where each debtor is a relative of the other debtor or of one of the other debtors, is an employee of the creditor or of an associate of his and which provide for an increase in, or permit the creditor to increase, the rate or amount of any item such as is mentioned in paragraph (2) above on the termination of such employment with the creditor or such associate, as the case may be; or
(b)under which the rate or amount of any such item falls to be ascertained throughout the duration of the agreement by reference to the level of any index or other factor in accordance with any formula specified in the agreement;
and which do not provide for an increase in, or permit the creditor to increase, the rate or amount of any item mentioned in paragraph (2) above in any way other than those permitted by either or both of sub-paragraphs (a) or (b) of this paragraph.
(4) Paragraph (1) above does not apply to agreements under which the total amount to be repaid by the debtor to discharge his indebtedness in respect of the amount of credit provided may vary according to any formula specified in the agreement having effect by reference to movements in the level of any index or to any other factor.
(5) The rate mentioned in sub-paragraphs (a) and (b) of paragraph (1) above is the higher of the following, that is to say—
(a)the sum of one per cent and the highest of any base rates published by the banks named in paragraph (6) below, being the latest rates in operation on the date 28 days before the date on which the agreement is made; and
(b)13 per cent.
(6) The banks referred to in paragraphs (1)(c) and (5)(a) above are—
Bank of England
Bank of Scotland
Barclays Bank PLC
Clydesdale Bank PLC
Co-operative Bank Public Limited Company
Coutts & Co.
Lloyds Bank PLC
Midland Bank Public Limited Company
National Westminster Bank Public Limited Company
The Royal Bank of Scotland p.l.c.
TSB England & Wales public limited company.
5. The Act shall not regulate a consumer credit agreement made—
(a)in connection with trade in goods or services between the United Kingdom and a country outside the United Kingdom or within a country or between countries outside the United Kingdom, being an agreement under which credit is provided to the debtor in the course of a business carried on by him; or
(b)between a creditor listed in Part IV of Schedule 1 to this Order and a debtor who is—
(i)a member of any of the armed forces of the United States of America;
(ii)an employee not habitually resident in the United Kingdom of any of those forces; or
(iii)any such member’s or employee’s wife or husband or any other person (whether or not a child of his) whom he wholly or partly maintains and treats as a child of the family.
6. The Act shall not regulate a consumer hire agreement where the owner is a body corporate authorised by or under any enactment to supply electricity or water and the subject of the agreement is a meter or metering equipment used or to be used in connection with the supply of electricity or water, as the case may be.
Francis Maude
Parliamentary Under-Secretary of State,
Department of Trade and Industry
19th May 1989