Distance credit and hire contracts

The Consumer Contracts Regulations do not apply to regulated credit agreements such as hire purchase, conditional sale or personal contract purchase because an outright purchase is not being made (ie the customer does not become the legal owner at the outset) and services of a credit nature are not covered by the regulations.

The rules and regulations governing distance credit agreements are complex, with varying aspects governed separately by the:

  • Financial Services (Distance Marketing) Regulations 2004;
  • FCA rules: CONC 2.7;
  • Consumer Credit (Disclosure of Information) Regulations 2010.

Areas for consideration

The requirements differ depending on whether the finance agreement is concluded over the telephone or by other means such as online, and the amount of credit financed. These are the key areas for consideration:

  • Provision of information – more information needs to be provided to consumers for distance contracts.
    • For credit agreements this includes information on:
      • the lender’s authorisation from the FCA;
      • provision of the Standard European Consumer Credit Information (SECCI) in the pre-contractual information.
    • For hire agreements this requires the information set out under section 2 of the Consumer Contracts Regulations (here) to be provided to the customer.
  • Communication between lenders and intermediaries – lenders, dealers and brokers must ensure the correct distance sales documentation and contracts for credit and hire agreements are provided. If the customer is given the wrong information, this could lead to the agreement being unenforceable – leaving the lender without any ownership rights to the vehicle.
  • Hybrid sales and the right to cancel – where some of the sales process is undertaken at a distance and other aspects are conducted at the point of sale, the agreement may be cancellable under the Consumer Credit Act 1974 where either:
  • Right to withdraw replaces right to cancel – for regulated credit agreements where the customer has the right to withdraw, they will not have the right to cancel the agreement. The right to withdraw only allows the customer to withdraw from the finance agreement, not from the purchase of the vehicle.

Rights to redress

Where there are satisfactory quality issues with a vehicle purchased using a distance credit or hire agreement, the customer has the same rights to reject, repair and replace under the Consumer Rights Act 2015 and additional rights under the Consumer Protection from Unfair Trading Regulations 2008 as they do with an on-premises contract.