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Credit Debt And Your Rights

Do you buy clothes, holidays or gifts on credit card? Then you’re one of millions of people who use consumer credit. Simply put, it’s a way to get what you want in advance of paying for it. The most common example of consumer credit is using a credit card. However, until you make the full repayments, you are effectively in debt to the company you owe money to. So what is consumer credit debt and what are your rights when it comes to using it?

Table of contents:

    Consumer Debt

    In general terms, consumer debt is a personal debt that you owe as a result of buying something on credit. Personal debts include credit card debt, student loans, car loans and payday loans, as well as mortgages. Personal debts are usually taken out for a variety of reasons, whether it is to finance a specific purchase or to fund everyday living expenses.

    What Is The Consumer Credit Act

    The Consumer Credit Act protects you, the consumer, when you are using credit. It sets out your rights when you borrow money and what creditors must do when they loan you money. The latest version of the Act is from 2006, so if you feel your rights have been breached when it comes to consumer credit, then you can refer to the points within this Act. It covers regulated debts, which applies to the most common household borrowing, including;

    • Credit cards
    • Store cards
    • Store Finance
    • Payday Loans
    • Personal Loans
    • Hire purchase
    • Catalogues

    However, it doesn’t cover these types of debt, which are unregulated;

    • Mortgages
    • Debts to individuals, such as family or friends
    • Debts to unlicensed lenders or loan sharks
    • Household bills, including gas, electric and water
    • Debts to local or central Government, including council tax, benefit overpayments and taxes
    • Charge cards

    This list is not exhaustive, but acts as a general guideline of some common consumer credit debt.

    Credit Debt And Your Rights

    When it comes to credit debt and your rights, there could be a scenario where you disagree with the amount of debt you owe. Or how the creditor is pursuing you for payment. In which case, you can refer back to the Consumer Credit Act. These are some examples of your rights below.

    • Each creditor must send you regular statements and an arrears letter if you fall behind on a regulated debt. So check you have been receiving these before dealing with any other action from your creditors.
    • A creditor has to act responsibly, which means they are not allowed to harass you while pursuing repayments. This includes contacting friends and family without your consent.
    • Also, a creditor can only contact you between 8am-9pm Monday to Friday, so if it’s outside of those hours, you don’t have to respond.
    • If you do fall into arrears, a regulated creditor must send you a default notice and give you time to bring your account up to date before taking further action.

    What About Unregulated Credit Debt and Your Rights

    If you owe money to a lender and it’s unregulated debt, then you may not be covered by all the rights within the Consumer Credit Act. Perhaps you have agreed other terms and conditions with the lender directly. If you are entering into an unregulated debt, make sure you read all the small print, especially the terms and conditions.

    Typically, there are still legal requirements that every creditor must follow, but you may have less protection as a consumer with unregulated debt.

    How To Pay Back Consumer Credit Debt

    When it comes to paying back the money you owe, you have the right to agree your terms with the creditor. This can include flexible repayment terms, setting up a payment plan or another option that suits you.

    If you’re really struggling with paying back debt, then you can get in touch with your creditors and ask them if you can make smaller repayments or even freeze payments for a few months. In some situations, you may have lost your job, or become sick and unable to work, and this will affect your ability to pay back consumer debt. In which case, they may offer hardship arrangements in extreme cases.

    Your Right To Complain

    You have a right to complain when it comes to credit debt and your rights. If you think a creditor is chasing you for money unfairly, you can complain to them in the first place, or to a trade association.

    It may reach the point where you fear eviction or repossession, in which case, you can ask for help from a free debt service in your area as soon as possible. A debt adviser will help you to put a plan together and give you advice on your consumer rights as well.

    It doesn’t matter how you make your complaint, as your creditor or energy supplier should deal with it in the same way, whether it’s in writing, over the phone or in person.

    Try to make your complaint in writing, this way you get to keep a copy so you’ve got a record of what was said which can be useful later on. If you post your complaint, then use recorded mail, and this allows you to check your letter was definitely received. Keep any replies as well.

    Also, you can ask your creditor to stop any further action while they are investigating your complaint.

    Ideally, your creditor will confirm they have received your complaint which should explain how they will deal with it and how long it will take. You should get a final reply and most aim to do this within 8 weeks.

    Conclusion

    There are several examples of consumer credit debt and if you can manage it wisely, then it’s often a useful way of borrowing. However, it’s always best to be aware of the pros and cons before taking out a loan.

    The Consumer Credit Act offers several rights to consumers while they are still responsible for repayment after borrowing money. Make sure you know what your consumer rights are so if something goes wrong with your financial agreement, you’ll know how to deal with it.

    Remember, you don’t have to struggle with debt on your own and there is free help and support available.

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