Transitional provisions in consumer credit law

Relevant to
Licensed consumer credit providers and mortgage providers in the UK

Took effect on
6 April 2008

From 6 April 2008, all new consumer credit agreements - regardless of their value - will be brought into regulation unless they are specifically exempt.

Transitional provision to exempt buy-to-let lending

The Consumer Credit Act 2006 (which amends the 1974 Act) removed the £25,000 financial limit above which consumer credit agreements were previously unregulated. This provision would have brought buy-to-let agreements within the scope of the 1974 Act and thus into regulation.

To prevent this, buy-to-let lending meeting specified criteria will have an exemption under a Legislative Reform Order (LRO) that is due to come into force on 1 October 2008.  Until the LRO comes into force, a transitional arrangement will exempt buy-to-let lending that meets the new criteria from becoming a regulated activity.

Transitional provision for existing unregulated agreements

The lifting of the financial limit only applies to new agreements made on or after 6 April 2008. This means that existing agreements over £25,000 will remain unregulated unless altered.
 
The transitional arrangement provides that previously unregulated agreements (by virtue of the £25,000 financial limit) will remain unregulated where the variation either does not involve the provision of further credit (in the form of a cash loan), or is itself an exempt agreement.

The transitional does not apply to those agreements where the variation does involve the provision of further credit.

• Find details on the transitional provisions on the Department for Business, Innovation & Skills website - Opens in a new window

Full title of regulation
The Consumer Credit Act 2006 (Commencement No. 4 and Transitional Provisions) Order 2008 [SI 2008 831 (C.40)]

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