Protection Against Excessively High Interest Rates

Under the Consumer Credit Act, a lender shouldn't charge an 'extortionate' amount for loans or credit, but the Act doesn't define 'extortionate' - it's up to the courts to decide, in individual cases. They'll take into account the particular circumstances of the loan - the creditworthiness of the borrower, the prevailing interest rate, whether the borrower was pressurised in any way, and so on.

All loans - even if they're over the £45,000 limit - can be reviewed in this way. But only the borrower can ask for such a review - not the local Trading Standards Department or a debt counsellor, say. You can ask for the review during court proceedings started by a lender to whom you owe money, but you can also take the initiative yourself and ask the court to review the interest rate you're paying on a loan which isn't in default. If the court decides that the rate of interest is extortionate, it has very wide powers to alter the loan agreement. It's a good idea to get legal advice before going to court.

WARNING The court's view of what's extortionate and

what's not can be an unpleasant shock. For example, in one case, an APR of 57.3 per cent was being charged, but the judge ruled that the deal was not extortionate because the loan was for a very short period of time, was fairly risky from the lender's point of view, was arranged at very short notice with few checks being made, and the judge was convinced that the borrower was well aware of the circumstances when he took out the loan.


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Licensing

Under the Consumer Credit Act, lenders making loans to individuals up to the value of £45,000 must be licensed. It's a criminal offence for them to carry on their business if they're not. There are a few exceptions such as local authorities. Also, lenders making loans of less than £60 don't, at present, need a licence, though the government is reviewing this. Other people and businesses, involved in lending, such as credit brokers, debt collectors, credit reference agencies and debt counsellors must also be licensed at present, though the government has proposed that in future they might... see: Licensing


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