Clause 12 - Notice of default sums
Consumer Credit Bill
2:15 pm
Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations and Consumer Affairs), Department of Trade and Industry; Bradford South, Labour)
A key element of the Government's proposed reforms is transparency of information. An important part of that for consumers is that they should be aware of significant fees and charges placed on their accounts. The clause will require creditors and owners to provide notices to debtors or hirers where default sums exceed a specified amount.
A default sum is defined in new section 187A as an amount payable, other than interest, by the debtor or hirer for any breach of his agreement. That could include a late payment fee, a missed payment fee or legal fees. New section 86E(2) states that creditors or owners have to give consumers a notice after the default sum becomes payable, but that notice can be incorporated in any other statement or notice sent to the debtor or hirer. Debtors or hirers should have a reasonable period before creditors or owners can impose interest on default sums. That would enable them to pay the sum before additional interest is charged.
Under new section 86E(4), interest on the default sum can begin to accrue on the customer's account only 28 days after the notice is given. If a creditor or owner does not provide a notice, he cannot enforce the agreement. The debtor or hirer will not be liable to pay any cost for producing or sending the arrears notice. The Secretary of State will make regulations to cover the form and content of such notices, and the regulations will also prescribe the amount of the default fee to trigger the notice requirements and the period by which it must be sent. We will consult on those aspects before the regulations are made.
It is imperative for consumers to be kept aware of their financial situation with transparent information. The clause ensures that they will be kept up to date of any charges being applied to their accounts.