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2. FB's writings on Law
2.6. FB's writings on Consumer Credit
Law
2.6.4. FB's articles on Consumer
Credit Law
1999.004 ‘Multiple agreements under
the Consumer Credit Act s.18’ (continued)
......................rule
designed for one type of ‘consumer credit agreement’,
for example the rule laid down in section 16(1) (exempt agreements)
that in specified circumstances such an agreement is not to be
regulated by the Act, is not intended to be applicable to other
types of ‘consumer credit agreement’. So for example
if a particular ‘consumer credit agreement’ is partly
of the kind mentioned in section 16(1) and partly of a different
kind it is necessary to separate out the two elements in order
that the Act can be applied to each correctly. That is done by
subsections (2) to (4) of section 18, the relevant portions of
which run as follows-
‘(2) Where a part of
an agreement falls within subsection (1), that part shall be treated
. . . as a separate agreement.
(3) Where an agreement falls
within subsection (1)(b), it shall be treated as an agreement
in each of the categories in question . . .
(4) Where under subsection
(2) a part of a multiple agreement is to be treated as a separate
agreement, the multiple agreement shall (with any necessary modifications)
be construed accordingly; and any sum payable under the multiple
agreement, if not apportioned by the parties, shall for the purposes
of proceedings in any court relating to the multiple agreement
be apportioned by the court as may be requisite.’
Let us apply this to what I am calling
a Class 1 agreement, that is an agreement whose terms are such
as to place one part of it (‘part A’) within one CCA
category (call it ‘category X’) and another part of
it (‘part B’) within a different CCA category (‘category
Y’). The effect is that part A is to be treated as a separate
agreement, and so is part B. So the reference in section 18(3)
to ‘an agreement’ applies separately to the notional
agreement constituted by part A and to the notional agreement
constituted by part B. The Act applies as if there were two separate
agreements: part A falling within category X and part B falling
within category Y. So if a single agreement comprised both a ‘consumer
credit agreement’ and a ‘consumer hire agreement’,
the parts of it relating to the former would be treated by the
Act as a separate consumer credit agreement while the parts of
it relating to the latter would be treated as a separate consumer
hire agreement.11 Some parts would doubtless
overlap and be included in both.
Now let us take the example of a
Class 2 agreement, where the terms are such as to place one part
of it (‘part C’) within a CCA category and another
part of it (‘part D’) within a non-CCA category. Section
18(6) gives us a ready-made case-
(6) This Act does not apply
to a multiple agreement so far as the agreement relates to goods
if under the agreement payments are to be made in respect of the
goods in the form of rent (other than a rent-charge) issuing out
of land.
This is directed to the furnished
letting agreement. But for this subsection the part of the rent
attributable to the use of the furniture (call it payable under
part C of the agreement, with the remainder of the agreement being
part D) would have fallen to be treated as a hire payment. The
analysis would then have been that we have here a Class 2 agreement
where part C falls within the CCA category ‘consumer hire
agreement’ and part D falls within a non-CCA category which
we might call a ‘tenancy agreement’. (It does not
matter what we call it because it is outside the Act.)
Section 18(4) provides for apportionment
of amounts specified in the agreement. The possible need for the
apportionment of payments and other amounts specified in the agreement
is obvious where the agreement is notionally to be divided into
parts, and section 18(4) provides for this. It assumes that no
apportionment will be needed in the case of a Class 3 agreement,
that is one whose terms are such as to place the whole of it within
two or more CCA categories. This would apply for example where
the whole agreement was a personal credit agreement and the whole
of it was also a consumer credit agreement. No apportionment of
amounts would be needed. If at the same time one part was a debtor-creditor
agreement and another part a debtor-creditor-supplier agreement
some apportionment might be needed, but in the latter respect
it would be a Class 1 agreement. This illustrates how, as already
explained, the same agreement may fall into two or more of the
four classes mentioned above.
The ‘parts’ of an agreement
This brings us to what section 18 means by ‘parts’
of an agreement. It will by now be clear I hope that a ‘part’
need not be separately set out as such in the agreement. To elucidate
this further, it may help if we think of the agreement in terms
of a document. I will assume the agreement is printed in a single
document and refer to the entirety of its terms as ‘the
document’.12 Let us for the moment ignore
the need to include special features in the document in order
to comply with the Act. We must begin by uncovering the reality
of the parties’ agreement, quite apart from anything the
Act may require.
The first point to make is that the
document may either consist of what in business terms is truly
one agreement only (let us call that a single-agreement document),
or it may consist of what business people (and indeed customers
also) would regard as two or more agreements rolled up together
(a multi-agreement document).
An example of a multi-agreement document
would be one that embodied (a) an agreement to take a car on hire-purchase,
(b) an agreement to enter into a payments protection insurance
policy relating to the hire-purchase agreement, and (c) an agreement
for the periodical maintenance of the car. This is in one sense
three separate agreements. Yet in another sense it is one agreement
only, because the whole arrangement is entered into at the same
time, and between the same parties, and is set down (or for our
present purposes is deemed to be set down) in one document.
Here the multi-agreement document
is one agreement, yet anyone would accept that at the same time
it is three agreements rolled into one. Different parts of it
constitute what are in substance different contracts. There are
likely also to be common parts, such as the names, addresses,
and signatures of the parties. We see no difficulty in speaking
of a multi-agreement document of this kind as a ‘multiple
agreement’. It is natural to do this. Section 18 does it,
and spells out what that means.
So in a multi-agreement document
each part can be looked on, if relevant common parts are each
time included, as a separate agreement complete in itself. It
may or may not be possible to draw a line round this in the document;
but that is immaterial. References in section 18 to a ‘part’
of an agreement are not confined to a part the wording of which
is entirely separate from that of other parts of the agreement.
An agreement may have a provision (for example that stating the
names of the parties) which is common to two or more ‘parts’
of the agreement. The separation into parts will usually be notional,
and independent of the actual way the wording of the agreement
is arranged. Indeed it may be necessary to bring in, as a component
of a ‘part’ of an agreement, terms which are implied
rather than expressed.
Suppose a hire-purchase agreement
also includes a provision (‘provision P’) financing
a one-off premium payable by the debtor under a policy of payment
protection insurance. Here the agreement comprises two ‘parts’.
One consists of provision P (including any implied terms relating
to it), together with common provisions of the agreement (such
as names of parties) applicable to provision P. The other consists
of the express and implied provisions of the agreement relating
to the hire-purchase transaction, together with other common provisions
applicable to it.
The effect of section 18 in this
example is to make it clear that the ‘total price’
for the purposes of section 90 of the Act (which relates to the
retaking of protected hire-purchase goods) will not include the
one-off premium under provision P. Equally the ‘paid-up
sum’ for the purposes of section 90 is limited to the payments
under the part constituting the hire-purchase agreement. This
reverses Mutual Finance Ltd v Davidson [1963] 1 WLR 134,
where an agreement for the hire-purchase of a car, coupled with
the advance of credit covering the premium insuring the car, was
mistakenly held to be wholly a hire-purchase agreement.
As I have explained, section 18 was designed to avoid the difficulties
caused by erroneous decisions of that sort.
It will be seen that what matters
with a multi-agreement document is that it is possible to collect
from the document as a whole what amount to the respective terms
of two or more separate agreements. When we have done this, we
can decide in relation to each set of terms whether or not it
constitutes an agreement falling within a category mentioned in
the Consumer Credit Act, for example a ‘consumer credit
agreement’ as defined by section 8(2) or a contract which
a creditor requires to be made as a condition of making the consumer
credit agreement, within the meaning of the definition of ‘transaction’
in the Consumer Credit (Total Charge for Credit) Regulations 1980,
reg. 1(1).
Now let us take a different example,
this time a single-agreement document. The document embodies what
it would be natural to call one agreement only, say a cash loan
of £50 which is of a type offered by the creditor only to
the creditor’s own employees, and under which the only amount
included in the total charge for credit is interest, always at
the Bank of England’s base rate. It is perhaps not natural
to call this a ‘multiple agreement’, but section 18
does so. Why?
Many sections of the Act make provision
in relation to an agreement for ‘fixed-sum credit’
as defined by section 10(1)(b). This document is an agreement
for fixed-sum credit. Other sections make provision about an ‘exempt
agreement’ as defined by section 189(1). This document is
an exempt agreement 13. Yet further sections
make provision about a ‘small agreement’ as defined
by section 17(1). This document is a small agreement.
A single agreement which embraces
several items (for example a hire or hire-purchase agreement covering
two or more articles) is not for that reason a ‘multiple
agreement’. If all the items are dealt with by the agreement
in the same way (for example if they are all hired on common terms)
the agreement will be treated in exactly the same way under section
18 as if it dealt with one item only. Even if the terms differ
between the items this will not render it a multiple agreement
unless the differences in the terms place parts of the agreement
in different CCA categories. If the total credit or hire payments
under such an agreement are above the statutory limit for a regulated
agreement it is not possible to treat it as a regulated
continued........................
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.
So, applying the documentation requirements laid down in the Consumer
Credit (Agreements) Regulations 1983, the whole agreement (since
the division into separate parts is only a notional division)
would need to have two statutory headings: A Credit Agreement
regulated by the Consumer Credit Act 1974 and A Hire Agreement
regulated by the Consumer Credit Act 1974. If an agreement is
both a regulated credit agreement and a regulated hire agreement
the customer obviously needs to be told this.
.
Even if in fact two or more documents have been used, we can for
the purposes of this discussion treat them as combined together
to form ‘the document’.
.
Within article 4 of the Consumer Credit (Exempt Agreements) Order
1989, as amended by the Consumer Credit (Exempt Agreements)(Amendment)
Order 1998 article 2.
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