Regulated credit agreement

Definition

A regulated credit agreement is the document signed between the creditor and the customer that details all the terms and conditions of the finance package that is about to be initiated. It details what both parties have to do across the term limit of the contract.

What is the purpose of a regulated credit agreement?

The purpose of a regulated credit agreement is to explain clearly what will happen as part of the finance package. It explains what the lender is expected to do, e.g provide the use of the car for the amount of time set in the agreement, for an agreed price and interest rate.

For the customer, it will detail the obligations that they have, for example the cost of the monthly payments, the amount of time those payments must be made, and any mileage limits or condition requirements that are in place.

Car finance agreements are covered by the Consumer Credit Act, and so will provide you with some protection in how they are written and how your rights are protected.

What will I find in a regulated credit agreement?

There are a number of important details that will be recorded on the regulated credit agreement. The start date of the agreement will be written, as will the term length.  In a finance agreement with a fixed rate of interest, this will be recorded as well as the total cost of the entire finance package, including administrative fees and any other charges. If you are taking out a finance package with a variable rate of interest, than that APR will also be included, and the terms of how that interest rate can change will also be detailed.

The agreement will also detail any break clauses or how you can cancel an agreement early. There will also be an explanation of what will happen if you fail to meet payments, including when you will enter into a default and what steps will be taken to reclaim any money owed after an agreement has been broken.

How does a regulated credit agreement protect me?

A regulated credit agreement will have been approved by the Financial Conduct Authority and/or will follow the rules set by the Consumer Credit Act. That means the terms and conditions included in the agreement will meet the CCA’s strict criteria for consumer protection. All the terms and conditions will have been written clearly, so that you can understand exactly what you are signing up for before you complete the process.

It also protects you should you have an issue with your finance payments that means you cannot complete the agreement. It will ensure that the penalties that will be applied are not too excessive, and will have been detailed at the start of the agreement.

Can I cancel a regulated credit agreement?

You may be able to cancel a regulated credit agreement provided you meet the terms set out in that agreement. This could be following a specific cancellation process, or paying a settlement fee that will also have been detailed in the original credit agreement.