How will the CCA affect your commercial business?

Changes to the Consumer Credit Act recently came into force and it is important for commercial brokers to be aware of what they involve.

The changes place increased emphasis on the percentage of family occupancy in the security property and on establishing the purpose to which a loan will be put. These factors must be considered to determine whether the loan is exempt from regulation.

Which Loans are Regulated?

All loans that are less than £25,001 remain CCA regulated. Loans greater than £25,001 where the security property has greater than 40% family occupancy and the purpose of the loan is predominantly (>50% of the loan) for personal use, will also be CCA regulated. These loans must follow the same process as pre-existing CCA regulation, with consideration periods.

Which Loans are Exempt?

Some loans greater than £25,001 may become unregulated dependant on the purpose of the loan or the occupancy of the property. There are two factors which may determine whether a loan is exempt:

1) If the applicant or their immediate family intends to occupy less than 40% of the property, the loan will be exempt.

2) Should the applicant or immediate family intend to occupy more than 40% of the property, but the predominant purpose (>50% of the loan) is for business purposes, then the loan can be exempted from CCA regulations and becomes unregulated.

Loans for any purpose to business partnerships of more than 3 persons and Limited companies will always be exempt from CCA regulation.

Loans that are exempt can follow the same unregulated loan processes. Unregulated agreements can apply; however consideration periods need not apply.

The following table will hopefully provide some clarification: