Business loans and the Consumer Credit Act

treading_carefully

Why would a bank want to alter a credit agreement to stipulate specifically in the new agreement that it is for business purposes only and not covered by the Consumer Credit Act.?

If things went t*ts up for the debtor, ie cannot pay and bank goes through their legal processes to recover the maximum they can, what is the difference to both bank and debtor in the credit agreement being treated as a business loan as opposed to being covered by CCA. What is the advantage of it being covered by CCA.?

Surely a bank can instigate bankruptcy proceedings in either case and get the same outcome.?

Appreciate any feedback on this issue.

treading_carefully

Bump.........

jonesMUFCforever

You have answered the question in your first sentence of the first post.

negg

Because consumer law doesn't cover businesses. It only covers consumers.

treading_carefully

But why is the bank insisting on this clause now when it was not on previous agreements (for the same debt). I am trying to work out what the bank is concerned about. Let us say it is a grey area as to whether the borrowings were for the normal course of business. If the loan is covered by the CCA what is the disadvantage to the bank if any or advantage to the debtor if any. I know that the scope of the CCA was widened greatly in 2006 to cover businesses of three partners or less and the £25,000 cap was removed for borrowings used for something other than the normal course of business, (usually property related borrowings).