Offering Finance / staged payments

purplecurly · 18 April 2018 at 1:01PM

My son is a sole trader doing bespoke welding and fabrication - mainly for drift cars and rally cars - roll-cages and exhausts etc. He has been asked again and again by customers if they can pay a deposit and then pay for the work in installments.

Problem: is this a credit agreement regulated by the consumer credit act?

We are very confused after trying to read about it.
Basically, he wants them to pay a third up front as a deposit with the car as security. If they don't pay they can't collect their car - if they completely fail to pay after written notice of outstanding payment then he has the right to sell the car to recoup his costs.

Is this doable?

Any advice appreciated

bingo_bango · 20 April 2018 at 1:39PM

The short answer is....it depends.

If he requires no more than 12 payments, and those are made in a period of not more than 12 months then no, it isn't regulated. That is ONLY the case where he does not charge interest or add any other charges (arrangement fees etc). Short checklist below (lender & supplier can be the same entity in this example).

be a borrower-lender-supplier agreement, for fixed-sum credit;
not require the borrower to make more than 12 payments; and
require the borrower to make such repayments within a period of 12 months or less (i.e. potentially, monthly repayments); and

The credit must either be secured on land, or be provided without interest or other charges.

If he deviates from those criteria, then it is caught within the scope of a regulated agreement under S.140 of the Consumer Credit Act and he must therefore register with the FCA for carrying out regulated activities.

Still worth drawing up written agreements for his customers and making them aware that he intends to exercise rthe right of a lien for unpaid balances. Get that signed and keep a copy.

He may need to look into GDPR responsibilities as well, but if he keeps customer records he will already have considered that, won't he?

Offering Finance / staged payments

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