Hi, thanks for your question. My name's XXXXX XXXXX I'm going to assist you with it.
Under the Consumer Credit Act 1974 (the CCA) any agreement between an "individual" and "any other person" pursuant to which credit is provided will be a consumer credit agreement and will be regulated by the CCA, unless exempt.
With regard to a loan from a parent to its child, there is a good chance that the agreement will either be: (i) exempt; or (ii) will only be very lightly regulated as a "non-commercial" agreement. In either case, the "creditors" (i.e. the parents) do not need a consumer credit licence and the loan itself is still likely to be enforceable, even though it does not meet all the requirement of the CCA.
So, is it exempt? The most likely reason for a loan between parents and a child to be exempt is due to the low interest rule. If the interest under the loan does not exceed 1%, then the agreement will be exempt under the CCA and none of the rules will apply. In that case, no, the loan is not regulated by the CCA.
If it is not exempt, then it will still likely fall within the defintion of a "non-commercial agreement" as it will not have been made in the course of the creditors' business. In this case the agreement will be partly regulated by the CCA 1974 but, crucially, the agreement will not need to be in the format required by the CCA 1974 and there is no need to serve a default notice before demanding the unpaid balance.
This means that loans from parents to children are unlikely to be anything other than partly regulated by the CCA 1974 (if at all). Even if they are partly regulated, they are unlikely to be vulnerable to unenforceability due to the application of the CCA 1974.
I hope this answers your question but do let me know if you need any clarification.
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