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Alex J.
Alex J., Solicitor
Category: Property Law
Satisfied Customers: 3498
Experience:  Two years conveyancing experience.
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Is it lawful to underwrite commercial stocking facilities on

Customer Question

Is it lawful to underwrite commercial stocking facilities on consumer credit agreements and should the lender provide annual statements under the Consummer Credit Act 1974
Submitted: 3 years ago.
Category: Property Law
Expert:  Alex J. replied 3 years ago.
Hi

Thank you for your question and welcome to Just Answer.

Is this an Asset Based Lending Agreement? Is the "underwriting" based on some kind of guarantee?

Kind regards

AJ
Customer: replied 3 years ago.

Hi the facility is to provide the stocking of motor vehicles. Each item of stock is signed up on an individual agreement & registered with H P I &Equifax as a consumer credit arrangement.

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

Who signs the agreement on behalf of the borrower? Is it a company?

Kind regards

AJ
Customer: replied 3 years ago.

Hi ,a director of the company signs the agreement.The total of the facility offered is £500.000.

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

Does the director sign in his name personally or on behalf of the company? I.E is the company a named party?

Presumably these cars are then sold on and upon sale the proceeds are accounted to the finance company or the finance is transferred to the purchaser?

Kind regards

AJ
Customer: replied 3 years ago.

Hi,the agreement is in the name of the company & the director signs on its behalf. Once the vehicle is sold the agreement is settled by the borrower. I will be away from my desk for about an hour but will be back by 11am. Many thanks.

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

This agreement does not fall under the exemption of S.16 of Consumer Credit Act 1974. It therefore does fall under the scope of the act.

Can you explain what your specific concern is in relation to this agreement being regulated?

Kind regards

AJ
Customer: replied 3 years ago.

Hi, my concern is under the act this form of agreement is intended to protect the consumer .Commercial stock funding by this means appears irregular to me and I am worried that it may not be safe. Kind Regards.

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

If the agreements are for under £25k and are with a company they will still be governed by the CCA 1974.

The only thing to bare in mind is that because the agreements are between to Companies they are not "regulated" agreements. This is a technical difference but as the name suggests regulated agreements are subject to much more regulation.

The advantage you do have is, if your business turns over less than £2 million you have recourse to complaint to the Financial Ombudsman if these agreements go wrong.

The reason why these agreements fall under the CCA is because of how they have been structured, i.e as individual agreements.

I look forward to hearing from you.

Kind regards

AJ
Alex J., Solicitor
Category: Property Law
Satisfied Customers: 3498
Experience: Two years conveyancing experience.
Alex J. and 2 other Property Law Specialists are ready to help you
Customer: replied 3 years ago.

Hi many thanks for your prompt reply which has eased my concerns & I can now look further into the lenders proposition. Once again many thanks Geoff.

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

I wish you the best of luck.

Please do not hesitate to contact me with any follow up points.

Kind regards

AJ

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