Cash Generator and similar businesses offer a service where individuals can sell items with the option to buy them back later. These agreements are often structured as a sale with a buy-back option, seemingly circumnavigating consumer credit regulations. But is this legal, and can the Consumer Credit Act be applied to these transactions? This article explores the legality of buy-back agreements and whether they truly sidestep consumer protection laws.
A typical buy-back agreement works like this:
These agreements are designed as outright sales with an option to repurchase, which the companies argue means they aren't lending money and therefore don't fall under the regulations of the Consumer Credit Act.
The critical question is whether these buy-back agreements are, in substance, a secured loan. Consider this:
The argument is that even if the agreement is worded as a sale and buy-back, the underlying economic reality resembles a loan. UK law often looks at the substance of a transaction rather than just its form. This is similar to how tenancy laws cannot be avoided by simply calling a rental agreement something else.
If a buy-back agreement functions as a loan, the Consumer Credit Act should apply, offering several protections:
If these agreements are indeed consumer credit agreements, the failure to comply with the act could render them unenforceable.
The Financial Ombudsman Service (FOS) is an independent body that resolves disputes between consumers and financial businesses. A complaint to the FOS could be a viable option for those who believe their buy-back agreement is unfair or violates the Consumer Credit Act. If the FOS rules that these agreements are indeed consumer credit agreements, it could have significant consequences for businesses like Cash Generator, potentially disrupting their business model.
To file a complaint with the Financial Ombudsman Service, gather all relevant documents such as the buy-back agreement, receipts, and any communication with the company. Clearly outline why you believe the agreement is unfair and how it violates the Consumer Credit Act.
While businesses offering buy-back agreements structure them to avoid the Consumer Credit Act, there's a strong argument that they function as secured loans. If these agreements are deemed to be consumer credit agreements in disguise, companies like Cash Generator would be required to comply with consumer protection laws, like those set out by the FCA. Consumers who feel they have been treated unfairly should consider seeking legal advice and filing a complaint with the Financial Ombudsman Service.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. If you have a specific legal issue, consult with a qualified solicitor.
