Explanatory note

These Regulations amend the Consumer Credit (Advertisements) Regulations 1989 (“the 1989 Regulations”) and Part II of the Consumer Credit (Content of Quotations) and Consumer Credit (Advertisements) (Amendment) Regulations 1999 (“the 1999 Regulations”).

Provisions of the 1989 Regulations are revoked and re-enacted with amendments. Under those Regulations, certain credit advertisements were required to carry a warning statement (“Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it”) where security was or might be required in the form of a mortgage on the debtor’s home. These Regulations replace that warning statement for two types of mortgage loan secured on the debtor’s home. The first type is one which does not, while the mortgaged property continues to be the debtor’s main residence, require any instalment repayments of the secured sum or any payment of interest on it (other than interest charged when the debtor makes a voluntary repayment, as he does when exercising a contractual or equitable right to redeem). The second type of mortgage loan is one which may require interest payments but does not require full or partial repayment of the secured sum while the mortgaged property is the debtor’s main residence, and under which the creditor cannot repossess or sell the property during that period. The new warning statement is: “Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in doubt, seek independent advice.”.

The 1999 Regulations are similarly amended. They required the same warning statement in quotations for mortgage loans secured on the prospective debtor’s home. The new statement is substituted by these Regulations where the mortgage loan would be one of the two types described above.

In addition, there is a drafting change to regulation 2(3) of the 1999 Regulations.

In Scotland, loans which are secured over land are secured by a standard security. This is reflected in the amendments made to the 1989 and 1999 Regulations. A paragraph is added to the 1989 Regulations which, for the first time, expressly provides that in the Regulations as they apply to Scotland references to a mortgage, charge or other security on land are to be taken to refer to a standard security over land.

A Regulatory Impact Assessment of the costs and benefits which will result from these Regulations has been prepared. Copies have been placed in the libraries of both Houses of Parliament and can also be obtained from the Consumer Affairs Directorate of the Department of Trade and Industry, Room 407, 1 Victoria Street, London SW1H 0ET.