Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, what information his Department holds on changes in the level of use of personal contracts for agreements in the last five years; what assessment he has made of the reasons for those changes; and if he will extend the provisions of the Consumer Credit Act 1974 to enable full payment ahead of time to personal contract hire agreements; and if he will make a statement.

The Government is committed to supporting businesses to offer their customers choice about how they pay for goods and services. Payment by instalments can provide consumers with a helpful way to spread the costs of household goods and services, and this can be an important budgeting tool for consumers.

The Government took action in 2015 to exempt credit that is provided free of interest and charges over less than 12 months from Financial Conduct Authority (FCA) regulation, unless 12 or more repayments are due.

To be exempt from FCA regulation, the credit agreement must not be a conditional sale, hire purchase or pawn agreement, and must not finance the purchase of land. The credit agreement must finance the purchase of specific goods or services, must be for a fixed amount, and must contain no charges, interest or administration fees.

The provisions within the Consumer Credit Act 1974 (CCA) to enable full payment ahead of time do not apply to agreements which fall under this exemption. The CCA provides important safeguards to protect consumers, and so the exemption is limited to agreements which meet the specified criteria. The Government has no plans to modify this exemption.