‘Debtors’ to get a fairer Green DealPrint publication
The Department of Energy and Climate Change (DECC) recently announced further revisions to the Consumer Credit Act 1974 (the CCA), as applicable to Green Deal plans. The intention is that all domestic Green Deal Plans will be regulated by the CCA, whilst non-domestic property will only be affected in certain instances.
In May 2013 following calls from stakeholders, DECC launched its consultation proposing alterations to the CCA for the Green Deal – the government’s flagship initiative to improve buildings’ energy ratings by eliminating the upfront costs of efficiency measures. The basic premise of the Green Deal is that energy efficiency improvements should be self-funding via electricity and gas bill savings. Certain measures are therefore eligible for a pay-as-you-save financing mechanism, whereby accredited providers install features such as loft insulation for homes and businesses without initial costs.
Since consumers were first able to sign-up to Green Deal programmes in January 2013, the DECC has emphasised the importance of consumer protection. This is particularly reflected via the inter-relation between the Green Deal and the CCA. Green Deal plans are, essentially, a type of unsecured loan and interest is charged on the loan. Under the Energy Act 2011, the CCA was modified in relation to the Green Deal to:
- exempt from CCA regulation Green Deal plans for businesses where the credit provided was no more than £25,000
- exempt energy suppliers from needing an Office of Fair Trading (OFT) licence for the purposes of collecting plan instalments
- alter other relevant CCA requirements.
Albeit placing a number of plans beyond the scope, many Green Deal participants are subject to the onerous legislation. Plans in the residential market in particular are still regarded as regulated consumer credit agreements under the CCA. All relevant documentation has to comply with the CCA’s strict requirements.
Understanding when a party should be regarded as a ‘debtor’ for CCA purposes has become a matter of importance for providers and consumers alike, as essentially only where Green Deal debtors are ‘individuals’ do they receive the associated protections. Traditionally a person entering into a credit agreement will also be making repayments, so they are easy to identify as the ‘debtor’. However, with a Green Deal plan, different parties may be involved – with one person entering into the credit agreement (for instance, a tenant as ‘bill payer’ in a rented property) and another entering into the agreement to supply and fit energy-saving measures (an ‘improver’ landlord, for example).
Responding to its initial consultation, the DECC stated that Green Deal plans would be both restricted-use credit and deemed as debtor-creditor-supplier agreements for CCA purposes – regardless of whether the ‘improver’ and ‘debtor’ were one and the same. It had also proposed to amend the ‘debtor’ definition so:
- for any prospective credit agreement, the bill payer at the point of entry into the agreement would be the ‘debtor’, rather than the bill payer at the point of payments commencing
- for any current credit agreement, the person receiving the CCA’s protection as a ‘debtor’ would be both (1) anyone liable to pay the plan’s instalments as a result of their responsibility for the property’s energy bills and (2) anyone else with arrears under the plan due to such previous responsibilities.
However, these proposals left uncertainty as to precisely whether any one Green Deal plan would be regulated or not. A particular concern arose surrounding unregulated Green Deal plans being issued for domestic properties to corporate landlords, but then passed onto consumer tenants. As a result, further changes are to be made.
All domestic Green Deal plans are therefore now to be regulated, regardless of the identity of the ‘improver’ or ‘bill payer’ (unless exempt under any other CCA provision). Non-domestic plans are regulated only where the ‘improver’ is an individual, that is, the property’s occupier / owner who makes arrangements for the plan. The exemption relating to businesses (under section 16B(1A) of the CCA) will also only apply when the Green Deal consumer credit agreement is made for non-domestic property.
Following worries that ‘improvers’ would not receive rights and protections relevant to their roles under a Green Deal plan, the DECC has further decided that the ‘improver’ will now be the ‘debtor’ for certain sections of the legislation whilst they are still the owner / occupier of the property – alongside the current and previous (if in arrears) ‘bill payers’. As an aid for providers, the relevant sections of the statute are outlined in a new schedule to the CCA. Of greatest importance:
- the ‘improver’ must sign the plan at the outset, but the bill payer’s consent also has to be sought
- only the current ‘bill payer’ or ‘improver’ can repay early, but the ‘improver’ can withdraw consent to the plan within the first 14 days
the first ‘bill payer’ will be subject to an assessment of creditworthiness, can request a copy of the agreement, and must receive the pre-contractual explanations document
- the current ‘bill payer’ should be sent statements, can request a copy of the executed credit agreement, and benefits from the CCA’s unfair relationship provisions
- the ‘improver’ should receive pre-contractual information, pre-contractual explanations, and copies of all agreement documentation. He will be subject to a credit assessment, but will also be protected via the unfair relationship provisions.
The DECC has laid the draft amendments before Parliament, aiming to make the alterations as soon as practicable. However, it still intends to consult and make further consequential amendments over the coming months. Additional developments are also expected to reflect the transfer of consumer credit regulation from the OFT to the Financial Conduct Authority on 1 April 2014. Despite this, it is hoped this recent fine-tuning of the CCA amendments will enable providers to proceed with greater confidence when issuing Green Deal plans.