17.Section 3 inserts a new section 16A after section 16 of the 1974 Act. Section 16A gives the Secretary of State power by order to provide for the exemption of consumer credit agreements or consumer hire agreements from regulation under the 1974 Act where the debtor or hirer has a “high net worth”. The provisions relating to unfair relationships will continue to apply to such agreements (i.e. the new sections 140A to 140C, inserted by sections 19-22 (see below)), as will the existing provisions relating to extortionate credit bargains (i.e. sections 137-140) to the extent they continue to have effect after commencement of new sections 140A-140C (see the note in respect of Schedule 3 below) if, for example, the high net worth exemption comes into force before the unfair relationships provisions.
18.In order that an agreement may be exempted under section 16A, the debtor or hirer must be a natural person (i.e. not a partnership, unincorporated association or body corporate) and it must include a declaration, in the specified form, that the debtor or hirer agrees to forgo the protection and remedies that would be available under the 1974 Act if the agreement were a regulated agreement. The debtor or hirer must also provide the creditor or owner with a statement of “high net worth”, again in the specified form, which has been made in relation to him by a specified type of person (e.g. an accountant or a solicitor). “Specified” in this case means specified by order of the Secretary of State.
19.A statement of “high net worth” must be current in relation to the agreement, i.e. made no more than one year before the date of the making of the agreement. The statement should state that the debtor or hirer, in respect of the previous financial year (being the year ending 31st March preceding the current financial year in which the statement is made), either:
received income of a specified description of the specified amount or more during that period; or
had net assets of a specified description which were of a value not less than the specified amount during the whole of that period.
“Specified” in this case means specified by order of the Secretary of State.