R01 Consumer credit and consumer rights law: free practice questions

1. Question 1 of 5

   Before the Consumer Credit Act 2006 removed the limit, agreements involving credit up to what amount were regulated under the Consumer Credit Act 1974?

   Option A: £5,000Option B: £25,000Option C: £15,000Option D: £50,000

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   The answer is B: £25,000

   The 1974 Act regulated agreements for credit of not more than £25,000. The 2006 Act removed this limit, replacing it with exemptions for business loans over £25,000 and high net worth debtors.

   Why the other options are wrong

   A

   £5,000 was the limit when the 1974 Act was first passed; by 2006 it had risen to £25,000.

   C

   £15,000 isn't the limit that applied before the 2006 Act.

   D

   £50,000 isn't the figure.

2. Question 2 of 5

   For a loan secured on land under the Consumer Credit Act, how much time must the borrower be given before the agreement for signature is sent?

   Option A: At least 24 hours' notice, with a phone call from the lenderOption B: No special rules, as secured loans are treated like any otherOption C: A 14-day notice period that starts once the agreement is signedOption D: A copy seven clear days before, then seven more days without contact

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   The answer is D: A copy seven clear days before, then seven more days without contact

   The borrower must receive a copy at least seven clear days before the agreement for signature is posted, and the lender mustn't approach them during that time and for a further seven days.

   Why the other options are wrong

   A

   24 hours is far shorter than the rules require.

   B

   Secured loans get extra time to reconsider.

   C

   The protection comes before signing.

3. Question 3 of 5

   How did the Consumer Credit Act 2006 extend the definition of an 'individual'?

   Option A: To include partnerships of any size, including large firmsOption B: To include only people aged 21 and over, not younger borrowersOption C: To include sole traders, small partnerships and unincorporated bodiesOption D: To include all companies and limited liability partnerships of any size

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   The answer is C: To include sole traders, small partnerships and unincorporated bodies

   The 2006 Act extended protection to sole traders, small partnerships (three or fewer partners) and unincorporated associations.

   Why the other options are wrong

   A

   Only partnerships of three or fewer partners are included.

   B

   There's no age-21 rule.

   D

   Companies aren't included.

4. Question 4 of 5

   What did the FCA's 2019 rules on peer-to-peer lending introduce for investors who aren't advised?

   Option A: A complete ban on the marketing of P2P platformsOption B: A guarantee of the returns promised by the platformOption C: An appropriateness check of their knowledge and experienceOption D: FSCS protection for all loans made through P2P platforms

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   The answer is C: An appropriateness check of their knowledge and experience

   The rules (PS19/14) introduced an appropriateness assessment for non-advised investors, minimum information requirements, stronger governance and wind-down rules and marketing restrictions.

   Why the other options are wrong

   A

   Marketing was restricted, not banned outright.

   B

   P2P returns aren't guaranteed.

   D

   P2P investments aren't generally FSCS-protected.

5. Question 5 of 5

   How does the Consumer Rights Act 2015 define an 'average consumer'?

   Option A: Someone reasonably well informed, observant and circumspectOption B: Someone aged over 65 who may be vulnerableOption C: Someone with a qualification in finance or lawOption D: Someone with no knowledge at all of financial products

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   The answer is A: Someone reasonably well informed, observant and circumspect

   The Act defines the average consumer as 'reasonably well informed, observant and circumspect'.

   Why the other options are wrong

   B

   Age isn't part of the definition.

   C

   No specialist qualification is assumed.

   D

   Some knowledge and care is assumed.

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