Consumer Rights: Most of us depend on it, but what do we know about the rules of credit?

Lending is ubiquitous and takes many forms, but ensure that you are aware of your rights before signing up

Where would we be without credit? Most of us wouldn't own homes, we would probably be driving old bangers and our clothes might be in tatters. But there's always a price to pay. That price is the interest, plus various fees and charges imposed by the lender. It all adds up to APR (Annual Percentage Rate). The higher the APR the more we pay back.

Most credit and hire agreements are regulated by the Consumer Credit Act. This gives you important rights, although mortgages are exempt as are agreements to hire gas, electricity or water meters or loans from your employer or a credit union.

If your agreement is regulated you'll be asked to sign a copy. The lender must give you a copy to keep, setting out what type of credit agreement it is, the APR, the payment amounts, when it is due, and how it is made up (loan, interest, administration charge). It must also include your right to cancel and the terms should you want to pay it off early.

You can cancel most credit agreements, apart from mortgages, overdrafts and some loans under £50, within 14 days of signing. If you do cancel you need to return any money given in advance and pay for goods already installed. If you bought goods and cancel the agreement, you'll have to pay for them in another way or return them. If you've paid a deposit or a part-payment you should get that money back. You must tell the lender that you are cancelling. Put that "notice" in writing and keep a copy.

Hire purchase (HP) and conditional sale agreements are common forms of credit. Under HP you buy the goods and pay an agreed amount by instalments. You don't own the goods until you have paid in full. You can end a hire purchase or conditional sale agreement in writing and return the goods at any time which means you can stop making the payments. But, if you end the agreement before you've paid half of the total the lender is entitled to ask for the rest of the money.

If your credit-bought goods develop a fault or turn up damaged or not at all, you can take action to get your money back from the trader or the finance company. But keep making the payments, stopping in protest could affect your ability to get credit in future. If you can't sort your problem out directly get advice.

There are occasions when you'll be glad you used credit. If you buy something costing more than £100 and less than £30,000 with a credit card and something goes wrong, but you can't trace the seller, they refuse to help, or they've gone bust you can claim from the credit card company. Credit can pay.

**

Q: I had an accident 18 months ago and was in hospital until last October. I now get employment support and disability living allowances. I've been trying to get a winter fuel payment as I was told I'm entitled to it, but neither the Job Centre nor the local council can help. Can you give me any advice?

PK, Hull

A: If you're eligible for the winter fuel payment you could get between £100 and £300. As you've been told you're eligible you must have been born on or before 5 July 1951. To be eligible you must have been getting state pension or another social security benefit such as Income Support in the qualifying week – for this year this was 17 to 23 September 2012.

Payments to people who qualify should be automatic, usually in November and December. However there are some exceptions. You don't qualify if during the qualifying week you were in hospital and had been getting free treatment for more than 52 weeks, which is where you may be affected. To double check call the Winter Fuel Payments helpline on 08459 151515.

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