A point of interest that arose today

I often post here about the misinformation floating around online, and the errors that people make in assuming things concerning Consumer Credit Law, however a series of events today made me decide to post this article.

I was presented with an argument about enforceability which was badly wrong. Well in fact a number of points were incorrect.

Error 1) If a bank or creditor cannot provide the original credit agreement then they cannot enforce the agreement in Court. Also if they don’t have the original then they cannot reconstitute the agreement.

This is incorrect. Even going back to Wilson v First County Trust (2003) UKHL 40, the Lords said that there must have been an agreement, signed by the debtor, however the Lords did not say that if the bank doesn’t have this agreement then they cannot enforce. There have been a series of judicial rulings which address this point.

HHJ Langan in Lloyds TSB vs Mitchell that the creditor did not have to produce the original signed agreement, he pointed out cases such as the Iron Mountain fire where thousands of credit agreements were burnt and pointed out that if the creditor lost his agreement because of the fire, then it would produce an absurd result that would have left the creditors unable to enforce compliant and enforceable credit agreements. That was never the intention of the Consumer Credit Act 1974.

In Carey v HSBC Bank Plc HHJ Waksman QC made it clear that the creditor does not need the original agreement to produce a true copy, he can rely on records held in computers and other sources to produce a true copy of the agreement, the only caveat is that the copy must be honest and accurate.

The Courts have also set down some guidance on the issue of unenforceabilty and who shares the burden of raising such arguments relating to unenforceabilty. In HFO Services vs Kirit Patel HHJ Platts made it clear where a debtor wishes to raise an allegation of unenforceability, he cannot just say “its unenforceable guvnor” he needs to say why. For example, its unenforceable because the amount of credit is misstated and therefore a prescribed term is missing and therefore the agreement does not comply with s61(1)(a) Consumer Credit Act 1974.

So what if you don’t have the original agreement? well the burden does rest on the debtor to make a positive assertion about the original agreement, as the law stands , unless the debtor is able to make a positive assertion that the agreement was unenforceable because….. or that there never was a signed agreement…………………….(Please note: This only applies for agreements signed before 6th April 2007) then it is going to be very difficult to challenge the enforceability of the credit agreement.

I would also point out that no where in the 1974 Act does it state the “Original actual signed piece of paper” must be brought to the Court. It would no doubt be accepted by the Court if a member of staff working for the bank in their archiving department gave evidence that there was a credit agreement recorded on the banks archives, and that the type of credit agreement in use at that time was “X” and the computer records show that “X” % rate of interest would have applied and the credit limit was “£XXXXX”. The Court is likely to accept such evidence unless there is a positive assertion coming from the debtor as to what he did or did not sign. Now i would also point out that making a positive assertion that you didn’t sign an agreement when you know you did, is not only likely to get found out and make you look foolish, if you make such an assertion in a Defence and sign such with a statement of truth knowing it isn’t true, then you may well end up facing contempt of court too.

That said, there are often ways of proving the agreement the bank says is a “true copy” is in fact not a true copy. I have developed this skill over the years, and have been successful on a number of occasions in proving that the “true copy” provided by lenders isnt.

Error 2) Improper execution is not the same as unenforceable when dealing with s61 and 127(3) Consumer Credit Act.

This error was argued before me today. If an agreement is unenforceable, then it is unenforceable because the agreement fails to comply with s61 Consumer Credit Act, s61 clearly states an agreement is “improperly executed unless……..” if we then turn to s65(1) Consumer Credit Act 1974 we find that an “improperly executed agreement is only enforceable by order of the Court”

If we look at s127(3) Consumer Credit Act 1974 which has now been repealed, that states

127(3) The court shall not make an enforcement order under section 65(1) if section 61(1)(a)(signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner).

So, we say unenforceable but to use the term improperly executed would lead to the same conclusion.

About paul @ watsons solicitors
Member of Chartered Institute of Legal Executives and a litigator for one of the leading firms of solicitors in Consumer Credit Act litigation. I was the fee earner in the landmark ruling of Harrison v Link Financial Limited and many other County Court decisions.

4 Responses to A point of interest that arose today

  1. Bill Knight says:

    Thank you Paul for a concise tour of relevant caselaw, which shows the evolution of ‘Unenforceability’ from what was seen as a ‘get out of debt free’ card 5-6 years ago to a challenge which must be uttered only after careful thought. So the cry “It’s unenforceable guv’nor” NOW has to be backed up by a credible and arguable reason for such an utterance – as the onus is no longer fully upon the lender to prove enforceability

    • Thanks Bill,

      The most important thing is that people apply the law to the facts of their case. What often happens, is people apply the law to the facts of fred blogs case and then assume that it also applies to theirs, which inevitably ends in tears from my experience.

      Unenforceability has been a fluid subject over the past few years, with a number of Court rulings clarifying how to interpret certain parts of the Consumer Credit Act 1974.

      That said, unenforceability is not a dead subject, far from it, but its knowing how to address each case, what arguments will work and what wont,and of course teasing out the facts of the case so that you can apply the law to them.

  2. Bill Knight says:

    Thanks for your response, Paul.

    Oh, I agree that Unenforceability is very much alive and kicking. I now see it used more as a means to achieve a different end – rather than as an end in itself – although it still has that potential.

    I guess that perhaps one of the problems that exists with the many legal and consumer forums that have sprung into existence in recent years is that people get to speed-read all about a whole number of ‘Fred Bloggses.’ They then pick the one that seems closest to their own case and tunnel-vision takes over. If he gets to Court as a Litigant In Person, then as soon as the hearing veers away from the ‘script’ he has in his head, the LIP is lost.

    As I’m sure you’re aware, these forums are populated by all manner of ‘lay preachers’ who bring their myriad skills to bear on all manner of problems. I guess by definition such a forum is actually “The biggest bunch of amateurs you’ll ever come across” – and I think there has always been a ‘healthy disrespect’ between such fora and the Legal Profession. So – when someone brings legal training to a forum, they are oft seen as ‘killjoys’ or harbingers of doom – and it is a pity that so many do not take their advice seriously, preferring to ‘follow their dream’ instead.

    Unenforceability is a heavy reality – not a floating dream – and should be afforded the gravity it deserves. Thanks again for volunteering to be such a ‘spoilsport’ for the benefit of us all, Paul – does the Devil’s Advocate also get to wear Prada ? !!!

  3. Pingback: Disclosure | Tm169's OPCA Blog

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