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.

The Jackson Reforms… a month on………….

Well its nearly a month since the wonderful Government brought in the amendments to the CPR which hit among other things the recoverability of successfees under no win no fee agreements.

Obviously, the initial thoughts were that consumers would face difficulties in obtaining access to justice and while this will undoubtedly be true for Claimants wishing to pursue a personal injury claim as they would now have to pay the successfee from their damages, for our clients it is not as bad as we first thought.

It is true that we are now more strict with the criteria of cases we take on, but the reality of it is that we are still taking cases on no win no fee, and while the client will now have to pay any success fee, we are not obliged to charge the Client a successfee at all if we dont want to and we are taking a flexible approach with clients and are happy to allow payment over a period of months where the case warrants it.

I must confess i did  think that the firm would cease taking on no win no fee cases, however, clearly i was wrong and the Jackson reforms, while more challenging are not a reason to stop taking cases on no win no fee.

Also, statutory demands are unaffected by these reforms, so we can still recover the successfee from the opponent, so cases involving bankruptcy are not affected at all.

I must say that Kerry Underwood of Underwoods solicitors was right when he said that the reforms are not as bad as some people thought they would be.

Restons Solicitors article on HFO Capital Limited v Wegmuller.

I was trawling the net the other day and i was fortunate (although Restons may disagree here) to find the Restons website.

I must say a nice looking site, however, its a pity about the Wegmuller report, because its wide of the mark. The author clearly has not given sufficient attention to the Judgment of Recorder Campbell.

In the case of HFO Capital Limited v Wegmuller, Mr Recorder Campbell considered the allegation by Mr Wegmuller that the Barclaycard agreement (subsequently  acquired by HFO)  he signed in the mid-1990’s failed to contain the prescribed terms and therefore did not comply with Section 61 of the CCA.  After making reference to “Carey v HSBC Plc” – in particular those passages which dealt with what the Act required the customer to sign – the Recorder noted the court had not been provided either with a copy of the original agreement nor a reconstitution of it.

That is entirely wrong. Before the Court were the following,

1) A copy of the signed application form.

2) Terms and conditions which clearly were provided with the card, in fact they stated that they were accompanying the card!!

3) a reconstitution of the agreement

None of which assist where the underlying agreement is unenforceable, clearly you cannot reconstitute to make a bad agreement good. As they say, you cannot polish a turd, if its a bad agreement, no amount of reconstituting can put it right!!!!

The problems with the case were not as the author of the Restons article suggests, and in fact i made an application to the Court prior to the hearing for an order that the Claimant do provide a reconstitution of the original agreement. The Claimant provided the disclosure, and the reconstituted agreement was entirely supportive of Mr Wegmullers views.

Although Mr Wegmuller actually acknowledged difficulty in recollecting exactly what he signed, the Recorder decided that in the absence of any direct evidence from either Barclaycard or HFO, as to account set up procedures/documentation, Section 61 compliance could not be proved.  Therefore the debt recovery claim brought by HFO was dismissed.

Ok, now its helpful to look at the Wegmuller ruling here.

14. I pause there for a moment. It is worth noting that none of those three terms is actually visible on the copy application form document in the bundle that was signed by the defendant on 25th March 1996.

Clearly Recorder Campbell found the prescribed terms were not on the application Mr Wegmuller signed. That was obvious, contrary to the authors assertion the agreement was before the Court, otherwise how did the recorder make such findings??

Worse was to follow as Mr Wegmuller had instructed a firm of solicitors who are well known for representing customers who wish to challenge their liability under  regulated agreements on the grounds of non CCA compliance.  That firm (and similar) will take comfort from this ruling – not least the award of costs made in their favour.

That Firm, what an amusing comment, it seems to be that they cant even bring themselves to mention our name, still anyone who reads the Wegmuller ruling will know who we are. I would also point out that every one is entitled to be legally represented, if the banks dont like losing money there is a solution, GET IT RIGHT- GET YOUR PAPERS IN ORDER and maybe even invest in lawyers who know about consumer credit law. On the point of costs, well yes, isnt it the case that costs follow the event? if the lender had won he would have wanted his costs surely? or would they be kind and say its ok dont bother paying? for goodness sakes , the mind really boggles. So yes, we won the case, yes we got paid, yes the client didnt have to pay his unenforceable debt and yes we were on a CFA so got an uplift.

Although perhaps a reflection of the quality of evidence before the Court in that particular case, the message is clear – when proceedings are defended, debt purchasers need to ensure that a litigation risk assessment is carried out on every “enforceability” case.  The reality is that for the purposes of both litigation and regulatory compliance they are an “extension” of the original lender.  Implementation of effective arrangements will ensure recoveries  are maximised and defeat/dissuade speculative and time-consuming challenges/defences.

With respect, i find it grossly insulting if the author is suggesting that Mr Wegmullers Defence was speculative. It was anything but. There were identified breaches of s61,62,63,78,86,87 Consumer credit Act. As for HFO Capitals Default notices one merely need read HFO Capital v Michael Burney which is on BAILII and can be found here
We have challenged that certain creditor before, and have at least 20 victories under our belts with them so if our defences are speculative the judges must clearly be missing something. As far as it goes, the failings were no the fault of our clients, they were the fault of the creditors and their stupidity in rushing off to court without making sure they had a case that was winnable. I have a wealth of rulings in the County Court and High Court also that supports the arguments i have used in cases such as Wegmuller, none of which can be called speculative.

On a closing point, i must remind myself of the words of the Vice Chancellor in the case of Wilson v First County Trust Ltd – [2001] 3 All ER 229 where Sir Andrew Morritt VC said

In effect, the creditor–by failing to ensure that he obtained a document signed by the debtor which contained all the prescribed terms–must (in the light of the provisions in ss 65(1) and 127(3) of the 1974 Act) be taken to have made a voluntary disposition, or gift,of the loan moneys to the debtor. The creditor had chosen to part with the moneys in circumstances in which it was never entitled to have them repaid;

It seems pretty clear that if a lender fails to jump through the hoops set down by the legislation then he deserves all the hassle he gets. Lets also not forget that many lenders DID Get it wrong over the last 20 years, and now their errors are coming to light to their detriment sadly.

Hire purchase agreements and s90-92 Consumer Credit Act 1974

Over the past few months i have dealt with a number of hire purchase cases whereby the creditor has taken possession of protected goods upon a debtor breaching the terms of the agreement regulated by the Consumer Credit Act 1974.

Protected goods are goods that more than one third of the repayments due under the agreement have been paid. Where the debtor has paid more than the one third of the total repayments before repossession the creditor would need an order of the Court to be entitled to repossess the goods. It is worth visiting the relevant sections of the Consumer Credit Act

90 Retaking of protected hire-purchase etc. goods.

(1)At any time when—
(a)the debtor is in breach of a regulated hire-purchase or a regulated conditional sale agreement relating to goods, and
(b)the debtor has paid to the creditor one-third or more of the total price of the goods, and
(c)the property in the goods remains in the creditor,
the creditor is not entitled to recover possession of the goods from the debtor except on an order of the court.
(2)Where under a hire-purchase or conditional sale agreement the creditor is required to carry out any installation and the agreement specifies, as part of the total price, the amount to be paid in respect of the installation (the “installation charge ”) the reference in subsection (1)(b) to one-third of the total price shall be construed as a reference to the aggregate of the installation charge and one-third of the remainder of the total price.
(3)In a case where—
(a)subsection (1)(a) is satisfied, but not subsection (1)(b), and
(b)subsection (1)(b) was satisfied on a previous occasion in relation to an earlier agreement, being a regulated hire-purchase or regulated conditional sale agreement, between the same parties, and relating to any of the goods comprised in the later agreement (whether or not other goods were also included),
subsection (1) shall apply to the later agreement with the omission of paragraph (b).
(4)If the later agreement is a modifying agreement, subsection (3) shall apply with the substitution, for the second reference to the later agreement, of a reference to the modifying agreement.
(5)Subsection (1) shall not apply, or shall cease to apply, to an agreement if the debtor has terminated, or terminates, the agreement.
(6)Where subsection (1) applies to an agreement at the death of the debtor, it shall continue to apply (in relation to the possessor of the goods) until the grant of probate or administration, or (in Scotland) confirmation (on which the personal representative would fall to be treated as the debtor).
(7)Goods falling within this section are in this Act referred to as “protected goods ”.

91 Consequences of breach of s. 90.

If goods are recovered by the creditor in contravention of section 90—

(a)the regulated agreement, if not previous terminated, shall terminate, and
(b)the debtor shall be released from all liability under the agreement, and shall be entitled to recover from the creditor all sums paid by the debtor under the agreement.

92 Recovery of possession of goods or land.

(1)Except under an order of the court, the creditor or owner shall not be entitled to enter any premises to take possession of goods subject to a regulated hire-purchase agreement, regulated conditional sale agreement or regulated consumer hire agreement.
(2)At any time when the debtor is in breach of a regulated conditional sale agreement relating to land, the creditor is entitled to recover possession of the land from the debtor, or any person claiming under him, on an order of the court only.
(3)An entry in contravention of subsection (1) or (2) is actionable as a breach of statutory duty.

The above is pretty clear yes? so why do creditors get themselves caught out? well the difficulty Mr Creditor seems to have is, in the cases ive dealt with, they have tried to argue that the debtor returned the keys, thus consented to the repossession and therefore the one third rule et al is irrelevant.

However, while a debtor can indeed consent to enforcement under the act, when it comes to repossession of protected goods the consent must be “informed consent” and in the cases which i have dealt with, the consent was clearly not informed consent.

The Court of Appeal case of Chartered Trust v Pritcher makes it very clear that recovery of protected goods must be by informed consent. So what does this mean? In Pritcher, the debtor had not been made fully aware of his statutory rights before the vehicle was repossessed. Such as the right to keep the goods after more than one third of the repayments had been made and seek a time order from the Court. This right was not explained to Mr Pritcher and therefore his consent was not informed consent. While the Pritcher case was relevant to the Hire Purchase Act, the editors of Goode agreed that the case would apply to the provisions of s90  Consumer Credit Act .

Given the amount of defective Default notices that we see, there is no doubt that some lenders will face a real difficulty if they repo protected goods after one third of the repayments have been made without securing informed consent of the debtor. It is my view that a materially bad default which does not provide the debtor with statutory information required by the Consumer Credit Act could invalidate any consent that the debtor may have given, if he did so not fully aware of his rights.
I have already dealt with such a case where the client was entitled to a refund of all monies paid under the agreement because informed consent was not achieved.

Santander v Mayhew

Case No: 0XY3859


Date: 08/03/2012

Before :


– – – – – – – – – – – – – – – – – – – – –
Between :

– and –
– – – – – – – – – – – – – – – – – – – – –
– – – – – – – – – – – – – – – – – – – – –
Karin Tampion (instructed by Howard Cohen) for the Claimant
Paul Brant (instructed by Watsons Solicitors of Llandudno) for the Defendant
Hearing date: 8th March 2012
– – – – – – – – – – – – – – – – – – – – –


1. This is a claim for the recovery of a debt accrued on a credit card.

2. The starting point here must be a reminder that this is a case where a major
commercial enterprise is seeking judgment against a consumer. It is true that the
underlying “merits” undoubtedly favour the Claimant but it is also true that it is
and was incumbent on Santander to get its tackle in order.

3. In April 2000 the Defendant went into Harrods and picked up an application
form for a Harrods store card. She filled in the form at home and sent it to GE
Capital Bank on 5th April 2000. Her application was successful and a card was
sent to her. The Defendant began to use the card.

4. The card was “upgraded” to a credit card in September 2003. The Defendant
was “selected” for the upgrade and an unsolicited card was sent to her in the
post. The Defendant voluntarily activated the card and thereafter used it to make
some small purchases and to transfer the outstanding balances from several
other cards.

5. In May 2009 GE Capital Bank became Santander Cards (UK) Limited, the

6. The Defendant ran into financial difficulties and in July 2009 she failed to
make the minimum payment due on the card. She informed the Claimant of her
problems in February 2010 and it was agreed that she would make payments of
£5.44 a month from March 2010.

7. On 12th October 2010 the Claimant served a default notice with a final demand
being sent on 11th November 2010. These proceedings were issued on 20th
December 2010.

8. The Claimant brought this claim and it is for it to prove, on a balance of
probabilities that it is entitled to judgment for the sum claimed.

9. Evidence for the Claimant was given in the form of the statement of John-Paul
Murphy the solicitor with conduct of the case. A hearsay notice was served and
although Mr. Murphy was present in court no oral evidence was adduced on
behalf of the Claimant. The Defendant herself gave evidence.

10. Four issues fall for determination (i) whether the agreement entered into in
April 2000 was valid (ii) whether the upgrade in 2003 was valid (iii) whether
the default notice complied with the requirements of the Consumer Credit Act
and (iv) whether the Defendant’s request under section 78 of the Consumer
Credit Act was complied with and, if it did not, whether that rendered the whole
agreement unenforceable.

11. Was the April 2000 agreement valid? Section 61 of the Consumer Credit Act
requires that a valid agreement must contain all the prescribed terms (credit
limit, interest rate and repayment terms) and be signed by the debtor and the
creditor. The Defendant’s case was that she went into Harrods banking hall
and picked up a pre-paid foldable application form which she took home,
filled in and sent off. She said there were no terms and conditions other than
those printed on one side of the form. She had kept a copy of the form for
her records. She also said that when she received the store card there were
no terms and conditions with it. It was the Claimant’s case that terms and
conditions were supplied, that procedures for providing terms and conditions
were automated and that it would be unrealistic to expect that the Claimant
could call anyone to give evidence as to the application of those procedures in
this case. The Claimant was not able to provide a copy of the documents which
it said would have accompanied the application form. The Defendant struck
me as a methodical person who had kept a copy of the application form for her
records and I have no doubt she would have kept, though possibly not read,
any terms and conditions sent to her. I believed her evidence that she had not
received any terms and conditions, either when she took the application form
or when she received the card. I therefore find that the April 2000 agreement is

12. Was the 2003 upgrade valid? In September 2003 the Defendant’s card
was “upgraded” to a dual card meaning that it was now a storecard and a
Mastercard. The new card was sent unsolicited to the Defendant who needed to
sign and activate it before she used it. It was open to the Defendant to decline
the new card but she chose to activate it and use it. The new card had an
introductory rate of interest for transferred balances and using it would gather
loyalty points. The Defendant took advantage of both these features. The
Defendant says that the agreement changed from a restricted use debtor-creditorsupplier
agreement to being an unrestricted use debtor-creditor agreement and a
debtor-creditor-supplier agreement which amounts to a modification of the
agreement such that compliance with the requirements set out in regulation 7 of
the Consumer Credit (Agreements) Regulations 1983. Compliance with the
regulation requires a copy of the fresh agreement containing the relevant
prescribed information to be served on the debtor. The Claimant did not allege
that any such document was sent to the debtor. It was the Claimant’s case that
the new card was supplied under a credit token agreement which remained in
force and that there was no modification attracting regulation 7. In my judgment
the Claimant’s analysis is wrong and there was a modification of the agreement
requiring compliance with regulation7. The Claimant did not argue that it had
complied with the regulation.

13. Was the default notice valid? Under section 87 of the Consumer Credit Act
a default notice must be served before any termination or demand for earlier
payment. Section 88 of the Act provides that a default notice must be in the
prescribed form. The Claimant served a default notice by post of 12th October
2012. The Defendant says that the notice was defective because it gave the
wrong figure for the amount due and no OFT fact sheet was included. The
Claimant explains that the difference is the amount by which the Defendant’s
credit limit had been exceeded and that error was detrimental to the Claimant
rather than to the Defendant. It was the Claimant’s case that the OFT fact sheet
would have been included with the default notice and in the event that it was not
there was a clear statement at the end of the notice that the Defendant should
contact the Claimant so that the sheet could be sent. The Defendant denied
that the OFT fact sheet was sent with the default notice, stated that she did not
request the sheet and candidly admitted that she might not have read the whole
letter. No evidence was adduced before me actively saying the fact sheet had
been enclosed. The Claimant invited me to conclude that that the defects in the
default notice were de minimis but I do not agree. The whole point of a default
notice is that the debtor should know exactly what is owed and it is irrelevant
that any defect would be to the detriment of the creditor. I accept the evidence
of the Defendant that no OFT fact sheet was enclosed and words inviting her to
send for the missing sheet are not sufficient to remedy the defect of its absence.
It is unfortunately the case that many debtors in the position of the Defendant
in this case do not read to the end of letters thus the importance of documents
being enclosed.

14. The Defendant’s section 78 request In order to comply with section 78 the
creditor must provide a copy, reconstituted if necessary, of the terms and
conditions originally agreed between the parties and, if different, those in
force at the time of the request within 12 working days, the agreement is
unenforceable until the request has been complied with. On 17th November
2010 the Defendant made a section 78 request to Lewis Debt Recovery, a
chasing letter was sent on 6th January 2011 and a section 78 request was made
to the Claimant on 15th January. The request was replied to on 2nd February. The
Defendant sent an entirely disingenuous reply on 4th February alleging that she
had received information for the wrong account. She claimed that she needed
information for account 5413613010473940 not the information she had been
sent which related to account 6356505552255858. Her evidence was that she
had kept the original agreement and a moment’s checking would have revealed
to her that the 6356 number related to her original account. In my judgment the
Claimant complied with the section 78 request within the stipulated time and
is not prevented from enforcing this debt for non-compliance with a section 78

15. It follows from what I have said above that the claim is dismissed. The claimant
must pay the Defendant’s costs to be subject to detailed assessment if not

Henrietta Manners
20th March 2012

Above is the Judgment of Judge Manners in Santander v Mayhew. It represents a very important ruling, especially for anyone with a Harrods, Debenhams, Marks & Spencers store card to name but a few. Yes it is only a County Court ruling but it accords with the view of the Office of Fair Trading, and also Goode Consumer Credit Law and Practice.

It is a very helpful judgment.

Debt collection industry faces “perfect storm”

Debt collection industry faces “perfect storm”.

I have just read the ab0ve article on Credit today. Anyone who knows me, will know i have been saying for a long long time that the debt purchase / collection industry is headed for a real problem if it didnt change and do it quickly.

The stories which i hear from clients are of agressive tactics which simply demand unmanageable amounts of money and do not stop to take stock of the debtors circumstances. The old saying you cannot get blood out of a stone springs to mind.

Now in my view, notwithstanding the fact that most regulated consumer credit agreements can be made subject of a time order under s129 of the Consumer Credit Act 1974 (as amended), i do not see why debt collectors employ this inflexible approach. If a debtor doesnt have the money to pay what you ask then it becomes pointless demanding it anyway. What seems more logical is if the debt collector agrees to accept the sum that the debtor can pay. At least he is then recovering something and the debt is being paid and more importantly the debtor is not being harrassed unnecessarily.

In my opinion, it is more the fact that people when they get pushed into a corner come out fighting that is causing the debt industry problems. Many of these people find their way to my firm and then when an assessment of the facts is carried out, often the debt being pursued is found to be irrecoverable for numerous reasons.

What costs the debt purchase industry more,is in the cases i have been the fee earner on, is that they launch legal action without carrying out a full assessment of the case being taken to Court. Often the debt purchaser doesnt even have the credit agreement which under pins their claim and do not even know what clause of the agreement is said to have been breached. Often there is a s78(1) Consumer Credit Act request outstanding which prevents the creditor from getting a Court judgment and yet they still press on with fruitless and ultimately expensive litigation.

The debt industry really does need to stop and take a look at its self. In fact i told one DCA solicitors that the case they had just lost against me , i would have won, it was simply the fact that the Claimant had failed to carry out a proper assessment of the case and put right the errors. That failure cost them close to £30k.

I am quite surprised actually that the DCAs havent approached us to represent them, then again, im not sure i could.