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.

Our order “appealled” to the Judge

An interesting case came up recently which went to reinforce my view that if you are not sure of the arguable points in your case, or how to present them correctly in a Defence, then you should seek legal advice.

The case in question, as so many others do, involved a matter where a clients account had been purchased by a third-party who were seeking to recover the balance outstanding on a credit card account.

The matter ended with the Client being sued, there appeared to be a number of grounds of challenge in this matter, however due to the clients lack of understanding many of the key points were missed out of the Defence, instead there were a number of irrelevant quotes from cases which didn’t assist.

The case did not really get off the ground, as the Claimant applied for summary judgment and unfortunately for the client, they succeeded and judgment was granted. Thus leaving the client with not only the full balance now being payable but also costs, and a CCJ on the credit record.

At this point the client contacted us and we took the case on a CFA basis. We also found a barrister on a CFA also. We considered the judgment and identified a number of weaknesses within the judgment. We prepared the grounds of appeal and filed the appellants notice (Form N161) . We identified a number of points which the Client had not considered or had not argued correctly.

We drafted up a consent order which allowed the appeal by the consent of the parties, of course the appeal court needs to be satisfied that there is a good reason for allowing the appeal without hearing the parties as the Courts do not like to interfere with a judgment unless there are good grounds to do so but as long as there are grounds and neither of the parties isnt a child or under the Court of Protection then it should be straight forward.

There was a fair bit of tooing and froing between the parties, and eventually the parties agreed to the appeal being allowed by consent relying on CPR 52 PD52A Paragraph 6.4. All of the costs were paid by the opponent.

The Judgment should never have been granted, but the client simply was unable to present a convincing argument to the Judge and as a result the client lost. The Client was on a tilted playing field from the start as the barrister the Claimant sent was well versed in Consumer Credit Law but the Client wasnt, it was a case of the Claimant barrister had the Judge eating out of his hand while the Client was simply given short shrift.

The case was put back on an even keel and an amended Defence was prepared raising all of the keys issues which gave the client a chance at trial.

The key point here however is if you do feel out of your depth, you are merely going to cause yourself more problems if you go it alone. It costs nothing to get some advice and see if there are any firms willing to assist you on no win no fee.

At the end of the day, success can never be guaranteed, but with the right help, you can give yourself the best fighting chance available.

MBNA told show must go on……..but gave up anyway

A follow up to my post last month on here.

MBNA were defeated on an application for summary judgment by my client who was represented by arguably one of the leading barristers in consumer law – Paul Brant of Oriel Chambers.

Well after the hearing, MBNA filed notice of discontinuance. The sceptic in me says they didnt want the issue about interest to come out at trial as it would be horrendously damaging but of course that is just my thoughts.

Anyway, im going to point out the interest issue here, so such is life 🙂

The client had a Bank of Scotland Credit card which was opened in 1994.

The terms of the original card provided that interest was simple interest. The terms did not provide an unfettered right to introduce new terms when the creditor felt like it.

The terms only provided a very narrow right to vary interest rates, but not the manner which interest was charged.

However, MBNA took over the card in around 2006, like they did with millions of others from the Bank of Scotland. So, MBNA without further thought it seems slapped new terms on the table and bound our client to them………or atleast they thought they did.

We disagreed. We pleaded that the Claimant was not entitled to compound interest and MBNA in their reply admitted that we were right bout the original terms of agreement, but it seemed MBNA were arguing they could vary the terms relying on their right to vary the RATE of interest.

We referred to Goode the leading authority on CCA work.

Paragraph 35.1 Goode Consumer Credit: Law and Practice refers when it is stated “Many variation clauses are drawn in very general terms, but the creditor should not assume that that these confer on him an unlimited power to alter the contract terms. A variation clause will, like the rest of the contract, be construed contra preferendem, and in the absence of clear language the court is unlikely to treat the clause as empowering the creditor to modify the contract in some fundamental manner outside the reasonable contemplation of the parties.’

Our view is that it is entirely correct, that the Creditor could not twist a clause to suit itself. Furthermore, the issue on compound interest has been to the Court of Appeal already in the matter of Armstrong v American Express. And in that case Amex had to reduce the balance from a compounded rate to a simple rate as their terms did not allow for compounded interest.

In our clients case, MBNA had been charging compounded interest over 6 years, so arguably there was a huge refund due our client which would of extinguished the debt in any event, that is certainly my own opinion.

Anyway, we will never know who was right and who was wrong…………