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.

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.