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.

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.