Unenforceable Credit Agreements
A large number of websites and services have arisen claiming to be able to get you out of your credit card and personal loan debt. You are probably asking yourself if this is true and are finding it difficult to understand the true position. Much of the hype and information is misleading and incorrect. However, it is true that some lenders are unable to issue legal proceedings to recover monies they claim are owed to them because some of their credit agreements lack ‘prescribed terms’ and are ‘irredeemably unenforceable’. The true position is as follows:
History
In 1974, Parliament enacted the Consumer Credit Act (the “Act”). The Act was designed to protect the public from unscrupulous lenders. It laid down requirements which had to be complied with for a credit card or credit loan agreement (“credit agreements”) in order for these to be enforceable.
The relevant part of the Act covers agreements for less than £25,000
The Act was drafted on the basis that lenders who didn’t comply with the provisions could not enforce repayment of the loan in a court of law. It was never intended to catch out the large blue chip banks and credit card companies but it has become apparent that many lenders have inadvertently fallen foul of these rules and so some of their credit agreements are unenforceable.
The 1974 Act provides that an agreement must contain certain prescribed terms. If an agreement lacks the prescribed terms it is unenforceable unless the lender applies to court for an enforcement order. There are certain circumstances in which the court does not have power or jurisdiction to enforce the agreement so the agreement remains unenforceable therefore the lender is unable to recover the debt.
This applies only to agreements signed before 6 April 2007. For agreements made on or after 6 April 2007 the court now has discretion under the Consumer Credit Act 2006 to enforce an agreement which does not comply with the 1974 Act’s requirements. In exercising its discretion, the court must balance the prejudice that would be suffered by the borrower if the court decided to enforce the agreement, against the prejudice that would be suffered by the Lender if the court decided not to enforce the agreement.
Other Claims Management Companies
You will probably have seen advertised or on the internet a number of companies claiming to be able to eliminate your debts and claim compensation on your behalf. Some companies are claiming that 80% of agreements are unenforceable. Some of these companies will be charging various prices in order to ‘get you out of your debt’ and they may also charge a percentage of any debt write off. They may also claim that they will subsequently claim compensation for you. The Ministry of Justice who monitors claims management companies who provide these services has issued warnings to consumers to help them identify unscrupulous companies. In particular, claims management companies should not be giving guarantees or making promises to get you out of your debt.
Certain aspects of the current law are still unclear
What is clear is that certain agreements are unenforceable in certain circumstances but it is wrong to assume that a high percentage of credit agreements are unenforceable. You will need to be advised of your personal situation as quickly as possible. If you are not making repayments you may be incurring default charges and legal costs. However, if you instruct us our lawyers will consider your legal position.
If you wish to find out whether your credit agreement is unenforceable you need sound advice. We will “audit” your agreement free of charge to see if it maybe unenforceable, you will need someone to act for you in legal proceedings, preferably on a no win no fee basis, which is what we may be able to offer.
Our Solicitor Will:
- Endeavour to obtain a copy of your credit agreement from your lender.
- Review whether your agreement is enforceable under the Consumer Credit Act.
- Give you advice as to whether your credit agreement is enforceable. If it is not enforceable he will notify the lender in writing and request confirmation that you have been discharged from any further obligations.
- Take all steps possible to ensure that an adverse credit rating is not made against you.
- If the credit agreement is enforceable he will advise you accordingly.
- If he has advised you that your agreement is unenforceable and a lender issues enforcement proceedings against you, he is able to represent you on a ‘no win no fee’ basis to defend the claim.
- He may be able to obtain a letter from the lender or the court discharging you from the debt. He may be able to remove the account from your credit rating so that no adverse credit rating can be made.
- In certain limited circumstances we may be able to obtain compensation from your lender.
- If you are being contacted by solicitors or debt collectors he will write to them to stop further collection activity.
Fees
Our initial “audit” is free.
Where we believe you have a claim, a fee of £295
plus VAT, if applicable, is payable should you wish to proceed.
For each agreement that is unenforceable we will attempt to reclaim this fee back from the lender which we will repay to you as soon as we receive it from them.
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Triangle Financial Services LLP,