16
Oct
Oct
Consumer Credit Debts & Write off
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There has been much hype over recent months over claims that loan and credit card debts taken out before 6th April 2007 can be written off due to recent changes in the law. Whilst much of the information surrounding this issue is inaccurate or misleading it is true that in some cases lenders are unable to issue legal proceedings to recover monies that are owed to them. This is because some of their credit agreements lack what are called ‘prescribed terms’ and are therefore considered ‘irredeemably unenforceable’.
What is the background?
In order to protect the public from unscrupulous lenders, the Consumer Credit Act was added to the statute books in 1974. It requires that most companies that offer goods or services on credit or those that lend money to consumers are licensed by the Office of Fair Trading. It is a criminal offence to trade without a licensing arrangement.
The Consumer Credit Act also requires certain credit arrangements to be set out in a specific way and that these arrangements must contain certain information. Without this information these agreements are not enforceable.
Credit agreements where the amount of credit or hire exceeded £25,000 were excluded from control until 6th April 2008. Whilst pre-existing agreements above £25,000 remain outside CCA regulation, all new credit and hire agreements are now covered by the 2006 Consumer Credit Act.
The Consumer Credit Act was worded in a way that lenders would be unable to enforce repayment of the loan or credit in court if they did not comply with the provisions of the Act.
Is it possible to write off debts?
There has been an increasing trend of consumers attempting to write-off their debts in recent months, partly thanks to a large number of advertisements from claims management companies seeking to exploit loopholes in the Consumer Credit Act legislation.
Where an agreement was signed before 6th April 2007, if a borrower doesn’t pay their debts the lender can apply to a court for an enforcement order to recoup their money. However, there are certain circumstances in which the court does not have power to enforce the agreement. The loan or credit agreement therefore remains unenforceable and the lender is unable to recover any money from the borrower using legal means.
For example, when lenders cannot produce copies of the original credit agreement that a borrower signed, or if the agreement failed to correctly state one of the Act’s ‘prescribed terms’ (such as the Annual Percentage Rate (APR)) firms claim that borrowers may be able to get your debt written off.
For agreements made on or after 6 April 2007 the court now has discretion under the 2006 Consumer Credit Act 2006 to enforce an agreement which does not comply with the Act’s requirements.
Despite some reporting to the contrary, cases of this type are continuing to be heard and the outcomes decided on their own particular facts.
Companies who promise to help
Many firms have appeared in recent months claiming in their advertisements to be able to get you out of your credit card or personal loan debt. There are some companies suggesting that up to 80% of agreements are unenforceable.
These companies generally charge a fee to assist you get rid of the debt, sometimes as a percentage of the amount you save. Whilst in certain circumstances as detailed above there are agreements which may be unenforceable, many of them are. If you believe that your agreement is unenforceable and you are not making repayments you may well be incurring legal costs and default charges should it be proved that you are mistaken. You may also incur charges to a claims management firm even if your case is unsuccessful.
Firms that provide regulated claims management services must be authorised by the Regulator and you can search on line to see if the claim management firm you are proposing to use is regulated.
Category : FINANCE
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