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The enforceability of hundreds of millions of pounds of credit card debt with be affected by legal test cases at the end of this month.
Manchester High Court is the venue for five days worth of time for twelve seperate cases to be heard which will help to determine a variety of legal issues under the Consumer Credit Act (CCA), with several of the cases being brought forwards by Cartel Client Review, a prominent claims management company.
Carl Wright, of Cartel Client Review, is hoping that a favourable decision is reached that will forced the bank and credit card companies to settle thousands of similar cases on his books.
“We want the judges to rule on these claims, providing precedents which will prevent the banks and credit card companies delaying on paying out on consumer claims any longer,” Mr Wright says.
This past year has seen an unprecedented amount of court action between lenders and borrowers with tens of thousands of similar cases yet to be heard.
Borrowers are aguing that the debts against them cannot be enforced because lenders have failed to follow CCA guidelines which the law states “a lender cannot ask a court to enforce a debt if the lender’s original agreement failed to comply with certain requirements.”
“Once you have established the agreement is defective, in at least one of a number of specific ways, the court has no discretion to grant an enforcement order in favour of the creditor,” says barrister Oliver Mishcon.
However, due to a new Consumer Credit Act in 2006, this lack of discretion for judges only applies to regulated consumer credit agreements entered into before April 7 2007.
The new CCA agreement states that loan agreements for fixed sums or credit cards must contain three “prescribed terms”:
- the amount of credit; or the limit of the credit, or the manner in which the limit will be decided
- the rate of interest
- how the borrower is to repay the debt.
Bob Imrie, who trains trading standards officers and also claims management firms in the operation of the CCA, is doubtful that the courts will let people escape their debts, saying “Courts are not very sympathetic to claims that terms and conditions were not provided to customers. You’ve got a real problem trying to undo an agreement on a technicality; you’ve got to provide evidence the banks behaved wrongly.”
However, the potential use of the law to favour debtors was highlighted by a case in October this year at Stockport County Court.
Deputy district judge Howarth issued a decision in favour of a Mr Yates, so that his credit card debt of £6,585 can never be collected.
Mr Yates had run up the debt after taking out the MBNA card in 2003.
In January 2009, the debt was sold, or “assigned”, to a debt collection firm and it swiftly took Mr Yates to court to get the money back.
He argued that the copy of the original agreement supplied by MBNA to the court was incomplete and illegible, and so it was unclear that the prescribed terms had in fact been included.
Th debt recovery did not turn up for the hearing and lost by default, but at the request of Mr Yates’ lawyers the judge went on to declare that the debt was unenforceable.
Mr Yates’ solicitor, Alun Thomas of law firm JW Hughes in Llandudno, says he has 300 similar cases on his books.
“There are solicitors up and down the country handling many more and there are many cases, but almost all of them have yet to be decided.”
