EuroDebt Welcomes OFT Clarification on 'Unenforceable Credit Agreement' Confusion
27th January 2010
Leading debt solutions expert, EuroDebt, has welcomed the OFT's publication of draft guidance for consumers
Leading debt solutions expert, EuroDebt, has welcomed the OFT's publication of draft guidance for consumers on the application of important sections of the Consumer Credit Act 1974 that allow them to request information about their credit agreements. The guidance has arisen following on-going concerns that tens of thousands of debtors are being misled into thinking they can get their debts written off.
"This situation has caused much confusion amongst consumers and as a result impacted on the activities of lenders, debt buyers, debt collectors and debt advice companies like ourselves", confirmed Kevin Still, Director, EuroDebt. "As a result borrowers have been left thinking they donít worry about certain debts whilst the lenders have continued to pursue them. And the situation was made worse with promises by licensed and unlicensed Claims Management Companies.
"This new draft guidance should provide welcome clarification for everyone concerned."
Sections 77-79 of the Act give an individual the right to ask for a copy of their credit agreement and a statement of account from the lender for £1. Under normal circumstance this could have been the original agreement was lost and the individual needed to check the terms such as the interest rate. If the creditor did not send a copy of the agreement within 12 working days, they were not allowed to take further action or enforcement against the individual until they sent the agreement. This is where the confusion arose.
The OFT consultation incorporates the findings of recent High Court cases that have clarified a number of technical issues. For example, sections 77-79 of the CCA allows a consumer to request a 'true copy' of their agreement. The High Court ruled that a true copy does not have to be a photocopy or an exact copy of the original. The lender is allowed to provide a reconstituted agreement, as long as that version is accurate and contains all the original information apart from the few exceptions that the law allows (which include the signature, signature box and date of signature).
The guidance also makes it clear that if a lender cannot comply with the sections - making an agreement unenforceable - then it is restricted in the debt collection activities it can undertake. The OFT considers it would be wrong to threaten court action if the lender knows that it is not possible.
Crucially the OFT has made it clear that 'Unenforceable' does not mean that an individualís debt is wiped out. Any outstanding debt is still owed, but there are some consequences for the lenderís ability to enforce the debt, but they can:
- request payment
- issue a default notice
- pass details of the default to a credit reference agency (e.g. Equifax, Experian or Callcredit)
- pass the individualís information onto a debt collector
The plain English part of the consultation is very helpful for consumers and debt advisors alike, which has been long overdue with the rise of both licensed and unlicensed Claims Management Companies targeting people with debt problems" added Kevin Still. "These sections of the Act shouldnít be used to avoid paying your debts, but equally lenders need to fulfil their obligations under the Act and work with legitimate licensed debt advisors in the free and commercial debt advice sectors."
He concluded; "I am pleased that the OFT has reinforced the point where a debt has been sold on to a Debt Purchaser. The lender should either tell you who to contact or advise the business that purchased the debt of your request. Lenders will also contact you if they believe that a party claiming to act on your behalf, like a Claims Management Company, is not properly licensed. They should also notify the Ministry of Justice and the OFT for further investigation."