Unenforceable agreements

Unenforceable agreements

 

By Joanna Connolly, head of consumer credit at MSB Solicitors LLP.

 

Credit agreements that may be unenforceable
 

If you have individual loans both secured and non-secured, hire purchase agreements or running credit agreements (credit and store cards) of up to £25,000, which were taken out before 6 April 2007, then it is likely that some of the agreements cannot be legally enforced by the creditor. This is because there are strict regulations, known as “prescribed terms” under the Consumer Credit Act 1974 which the creditor must comply with, and the financial penalty they pay for not complying with the relevant regulations is that they lose the right to enforce the debt.
 

Credit agreements may be unenforceable for many reasons, some of which are:

 

• The loan agreement does not state the amount of credit.

 

• Credit/store cards do not state the credit limit, interest rate charged or what the monthly repayment is.

 

• Depending on the date and type of agreement, there is no rate of interest or APR specified.

 

• Hire purchase/conditional sale and credit card/store cards agreements do not state how the money borrowed is to be repaid by stating the number of instalments, the amount of repayments or when the instalments are due to be paid.

 

• If the creditor has power to vary the interest rate or minimum amount payable for example, then that, depending on the type of agreement, must be specified.

 

• The agreement is not signed.

 

• The creditor has neither the original agreement nor a signed copy.

 

• In the case of cancellable agreements, such as loans signed in the borrowers home, failure by the creditor or hirer to include, in an agreement or copy, notice of the right to cancel.

 

Arrears notice penalty


If the creditor fails to provide a notice of sums in arrears when required to do so, they are not entitled to enforce the agreement until they comply. The debtor or hirer is not liable to pay any interest that relates to the period of the creditor or owner’s failure.

 

Notice of Default Sums


A creditor or owner must serve a Notice of Default Sums where for example they want to charge a late payment penalty. The notice must detail the amount the debtor has to pay. A creditor may only require a debtor to pay interest (in connection with a default sum) 28 days after the day the notice was given to the debtor. So if the creditor fails to give notice to the debtor then he can not enforce the agreement until notice is given.

 

Default / termination & court action


Before a creditor can terminate your credit agreement early for non payment, they have to follow the procedures required under the Consumer Credit Acts 1974 & 2006. If they have not complied with the statutory default and termination procedure and the creditor issues court proceedings then the creditor is only entitled to the arrears at the time they originally defaulted you, not the whole amount.

 

 

The views expressed in these articles are the views of the author only. No liability attaches to you for any advice given in the absence of a written retainer. If any issue affects you, you must instruct a solicitor and take appropriate legal advice.

 

Notes
Joanna Connolly is head of consumer credit at well-established Liverpool law firm MSB Solicitors LLP.
She has a particular interest in consumer credit and the enforceability of consumer credit agreements.
In addition to debt and insolvency expertise, MSB represents clients across Britain and internationally.

 

To contact Joanna Connolly directly e-mail joannaconnolly@msbsolicitors.co.uk or call MSB Solicitors on 0151 254 2200