Termination of Egg credit card agreement

[toymaker1]

Hello

Someone might be interested in my experience with Egg, who terminated my agreement without sending me a default notice (my account was not in default).

I have asked Egg to indicate to me the specific part of the 1974 Consumer credit Act which provides Entitlement to Egg to terminate my agreement when my account is not in default.

I have also asked Egg to indicate to me the specific part of the 1974 Consumer Credit act which provides entitlement to Egg to include in the Egg credit card agreement a term stating that Egg can terminate the agreement at any time.

I have told Egg that I consider Egg to be in breach of the 1974 Consumer Credit Act, and that if the matter goes to court I will, additionally, ask the court to use it's powers under sections 19/20 of the 2006 consumer credit act.

Regards

toymaker1

[steven4064]

Didn't this happen to loads of people when Egg was purchased by Citi? I think it was on the basis that they thought they weren't going to make enough money out of you.

[toymaker1]

Hello Steven

The point I am making is that it is irrelevant whether or not Egg makes money or not from a particular credit card holder. The only relevant question is - does Egg have a legal entitlement to terminate an Egg credit card agreement when the Egg card holder is not in breach of his/her Egg agreement? - That is to say when he/she has not been served with a default notice - in my case it would be under Section 87(1) of the CCA 1974. It would depend on what sort of account/agreement you have with Egg. In the case of a straghtforward credit card agreement, there is nothing in the CCA 1974 which provides Egg with an entitlement to to terminate an agreement which is not in default.

So far I have asked Egg more than 14 times to indicate to me the part of the CCA 1974 which provides Egg with an entitlement to terminate my Egg agreement (when I have not been served with a Default Notice).

One might expect Egg to immediately be able to indicate to me the relevant section of the Act which entitled Egg to terminate my agreement. - or am I missing something?

I am collecting a very interesting list of different sources which Egg have indicated to me provide Egg with the necessary legal entitlement to terminate my Egg agreement.
For example:
"We've considered your account history... following this review we've decided to end your Credit agreement"

"We reserve the right to terminate your agreement"

"part 7, section 98 of the CCA 1974"

"we gave you more than seven days notice"

"This is covered in section 20.2 of your terms and conditions"
"The CCA 1974 points 64-71 provides information around the legal entitlement that we've had to abide to around the closure of customer's accounts"

"I'm not going to start quoting lines from the Consumer Credit Act as it isn't necessary"

None of the above statement to me by Egg provide any legal entitlement to terminate my agreement when I have not been served with a Default Notice under S87(1) of CCA 1974.
The saga continues.

Regards
toymaker1

[steven4064]

What does section 20.2 of the T&Cs say - that seems to be the only really relevant one.

[toymaker1]

Hello Steven

I take your point, but the way I see it, Egg's terms and conditions derive their legal authority from the 1974 CCA. That is to say, Eggs Terms and conditions cannot contain a term which is inconsistent with anything in the 1974 Act Section 173(1).
Therefore, as I understand it, condition 20.2 of the Egg agreement is in breach of the 1974 CCA insofar as it states that Egg can terminate an agreement at any time. It seems to me that for Egg to state that Egg can terminate an Egg credit card agreement "at any time" is (totally!) inconsistent with, for example, Sections 87(1), 98, 61, and 60 (for a start).

Consider, for example, section 61(1) of the CCA 1974, which requires that a regulated agreement must contain all the prescribed terms and conform to 60(1) - "prescribed" means prescribed by the CCA1974. Term 20.2 of the Egg agreement(insofar as it states that Egg can terminate an agreement at any time) is not a prescribed term as defined by the 1974 CCA.
If you think about it, if Egg had the right to terminate an agreement at any time, it would make the CCA 1974 completely pointless, as Egg would have the legal entitlement to over-ride the provisions of the CCA which have been put in place to protect the consumer from exactly such practices!.

[steven4064]

I don't think it is inconsistent with s87 as that says you have to be given notice of termination if it is because of a breach. In your case there was no breach so no notice is required.

Similarly, s98 says they must give 7 days notice but only if the agreement has a specified duration. A credit card agreement has no specified duartion.

Section 61 deals with prescribed terms.The prescribed terms are those prescribed in schedule 6 of the consumer credit (agreements) regulations 1983 - tings like APR, minimum repayments, etc.

Section 60 is not relevant.

I know you are miffed and quite understandably. Egg have treated you (and loads of others) shabilly. UNfortunateley, I don't think the CCA 1974 is going to help you much.

[toymaker1]

Thanks for your response Steven,

If you are correct, it would mean that a cardholder not in default would be (much) worse off than a cardholder in default, which is clearly not the intention of the CCA 1974 nor sections 19-20 of CCA2006 (unfair business practices. i.e. a credit card company would be bound by the provisions of S87/88/89 of CCA1974 in the case of a defaulting card holder, but in the case of a non-defaulting card holder you seem to suggest that the credit card company can terminate the agreement on a whim.

For example, if a cardholder in breach of his credit card agreement receives a Default Notice under S87(1) and takes the action required to remedy the breach before the due date (S88.1), the breach will be treated as not having occurred (S89).
The credit card company, in compliance with S89, will treat the breach as not having occured and will therefore not become entitled to terminate the agreement (87.1.a), which the credit card company would have become entitled to do if the cardholder did not remedy the breach before the due date.
If the credit card company could terminate the agreement "at any time" it would render the protection available to the card holder Sections 87, 88 and 89 completely meaningless. That would also be totally against the intention of sections 19-20 of the CCA2006.

Regard
toymaker1

[steven4064]

That is how I understand the situation

One optrion open to you is to complain to the FOS using some of what you have written in post #7.

[toymaker1]

Hello Steve
My strategy will be to let Egg take me to court. During the court proceedings I will make an application to the court requesting the court to use it's powers under sections 140A and 140B of CCA 1974 as amended by CCA 2006. In my application to the court I will raise the points made in my post 7, and other points arising from the actions of Egg in terminating my Egg agreement outside the provisions of the CCA 1974.

The starting point for any assesment of the situation I have referred to in my posts is that the CCA 1974 is for the protection of consumers. This protection has been strongly re-inforced by sections 19/20 the CCA 2006 (now 140A and 140B of the CCA 1974)

If Egg is entitled (which I dont think it is) to terminate an agreement "at any time" - then the consumer has no protection whatsoever. - he would be at the mercy of the whim of Egg.

[steven4064]

Keep us informed of progress - we will be interested to see how this pans out.

[toymaker1]

Thanks for your comments Steven

I am shocked to discover that every online comment I have looked at regarding Egg's termination of agreements which are not in default seems to be in agreement with your own opinion i.e Egg have not infringed CCA 1974, they have merely treated people shabbily and the CCA 1974 isn't going to help much. Everyone seems to accept that Egg do have the right- as stated in term 20.2 of the Egg agreement- to terminate an agreement "at any time".

I totally disagree. consider the following.

The CCA 1974 has regulations which cover in detail the circumstances in which an agreement can be cancelled, withdrawn from or terminated, and the procedures which must be adhered to. It must also be noted that all of these regulations start from the premise that they are for the protection of consumers. The protection of consumers in these matters has been immensely strengthened by the CCA 2006, which amends the CCA 1974. Have a look at Sections 19/20, they are very relevant to the present discussion.

If, nevertheless there was an entitlement for Egg to terminate an agreement "at any time", it would be like Parliament giving Egg a sort of magic ace card - every time it would "trump" any regulation in CCA 1974 because being able to terminate an agreement "at any time" means just that. If Egg really were entitled to do that, the card holder (the consumer) would never win in any dispute about termination of his account, and Egg's supposed entitlement to terminate at any time would override any regulation in CCA1974 limiting termination rights of the creditor. I emphatically consider that Egg do not have an entitlement to terminate an agreement "at any time.

I have been reading the Explanatory Notes to the Consumer Credit Act 2006 issued by the Department of Trade and Industry.
In paragraph 36 of the Notes, which concerns Default Notices, it states:

"Section 87 of the 1974 Act requires a creditor or owner to give the debtor or hirer a default notice in the prescribed form if he wishes to terminate the agreement"

To me that is very clear. if Egg have not served a default notice, Egg has no entitlement to terminate an Egg agreement.

Regards

toymaker1

[steven4064]

Originally Posted by toymaker1

In paragraph 36 of the Notes, which concerns Default Notices, it states:

"Section 87 of the 1974 Act requires a creditor or owner to give the debtor or hirer a default notice in the prescribed form if he wishes to terminate the agreement"

THis is only partially correct because s87 actually says

87.--(1) Service of a notice on the debtor or hirer in accordance with section 88 (a default notice) is necessary before the creditor or owner can become entitled, by reason of any breach by the debtor or hirer of a regulated agreement,--
(a) to terminate the agreement,

s87 only applies if the debtor is in breach of the agreement. If the debtor is not in breach, then s87 gives him/her no protection from the whim of the lender.

[toymaker1]

Thanks for your comments Steven

I agree with you that there is a potential ambiguity about S87(1)of CCA 1974. However, consider the following.

I suggest that the Explanatory Notes to CCA 2006 prepared by the Department of Trade and Industry have the full authority of Parliament, and could therefore be used as a reliable source of information in legal proceedings.

It might be that because there is a possibility of misunderstanding S87(1) the government thought it would be sensible to provide a clear explanation of S87(1). I'm sure the Explanatory Notes were prepared by legal experts.

Regards
toymaker1

It seems to me that if you said to a judge during proceedings in court that paragraph 36 of the Notes was only partially correct, you would need a very strong argument to support your view, because what you would be saying, in effect, is that the Governments officially published explanation of the meaning of S87(1) is wrong! (The judge himself would possibly refer to the explanatory notes in a point of dispute).

My understanding is that a careful reading of CCA 1974 together with the explanatory notes, indicates that there are several circumstances in which a debtor/hirer/credit card holder can terminate an agreement, but there only two circumstances in which a creditor can terminate an agreement, they are:

1. in the case of a breach by the debtor of a regulated agreement, in which case the creditor, if he intends to terminate the agreement, must follow the procedures contained in sections 87 88 and 89.

2 In the case of a termination by the creditor where there has been no default. As you said in an earlier post, this is covered by Section 98 and only applies to agreements with a fixed duration. - It does'nt follow that the creditor can somehow assume it's ok to terminate another sort of agreement which is not specified in S98 (such as, for example, an Egg credit card agreement). You will see that every form of termination or cancellation or withdrawal from an agreement is covered in the CCA 1974. If you think about it, it just would not make sense for Parliament to say to credit card companies - "oh, by the way, actually you can terminate a card holder's agreement at any time, you'll find it much quicker and simpler than sticking to these complicated rules we've made"

[steven4064]

Of course, it may just be that no one ever thought that a credit card company would terminate an agreement when the debtor was not in default or when there was no otehr good reason.

[toymaker1]

Hello Steven

You're right.
Another way of putting it, as I see it, is that it has never occurred to anyone that a credit card company - in this case Egg- would have terms and conditions which were in breach of the CCA 1974. It seems so unlikely doesn't it? but I consider that is the case with Egg. I
I consider that nothing in the CCA 1974 provides Egg with an entitlement to terminate an agreement without giving the card holder a default notice.

Regards
toymaker1.

[steven4064]

Go for it, then

[Mistermind]

Is there not a crucial difference between

(A) terminating the agreement on a defaulting account and demanding immediate payment of the entire balance.

(B) terminating the agreement on a non-defaulting account, with the balance to be paid in monthly instalments as before, minimum 5% of balance outstanding.

In case (B) the repayment scheme remains unchanged, it's only the facility to accommodate new spending and cash advance that has been withdrawn. It is well known that cards have the right to vary an account's limit. In this case they are de facto reducing the limit every month to match the balance outstanding. Not very friendly, but post US subprime disaster and Northern Rock and Bear Stearns, credit cards themselves find it hard to borrow operating capital in the money market.

In the case of agreed bank overdrafts I believe banks have a legal right to call in the overdraft at any time, demanding immediate total repayment, a clause built into their overdraft acceptance contract. I believe credit cards do not have this legal right -- unless a cardholder defaults.

[toymaker1]

Hello Mistermind

Originally Posted by Mistermind

Is there not a crucial difference between

(A) terminating the agreement on a defaulting account

This is covered by S87(1)(a) i.e Egg must give a default notice. Egg terminated my agreement without giving me a default notice.

Originally Posted by Mistermind

(B) terminating the agreement on a non-defaulting account,

This is covered by S98(1) and S98(2)(a) i.e Egg can only terminate an agreement where the duration of the agreement is specified in the agreement. My Egg agreement does not have a specified duration and was not in default, therefore Egg cannot terminate it.

Originally Posted by Mistermind

It is well known that cards have the right to vary an account's limit.

This is covered by S87(1)(d) in the case of an agreement in default or
S98(4) in the case of an agreement not in default. i.e. Egg can, as you have said, vary the limit at any time. In my case Egg did not vary the limit, Egg terminated the agreement. Egg is not entitled to do that under the CCA 1974.

Regards

[Mistermind]

I am not clear if this is about the semantics of "termination".
In practice a credit card agreement is about two undertakings given by the card issuer to the cardholder :

(A) the cardholder can repay the outstanding balance at the rate of minimum 5% per month.

(B) the cardholder can incur new spending up to his credit limit.

If Egg is leaving arrangement (A) intact, but is curbing arrangement (B) by (if necessary) lowering the credit limit every month, is the regulator or a county court likely to rule against Egg for "terminating the agreement"? 161,000 other Egg cardholders are in the same boat.

[toymaker1]

Originally Posted by Mistermind

I am not clear if this is about the semantics of "termination".

This is not about semantics. "termination" is a specific action, the taking of which is strictly governed, in my case, by the regulations contained in S87 and S98 of CCA 1974.

Originally Posted by Mistermind

If Egg is (if necessary) lowering the credit limit every month, is the regulator or a county court likely to rule against Egg for "terminating the agreement"?

If Egg, as it is entitled to do under S87(2) and S98(4) of CCA 1974, lowered the credit limit every month, the regulator or a county court would not rule against Egg for "terminating the agreement".
However, that is not what Egg did in my case. Egg did not lower the credit limit, leaving the agreement intact, Egg terminated my account without giving me a default notice as required under S87(1)(a) and also in breach of S98(2)(a).[/quote]

Originally Posted by Mistermind

161,000 other Egg cardholders are in the same boat.

I hope that my postings on this matter might be of use to some of the other 161,000 Egg cardholders who, as you say, are in the same boat.
I suggest that cardholders in a similar position ask Egg to indicate which part of CCA 1974 provides Egg with the entitlement to terminate their Egg agreement when it is not in default. If you look at my second posting on this matter, you will note that even Egg did not seem to be able top provide me with a clear answer to that question!

Regards