Thread: CCA and Overdrafts - The Final Word?

Afternoon All

I've looked a few threads, and there seems to be differing views as to whether the CCA applies to agreed overdrafts with banks, as some would argue that it is effectively a form of credit.

Does anyone have definitive answer to this one???

Thanks as always!

Mr Fish...

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Overdrafts come under section 10 of the Consumer Credit Act.

10.—(1) For the purposes of this Act—
(a) running-account credit is a facility under a personal credit agreement whereby
the debtor is enabled to receive from time to time (whether in his own person, or
by another person) from the creditor or a third party cash, goods and services (or
any of them) to an amount or value such that, taking into account payments
made by or to the credit of the debtor, the credit limit (if any) is not at any time
exceeded; and
(b) fixed-sum credit is any other facility under a personal credit agreement whereby
the debtor is enabled to receive credit (whether in one amount or by
instalments).
(2) In relation to running-account credit, " credit limit" means, as respects any period,
the maximum debit balance which, under the credit agreement, is allowed to stand on
the account during that period, disregarding any term of the agreement allowing that
maximum to be exceeded merely temporarily.
(3) For the purposes of section 8(2), running-account credit shall be taken not to
exceed the amount specified in that subsection (" the specified amount") if—
(a) the credit limit does not exceed the specified amount; or
(b) whether or not there is a credit limit, and if there is, notwithstanding that it
exceeds the specified amount,—
(i) the debtor is not enabled to draw at any one time an amount which, so far as
(having regard to section 9(4)) it represents credit, exceeds the specified
amount, or
(ii) the agreement provides that, if the debit balance rises above a given
amount (not exceeding the specified amount), the rate of the total charge for
credit increases or any other condition favouring the creditor or his associate
comes into operation, or
(iii) at the time the agreement is made it is probable, having regard to the
terms of the agreement and any other relevant considerations, that the debit
balance will not at any time rise above the specified amount.

So the bank should be legally responsible to provide a signed copy of the agreement, the same as loans, credit cards etc?

Correct.

This is what I mean - there are varying opinions on this,

To help clarify matters, this is an extract from a Court case Coutts v Sebastyen and this part is partt of the summing up by the Judge in relation to overdrafts and teh Consumer Credit Act-

THE ACT
It is common ground:


(a) that the agreement for an overdraft of £2,000 in the terms of Coutts' letter dated 5 April 2002 was a regulated debtor-creditor agreement within the meaning of sections 8 and 13(c) of the Act, providing for 'running-account credit' within the meaning of section 10(1)(a) of the Act (in effect, a revolving credit within the agreed credit limit of £2,000); and


(b) that, as such, it was subject to the requirements of Part V of the Act (including the requirements as to documentation set out in sections 57 to 63 of the Act) save and in so far as it was excluded or exempted from such requirements.

Section 65 in Part V of the Act provides that an "improperly executed" regulated agreement is unenforceable by the creditor without a court order. It is common ground that a regulated agreement is "improperly executed" for this purpose if the requirements of sections 57 to 63 have not been complied with.

Section 74 of the Act provides for the exclusion of certain agreements from Part V. It provides as follows (so far as material):

"74. – (1) This part …. does not apply to –

(a) ….
(b) a debtor-creditor agreement enabling the debtor to overdraw on a current account, …
(c) ….
(2) ….
(3) Subsection 1(b) … applies only where the OFT so determines, and such a determination –
(a) may be made subject to such conditions as the OFT thinks fit …
(b) ….
(3A) …. in relation to a debtor-creditor agreement under which the creditor is …. a bank …. the OFT shall make a determination that subsection 1(b) above applies unless it considers that it would be against the public interest to do so.
(4) …."
Part VI of the Act relates to matters arising during the currency of credit agreements. Section 82 in Part VI, which is headed 'Variation of Agreements', provides as follows (so far as material):
"82. – (1) ….

(2) Where an agreement (a "modifying agreement") varies or supplements an earlier agreement, the modifying agreement shall for the purposes of this Act be treated as –


(a) revoking the earlier agreement, and
(b) containing provisions reproducing the combined effect of the two agreements,
and obligations outstanding in relation to the earlier agreement shall accordingly be treated as outstanding instead in relation to the modifying agreement.


(3) ….
(4) If the earlier agreement is a regulated agreement for running-account credit, and by the modifying agreement the creditor allows the credit limit to be exceeded but intends the excess to be merely temporary, Part V …. shall not apply to the modifying agreement.
(5) ….

(6) ….
(7) …."


THE DETERMINATION

The Determination (which is signed by the Director of Fair Trading) is made under section 74(3) of the Act. I set it out in full:
"1. Under the powers conferred upon me by Sections 74(3) and (3A) and 133 of the Consumer Credit 1974, I, the Director General, being satisfied that it would not be against the public interest to do so, hereby revoke with effect from 1st February 1990 the Determination made by me in respect of Section 74(1)(b) and dated 3 November 1983 and now determine that with effect from 1st February 1990 Section 74(1)(b) shall apply to every debtor-creditor agreement enabling the debtor to overdraw on a current account, under which the creditor is a bank.


2. This Determination is made subject to the following conditions:-


(a) that the creditor shall have informed my Office in writing of his general intention to enter into agreements to which the Determination will apply;
(b) that where there is an agreement between a creditor and a debtor for the granting of credit in the form of an advance on a current account, the debtor shall be informed at the time or before the agreement is concluded:
- of the credit limit, if any,
- of the annual rate of interest and the charges applicable from the time the agreement is concluded and the conditions under which these may be amended,
of the procedure for terminating the agreement;
and this information shall be confirmed in writing.
(c) that where a debtor overdraws his current account with the tacit agreement of the creditor and that account remains overdrawn for more than 3 months, the creditor must inform the debtor in writing not later than 7 days after the end of that 3 month period of the annual rate of interest and charges applicable.
3. In this Determination the terms 'creditor' and 'debtor' shall have the meanings assigned to them respectively by Section 189 of [the Act]. The term 'bank' includes the Bank of England and banks within the meaning of the Bankers' Books Evidence Act 1879 as amended."

That would be s.127-but of course with an overdraft there isn't an
executed agreement in the same way as exists for a loan etc.

The agreement they mean is the one mentioned in my post foom the Court
case-
(a) that the agreement for an overdraft of £2,000 in the terms of Coutts' letter dated 5 April 2002 was a regulated debtor-creditor agreement within the meaning of sections 8 and 13(c) of the Act, providing for 'running-account credit' within the meaning of section 10(1)(a) of the Act (in effect, a revolving credit within the agreed credit limit of £2,000); and

So they would have to provide the original account application, which should have the provisions within it, if credit were to be taken?

Or am I barking up the wrong tree?

Thanks guys...

Not quite. You need the confirmation letter from the bank when you took
out the overdraft. That should explain the conditions under which you
are governed-ie APR, the amount of the overdraft and when it expires.

If you wanted to see the original agreement of your current account, you
would probably have to send them an SAR. that would then open a new can of worms if they fail to supply the OA.

Take one step at a time Un1boy.
First, get the copy they say they can supply. It should have come with the SAR, shouldn't it?
If they can provide it, does it comply with the regulations?
And what happened to your 2000 overdraft when you opened the 2002
Student one? Were they merged or did you no longer have the original overdraft by then?

I don't know whether you're the same as me Un1, but when I sent my SAR, all I received were literally just transaction details for the last six years, and a list of charges.

When they put the account through Heatons LLP solicitors, I sent a CCA request, recorded delivery, and never heard from any of them again.

Same here.

I'm just wondering what I now need to send back to them, as I have sent the SAR, and am well over the 40 days, and have also sent a CCA request and am well over the 30 days there.

It's all far from being clear cut!!!