Time Orders

What credit agreements are covered?

You can apply for a time order if your credit agreement is regulated by the Consumer

Credit Act 1974. This depends on when you took out your agreement and how much you

borrowed at the time. Your loan will be regulated if you borrowed less than the following

amounts:

• £15,000 if you took your credit agreement out before 1 May 1998;

• £25,000 if you took your credit agreement out between 1 May 1998 and 5 April 2008;

• there is no financial limit if you took your credit agreement out from 6 April 2008

(unless your loan was taken out for business purposes).

Bank and buildings society mortgages taken out to buy your home are not covered. If you have a loan agreement it should state whether

it is covered by the Consumer Credit Act. The agreement should have a heading that says: 

CONSUMER CREDIT AGREEMENT REGULATED BY THE CONSUMER CREDIT ACT 1974

N440 is used pre litigation  - n1 used if its already in court.

When can I apply for a time order?

1. When an ‘arrears notice’ has been issued by your lender.

From October 2008, the lender must send you an arrears notice if you have missed two payments on your agreement. This notice must be sent to you within 14 days. It should tell you how much you owe under the agreement, how much the arrears are and if any interest or charges are being added.

New rules say that you can apply for a time order after you have received an arrears notice. You must write to your lender and give them 14 days notice that you are going to apply for a time order.

You must include in the letter details of the offer of payment you are going to make in your application.

Don’t forget to keep a copy of your letter as you will need to show this to the court when you apply for a time order.

TIME ORDERS

The procedure and forms you need to use depends upon whether you have a secured loan, a hire purchase/conditional sale agreement or unsecured loan. See the sections below for details of how to apply.

There will usually be a fee to pay with your application. If you are on a low income or certain benefits you may not have to pay the fee.

2. When a ‘default notice’ or ‘calling in notice’ or ‘termination notice’ has been issued by your lender.

The lender can issue a default or termination notice and call in the loan if you have fallen behind with payments.

Once you have received this, you can make an application to the County Court for a time order.

You don’t need to write to your lender to give notice that you are going to apply at this stage. The procedure and forms you need to use depends upon whether you have a secured loan, a hire purchase/conditional sale agreement or unsecured loan.

There will usually be a fee to pay with your application. If you are on a low income or certain benefits you may not have to pay the fee.

When Court Action Has Already Started

If a creditor has already started court action against you then you can still apply for a time order. The procedure and forms you need to use depend upon whether you have a secured loan, a hire purchase/conditional sale agreement or unsecured loan.

Type of debt to which a time order can apply - Unsecured credit

If you have an ordinary credit agreement which is not a secured loan/second mortgage you would not normally need to ask for a time order to be made.

If a creditor has already taken court action, then you should apply to pay the judgment at a rate you can afford.

The court should look at making an order for you to pay in instalments you can afford.

Interest is normally frozen automatically on court judgments for agreements under the Consumer Credit Act.

You may want to ask for a time order if an arrears notice or a default notice has been issued but the creditor is refusing either to accept your offer of payment, or to freeze the interest. If interest is still being added on to the debt and the creditor refuses to take court action then applying for a time order may be the only way to ask for the interest to be frozen. If the court makes a time order and you keep up to date with the payments, a creditor cannot apply for a county court judgment to be made.

This means a judgment will not appear on the Register of Judgments, Orders and Fines or on credit reference agency files, although the creditor may have registered the default on your credit reference file already when you fell behind with the loan.

1. How to apply before court action

You need a claim form called an N440 which you have to fill in with supporting information called the ‘particulars of claim’ You also need a full personal budget sheet and details of your circumstances. This should be taken to your local county court.

There will be a fee to pay with your application. If you are on a low income or certain benefits you may not have to pay the fee.

The creditor can put in a defence to the court objecting to your time order application.

There will be a hearing and the district judge will decide whether to make a time order in your case.

2. How to apply after court action

You can apply for a time order after your creditor has taken you to court by using a general court application form called an N244.

There will be a fee to pay with your application unless you do not have to pay the fee.

You need to include full details of your circumstances and a full personal budget sheet with the application. There will be a hearing where the creditor can object to the time order being made. The district judge will decide whether to make a time order in your case. If the creditor started action against you in a county court elsewhere you may need to apply for the case to be transferred to your local county court.

Some creditors say they can charge interest before and after judgment even though the court usually stops interest automatically on a Consumer Credit Act regulated agreement. It may be possible to ask the court to make a time order in this situation to stop or reduce the interest.

Hire purchase or conditional sale agreement

When a creditor goes to court for a ‘return of goods order’ you can ask for this to be suspended on the condition that you pay a fixed amount per month. This will usually be to pay the normal monthly instalment plus an amount on top to clear the arrears.

You can ask the court to make a time order if you cannot afford to pay the full instalments. The court will often make a court order to let you keep the hire purchase/conditional sale goods and pay off the agreement at the reduced amount without stating they are making a time order.

1. How to apply before court action

If the creditor has issued an arrears notice or a default notice on a hire purchase/conditional sale agreement then you can apply to the county court for a time order. The court can look at changing the terms of the whole agreement, not just the arrears, even if the whole loan has not been called in.

2. How to apply after court action

If your creditor goes for a ‘return of goods order’ they will send you a claim form called an N1. You can fill in the reply form called an N9C which comes with the application. Ask for the return order to be suspended (so that you keep the goods) on the condition that you pay a fixed amount on top to clear the arrears.

You can ask the court to agree that you pay less than the full monthly instalments if that is all you can afford

Your offer will need to be ‘reasonable’ rather than a token payment if you want to get a time order. If the creditor accepts the offer there does not have to be a hearing for this to happen.

If the court agrees then you will get a return order that is not enforceable as long as you pay off the instalments set by the court. This is actually a time order although it may not be clear that this is the case.

Secured loans

You may be able to use a time order to reschedule the payments on a loan that is secured on your house.

A time order may be a good option if you have fallen behind with a secured loan. You may be able to stop the lender repossessing your home.

You can apply for a time order once the arrears notice or the default notice has been issued or if your lender takes you to court to ask for a possession order.

1. How to apply before court action

You may be able to use a time order to reschedule the payments on a loan secured on

your home in order to stop repossession action. You can also apply for a time order once the creditor has sent you an arrears notice. You must write to your lender to give them 14 days notice that you intend to apply for a time order. You must include details of the offer of payment you are going to make in your time order application

Don’t forget to keep a copy of your letter as you will need to show this when you apply for a time order. You can also apply for a time order once the creditor has sent you a default notice and called in the loan.

You can do this without sending a letter giving notice to your lender first. You need to apply to your local county court using a court form called an N440.

There will be a fee to pay with your application. If you are on a low income or

certain benefits you may not have to pay the fee.

You also need to fill in the details of your income, outgoings and personal circumstances

on a ‘schedule’. There will be a hearing where your lender can object to a time order being made. It is up to the district judge to make a time order or refuse your application. If the time order is refused the lender could start possession proceedings to try to repossess your home.

2. How to apply after court action

You can apply for a time order when your lender makes a possession claim against you in your local county court. You will be sent a form N5 by the court and need to fill in the

defence form called an N11M. Tick Box 6 to ask the court to consider a time order and send this to the court with full details of your defence, details of income and outgoings and personal circumstances. You can ask for the payments to be reduced and for the loan to be rescheduled if necessary.

There are no fees to pay with this application as you are just replying to a court claim (fees are added to the possession claim by your lender instead).

There will usually be a hearing where the lender can object to a time order being made. The district judge may decide to make a time order, suspend possession and allow you to stay in your home as long as you make the payments ordered. They can also refuse your application and make an outright possession order. If you already have a possession order you can still make an application for a time order. You need to use the general application form N244

Has the whole loan been called in?

The law has not been entirely clear on what the court’s powers are when making a time order.

Following two court of appeal cases, time orders seem to apply in two situations.

Time orders on the arrears only

Sometimes a time order can only help with how much you should pay every month on the payments you have missed, leaving the ongoing monthly payments unchanged. This might mean the court also needs to look at changing or freezing the amount of interest being added to the arrears and possibly the interest rate on the whole balance you owe under the agreement. This is the case if the lender has only sent you an arrears notice (or in some cases a default notice) but the whole loan has not been called in. This is more likely where you have only had an arrears notice, as under the terms of most agreements the whole loan is called in automatically when the lender sends a default notice to you.

Time order on the whole agreement

You may have to wait for the loan to be called in before making your time order application if you want to ask the court to reduce the payments you have to make on the whole agreement and not just the arrears. Sometimes a time order can be used to change the whole agreement, setting lower payments and interest charges, and in certain circumstances stopping interest being added at all. This can only be done when the whole loan has been called in by the lender, where the loan agreement has automatically terminated on default or once possession proceedings have begun.

Advice

Anything you can say to show your situation is through no fault of your own will help when applying for a time order as the court will look at your payment record. Make sure you show how you got into debt and why you took the loan out.

What should you ask for

• If you cannot afford the full instalment you need to ask for the loan and arrears to be

rescheduled.

• For the court to be able to make a time order you must be able to afford to make an

offer of payment. The court will consider whether you can afford to pay what you

have offered or if you are offering as much as you realistically can afford.

• The court has to look at the position of the creditor as well as your situation when

deciding if it is ‘just’ to make a time order. This means if you cannot make an offer at all

or are unlikely to ever be able to pay off the loan the court may decide not to make a

time order.

• If you have asked for a new instalment rate but want to repay the debt within the same period of time then you can ask the court to change the interest rate to allow you to do this. Also, the interest may be so high that your reduced payments have no effect

without reducing the interest. You will also need to ask for any default interest and

charges to be frozen.

• If you can afford to make the normal monthly payments you need to ask for a time order to fix payments on the arrears only. If you get a time order on the arrears only you may want to ask the court to reduce or freeze the interest in order to let you repay the debt over a reasonable time. This will be necessary where interest being added on to the arrears is the same or more than the amount you can afford to pay towards clearing the arrears.

Is it ‘just’ to make a time order?

The court needs to look at the creditor’s position as well as your circumstances.

• Was the reason you took out the credit a good one?

• Could you afford the payments when you first took out the agreement?

• Is your agreement very expensive or not appropriate for your needs at the time?

Point out a high interest rate and how much you would have to pay back over the whole period.

• Have you taken out further credit since? If so, was there a good reason for this?

• Have you had a good payment record until the point you stopped paying?

• What is the reason for your non-payment?

Have your circumstances changed? Explain the background to your situation.

• Have you tried to sort out your problems and ask the creditor for a payment arrangement (to show that you haven’t ignored the debt)?

If the creditor has refused to negotiate you need to point this out.

Start making the payments you have offered as a gesture of goodwill.

• Is your situation temporary and likely to improve in the future? The court is likely to want to make a time order for a time-limited period.

Costs

You need to be careful with time order applications in relation to secured loan agreements. The secured lender is usually allowed to add possession costs and charges to the outstanding balance you owe on your loan.

If your time order is refused you may have lots of extra costs added to your debt. This will usually happen automatically. If there is good reasons that you feel the costs are unfair, you can ask the court to refuse the lender’s costs.

This might be if the creditor has been ‘unreasonable’ in some way.

Unfair relationships test

If you feel the interest rate charged on your agreement is excessively high, or that the terms and conditions of the agreement are unfair, you may be able to take action against your lender.

This may also apply if your lender has behaved unfairly in the way in which they have dealt with your agreement.

It will be up to the lender to prove that the agreement is not unfair. The

court will have wide powers to alter terms of the agreement or even order the lender to pay money back to you.

UK Consumers should use statutory rights to reduce interest on credit agreements - By Mike Dailly - Govan Law Centre

Financially vulnerable consumers across the UK taken to court for defaulting on high interest credit - including 'second charge' mortgages - are unaware of powerful statutory rights which can help, according to Glasgow's Govan Law Centre.

 

Section 136 of the Consumer Credit Act 1974 (CCA) permits the court to amend 'any agreement or security' in making a time order under section 129 of the Act as it considers just, having regard to the means of the debtor. That includes the right to ask the court to reduce the rate of interest within a consumer credit agreement.

Trawling through CAG magazine, I happened across an article by Mike Dailly of the Govan Law Centre. I was wondering if aside from using a Time Order for the purposes explained in Mr Dailly's article, whether those caught in the Pay Day Loan trap could also benefit.

Southern & District Finance plc v Barnes [1995] and Director General of Fair Trading v First National Bank [2001].

As part of the case of Southern District Finance plc v Barnes, the court of appeal also said that time orders should only normally be made if someone is in temporary financial difficulty. The court has not been very clear about how they should decide if your difficulties are ‘temporary’. You may have to show that your case is not a normal one or there is a good chance of your circumstances improving. The court may well only give a time order for a limited period. You may have to ask for any exceptional circumstances to be taken into

account to allow you to have a time order over a longer period.

However, in Director General of Fair Trading v First National Bank the court looked at whether you need to be in temporary financial difficulties to have a time order. They said that section 129 of the Consumer Credit Act 1974 allows the court ‘to make such order as seems just to it in all the circumstances’