HSBC managed account - Trying to remove a invalid? default

[car2403]

Hi Chris and all,

 

Unfortunately, I think there has been some presumption of information here, so I'm hoping to set the record straight without offending anyone.

 

As this is a Bank account, there are 2 important pieces of information;

1. The account isn't regulated by Part V of the Consumer Credit Act, as it will be subject to an OFT Determination under s.74 CCA 1974, meaning that it doesn't need to conform to the form/content of Part V.
   
2. No Default Notice is required for a bank account, but to be able to enforce the debt, the Bank will have to have followed the prescribed process of terminating the "agreement" as outlined in Part VII CCA 1974.

Now, as for 1., you can see my Barclays Bank Default Removal thread for more info, as all the technicalities relating to this issue are described there; (I know you've already read it, Chris, but others will find it useful too)

 

http://www.consumeractiongroup.co.uk/forum/barclays-bank/110184-car2403-barclays-bank-default.html (In Court THIS Friday, if you're interested!)

 

In short, the Bank will need to be able to show (which is unlikely) that they've complied with the OFT's Determination - to benefit under it, they must be able to show;

1. The creditor shall have informed [the OFT] in writing of his general intention to enter into agreements to which the Determination will apply;
   
2. 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.
   
3. 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.

The way most of these things go, is that you apply for an OD, get one, THEN the bank send you the letter - (as has happened in my case) IMHO, this means the Bank CANNOT receive the benefit of the OFT Determination, as they need to have sent the letter PRIOR to you being given the overdraft.

 

This does get quite technical, but here's how I'd play this; continue with the CCA letters, probably using the ones I sent in my thread, as they've been amended to include the details of how a OD is regulated under the CCA.

 

You definately need to send a DPA SAR, as you'll need evidence of the termination notice (if one was sent) containing those charges - (hey, why not reclaim those charges as you go along too!) IMHO, a termination notice that contains default charges making it inaccurate is tantamount to a Default Notice being inaccurate for the same reason. (The effect on your credit rating being the same, and the Woodchester ruling having a persuasive effect at least, if not binding in these circumstances)

 

Basically, they have to prove they've followed the process under the Determination or that they have properly executed the agreement under the CCA - if they can't show any of this, the debt is unenforceable and the Default entry should be removed.

[car2403]

1. Should I send it now or wait until I S.A.R - (Subject Access Request) them to see what they come up with in terms of the default / termination notice? I think that may be more sensible, but I don't want to lose the momentum so part of me wants to just fire this one off!

 

Send both the letter and the SAR now, no point in procrastinating

 

2. Also, the part where I mention the balance including penalty charges. Would it be best to leave this out for now until after the test case perhaps?

 

Leave it in - the OFT TC outcome may be known by the time you come to rely on it

 

3. Do I send this letter to the same address as before, i.e. my branch address. Or to the Service Quality Team address as with the S.A.R - (Subject Access Request)?

 

Send both to the DC address on the ICO website (Information Commissioner's Office - ICO)

 

[car2403]

This comes down to your personal opinion.

 

You are entitled, IMHO, to withhold payment while the account is in dispute. However, continuing to make payments that you can afford to reduce the debt will show a Judge (if you get to Court) that you aren't trying to avoid the debt itself, just the enforcement of it against you.

 

Depends on your own view and ethics, so I won't advise either way - neither of which is wrong, however.

[car2403]

Standard process I'm afraid Chris - bombard you with letters trying to scare you in to paying up, when the account is in dispute.

 

Send them this;

 

I refer to your recent letter dated XX/XX/XXXX.

 

You will see from your files that this account is “in dispute” and you have failed to reply to my s.77/s.78 Consumer Credit Act 1974 request dated XX/XX/XXXX.

 

I am writing to inform you that this dispute still stands and has not been resolved by your company.

 

 

 

 

 

As this account is in dispute and you were aware of this and are continuing to carry out collection activity, I now feel that you are in breach of your obligations under;

§

The Office of Fair Tradings Collection Guidelines – s2.8;

o

“i. failing to investigate and/or provide details as appropriate, when a debt is queried or disputed, possibly resulting in debtors being wrongly pursued”

§

The Banking Code – s.13.6

o

“k. not ceasing collection activity whilst investigating a reasonably queried or disputed debt.”

§

Your Consumer Credit License

 

 

 

 

 

As such, I must ask you to take notice that you must cease all collection activity with immediate effect. You have failed to produce a properly executed credit agreement and as such I dispute the entire balance of the alleged debt is unenforceable. As there is no agreement between us, you also do not have permission to continue to contact me regarding this account, either by post or by personal contact, be that by telephone or visits to my property. In fact, OFT rules and regulations clearly state that you can only visit me at my home if you make an appointment and I have no wish to make an appointment with you. There is only an implied license under English Common Law for people to be able to visit me on my property without express permission; the postman and people asking for directions etc (Armstrong v. Sheppard and Short Ltd [1959] 2 Q.B. per Lord Evershed M.R.). Therefore take note that I revoke license under Common Law for you, or your representatives, to visit me at my property and if you persist in sending "doorstep callers" to my home, you will be reported for harassment and be liable for damages for a tort of trespass. You would also be liable for conspiring in a tort of trespass by acting in defiance of my instructions and sending someone to visit me nevertheless. Should it be necessary, I will obtain an injunction from the Court.

 

 

I also deem any further collection activity, of any nature that involves contacting me in relation to this account, an act of personal harassment, for the reasons outlined in this letter. Please ensure that your system is updated to reflect this, as I will bring any further letters or phone calls to the attention of the Police, to whom I will make a formal statement regarding your conduct given I have already warned you your behaviour causes me to feel harassed.

 

I am of the view that your continued harassment of me puts you in breach of Section 40 of the Administration of Justice Act 1970, and the Protection from Harassment Act 1997.

 

If you continue to harass me by calling me, you will also be in breach of the Communications Act (2003) s.127 and I will report you to OFCOM, Trading Standards and The Office of Fair Trading, meaning that you will be liable to a substantial fine.

 

Be advised that any further telephone calls from your company will be recorded and used as evidence in any further formal complaint.

 

If you wish to resolve my complaint, as has been suggested in your recent letters to me, you must supply the documentation previously requested to substantiate your claims against me under the alleged agreement. Failure to do so will result in my ignoring any further letters from you and the actions outlined herein being taken in complaint against you. I will not correspond further with you regarding this issue unless you can fully substantiate your claim as I have outlined.

 

Yours faithfully

[car2403]

Even better, because that isn't a Default Notice - so it sounds like they don't have one.

[car2403]

You can get all that from my thread on Barclays, as I'm challenging my overdraft with them;

 

http://www.consumeractiongroup.co.uk/forum/barclays-bank/110184-car2403-barclays-bank-default.html

[car2403]

You've got it in one... nice to see a poster investigating their own claim, then just asking for clarification - lots of people ask and ask and ask, but you've taken the bold step of wanting to understand your own case! Excellent!

 

I'm not convinced you don't have a case - you have the same case I have against Barclays and look how far I've gotten with that one! Still some way to go, probably waiting for the OFT TC outcome, but that's looking promising and is due in May, (it will take you 5-6 months to get to Court anyway!) but it's worth the risk, IMHO.

[car2403]

I'd disagree with your comments on your s.10 notice - this is their reply to that, which is why it has arrived so quickly, as they are given 21 days to reply, stating their reasons why they won't comply with that notice. Whether their reasons are flawed or not is up for discussion, but they have replied to your notice and advised why they aren't complying - now starts the fun.

 

If the sequence of events means that they didn't comply with the OFT Determination, they can't claim the benefit of it. This means they need a properly executed credit agreement and it appears they don't have one.

 

If they also can't get the documentation right, they are on thin ice, IMHO. Having said that, a quick read of recent posts on my Barclays/HFC threads will show this is more common practise than we're lead to believe. This could be cause for a mass complaint to the OFT on this issue, IMO. We'll look at that later though, as getting this sorted for you is more important right now.

 

I'll need to work on a suitable response...

[car2403]

They don't have to prove you received the letter, only that it was sent, which can be done by a witness statement from a member of their staff.

 

They are likely just to provide another "copy" with the right information, which has just happened to me with HFC Bank regarding a Default Notice! The Court won't like it, though.

 

It's all about the technicalities now...

 

Can you post up the content of that final demand letter, personal details removed? Barclays included a EAR (equivilent annual rate) which includes compound interest - naughty, naughty, as that isn't the interest rate is it?

[car2403]

OK, here is the final demand letter that they sent me last week:

 

And then attached is a 5 page Statement of Means form (also dated 19th February 2008 and addressed to my current address).

 

Interesting, as it doesn't say it's a termination notice under s.98 CCA 1974 but clearly is;

 

 

98

.—(1) The creditor or owner is not entitled to terminate a regulated agreement except by or after giving the debtor or hirer not less than seven days' notice of the termination.

 

It's my understanding that there is no form/content requirements for this type of Notice, as it's not used in cases of default. This is from s.98(6);

 

(6) Subsection (1) does not apply to the termination of a regulated agreement by reason of any breach by the debtor or hirer of the agreement.

 

Thinking about this off the top of my head, they shouldn't be using termination notices in cases of default, IMO.

[car2403]

Hi Chris, I'm a little confused here. The CCA Section 98 applies to non-default cases so you're saying that using such a method to terminate the account should not give the bank the right to record a default... is that right?

 

Stick with me kidda...

 

The Bank will use this section to terminate the agreement, as it is a regulated agreement under the CCA - they can't issue a Default Notice as that's not the way that the original (alleged) letter sent to you would have outlined the method of termination. This section is used to terminate agreements that aren't in default - what I'm say is that practise is suspicious in the least, but if they hadn't done this they couldn't have terminated the agreement. It's quite technical and a moot point really, as the bank has terminated - just thinking out loud as to what it means. (Although, we may need to consider this if you get to Court - be interesting to see what a Judge would decide)

 

Also, am I right in thinking that The OFT determination only applies to Part V of the act which covers entry into agreements and not which agreements are covered by the Act.

 

Technically not right.

 

The s.74 Determination covers agreements between banks and their customers to allow them to go overdrawn - they are regulated agreements regardless, so are covered by the Act. The determination just means that they aren't subject to the regulation of Part V. (form/content of agreements - not how you enter in to one)

 

So in summary, if I understand it correctly, the overdraft is a regulated agreement, however, by conforming to the requirements of the OFT Determination the banks are exempt from the requirements of Part V, which covers entry into agreements. This does not exempt them from the requirements of the remainder of the act, which means that in order to default me they must have served a Default notice in the prescribed form, as required by Section 87?

 

Replace "entry into agreements" with "regulation as to form/content of the agreement" and the rest is spot on, except for the Default Notice. They would have to have told you the method that they would use to terminate the agreement - in this case, a final demand requiring immediate payment of the outstanding amount.

 

Overdraft agreements in general, it seems, are never terminated using a Default Notice - (to my knowledge) the bank just demands full repayment, then records a Default on your CRA file if you don't repay it on demand.

[car2403]

There's an email link in my sig.

 

I'll have a think about a reply and see if I can conjure up something interesting for you, too.

[car2403]

This is the letter we're responding to, right? (A bit confused by multiple posts above)

 

Thank you for your dated 19 February 2008 the contents of which have been noted. I am sorry that you have had cause to contact us again on this matter.

 

My records confirm that your account was closed and the outstanding balance passed to our recovery agents on 15 August 2007 following the issue of Final Demand. Final Demand was issued on 28 June 2007 due to the account being operated outside of its agreed terms and conditions. At that stage the account was overdrawn and inactive. A copy of the Final Demand was forwarded to you on 19 February 2008. I have also enclosed copy statements which will provide you with the nexessary information on how the balance was acrued.

 

As no response was received to our various correspondence advising you of our requirements in this respect, the bank had no alternative other than to continue with its normal debt recovery proceudures which resulted in the closure of the account. This information would be recorded with credit reference agencies.

 

As a subscriber to the credit reference bureau the bank has an obligation to other lenders who use the data in assessing credit applications to ensure that this information is accurate.

 

Whilst I appreciate your comments, I am satisfied that the entries recorded with Credit Reference Agencies provides a fair and accurate representation of the manner in which your accounts had been operated. In these circumstances, it would not be appropriate to amend them.

 

Thank you once again for taking the time to bring your concerns to the bank's attention. I am only sorry it was necessary for you to do so. I trust matters can now be considered concluded, however, should this not be the case the next step in our complaint handling procedures is detailed on the enclosed guidance sheet.

 

Your sincerely

 

Mrs xxxxxx

Customer Services Officer

 

Here's my considered response then;

 

Dear Sir/Madam,

 

I refer to your letter dated **/**/****.

 

Your response in no way satisfies my request for information, nor does it fully substantiate the grounds up on which you are continuing to process Default information with third party Credit Reference Agencies.

 

To clarify, under the Consumer Credit Act 1974, defaulting a debtor without following the correctly prescribed process would be unlawful. Further to this, such default informtion is covered under the Data Protection Act 1998 and as such - were found to be inaccurate - would also be unlawful under that Act. Without a correctly executed credit agreement, or evidence to show that you have otherwise complied with the requirements of the Act, any recording of such default information is indeed inaccurate. In fact, how can you demonstrate that I owe you money at all, not least show that I was in default of our agreement? This is the crux of my complaint, which has gone ignored in your replies to date.

 

As you have failed to provide any substantial evidence to show that you have complied with the requirements of the Consumer Credit Act 1974, I consider you in default of my request and further consider that the outstanding debt under the alleged agreement is now unenforceable due to your default. As such, I will no longer be making payment to this account, until such time as you are able to demonstrate that you have fully complied with the relevant legislation and subsequent regulations.

 

Further to this, I also consider that your response is an inadequate reply, for the reasons stated above, and I look forward to hearing from you in confirmation that you will comply with the Data Protection Statutory Notices issued to you previously.

 

I must warn you that any attempt to enforce this debt against me will be met with strong defence in reply. I am also considering taking legal action in the County Court to enforce your compliance with my previous correspondance, should you fail to respond, or respond in the negative, to this letter.

 

Yours faithfully,

 

If they don't come back with what you want, you'll have to consider your options - Court is the only way to force their hand here, IMO...

[car2403]

The only value to can add is to "p" the Judge off at a later stage.

 

As you say no detriment for putting it in, so go for it, Batman!

[car2403]

Part of the Determination allows for them to prescribe the method of termination of the agreement, so the letter they send originally will state the method of termination up on either your default of the agreement or their decision to terminate it otherwise. (All overdrafts are repayable on demand regardless of default or otherwise)

 

So, as the termination of the agreement has to happen as described in the agreement itself, it isn't subject to the prescribed default and termination process described in Part VII, s.87/s.88, of the CCA.

 

In essense, by using the overdraft, you are agreeing to the terms of the agreement as outlined by the bank in their letter to you when you sign/signed up for the overdraft. This falls in to one of the areas of the CCA that allows for "voluntary enforcement" - ie, you've agreed that the terms of the overdraft apply to you by implicitly agreeing because you've used the agreement.

 

It does get quite technical looking at the legal arguments, especially as you have to understand the contractual obligations created between/by the parties, as well as the effect of consumer legislation, but, in essence, only a termination notice giving you notice to repay in full or have the agreement terminated is usually the requirement.

 

I may have must confused you some more...

[car2403]

Thanks, I suppose I must have missed the part in the determination that allows them to decide how they will terminate the account. I thought the determination only excused them from Part V of the act, not from following the prescribed method of termination, which is covered in Part VII.

 

In fact, they aren't exempt from Part VII - they use s.98 termination notices (non-default cases) to terminate, instead of a s.87/s.88 default notice.

 

In theory, they never terminate an overdraft agreement because you are in default - they demand repayment in full, because they can, then terminate when you don't.

 

In practise, they terminate because you are in default, otherwise why would they terminate the agreement?

 

It's all clock and dagger, but this is what the OFT wants - Parliament allowing them to do it - so who are we minions to argue?

 

It would be an interesting argument to have in front of a Judge though wouldn't it?

[car2403]

Not old ground - these are valid questions.

 

There is a difference between a "default" and a "Default"; a default is a failure to maintain your obligations under a contract, whereas a Default is a formal method of termination of a consumer credit agreement.

 

An overdraft is effectively a regulated agreement that falls short of a full consumer credit agreement, due to a relaxation of the form/content requirements in the form of exemption from Part V of the Act. By breaching any term of that contract and, in fact, even if you don't breach the agreement, the bank can demand full and immediate repayment - this is their right under the contract which forms part of the agreement. Such a demand doesn't require a Default Notice, as you don't have to be in default to have a demand made.

 

Ironically, being in default isn't dependant on having a Default! A Default would, (or should!) however, always flow from a default!

 

A complicated bit of law to explain, as it merges contract law with consumer law and makes this a minefield. Upshot of this is, the bank calls the shots and you allow them to because you consented to the terms of the agreement by using the overdraft. Their, arguably well grounded, response is that if you don't like it you shouldn't have used the overdraft. Harsh, but fair, if you look at it like that.

 

Ultimately, they hold an argument that you've consented to all this as you've used the overdraft based on the contract - which isn't fully regulated by the CCA. (I believe voluntary/consentual enforcement is a defence against an unlawful enforcement claim also, just to stick the boot in)

[car2403]

They won't budge an inch - this is all pre-litigation protocols before issuing a court claim to force their hand. It won't see a Court room - have you read my Barclays claim thread recently?

 

Don't forget they DO need to send a s.98 Termination Notice, which, if it includes unlawful penalty charges, can still be challenged - in the same way that amounts to an unlawful default amount on a Default Notice, IMHO.

 

Working for me...

[car2403]

I've been keeping a very close eye on it ;-)

 

Thought you might...

 

The thing is, your default amount was made up mostly of bank charges, in my case bank charges make up a tiny fraction of the default amount. Still, I suppose you can't have varying degrees of unlawfulness can you? I guess an unlawful default is an unlawful default irrespective of the amount....

 

Hmmm... Yes and no, is the answer.

 

The Woodchester Lease Management v Swain ruling will render a Default Notice that is inaccurate unlawful, therefore any Default as a result would be unlawful as a result.

 

The argument here is that penalty charges applied to the account render the Termination Notice, (akin to a Default Notice in effect) unlawful as well.

 

The Woodchester case ruling Judgment includes the words;

 

"Moreover, a lender should be able to calculate quite easily what sum was due, whereas an ordinary hirer might not know, although the court might overlook an error which could be described as de minimis. In the instant case, the breach was adequately described as 'failure to pay the rentals specified on their due dates', but it did not specify accurately what sum of money had to be paid. Accordingly, the assistant recorder had been incorrect to hold that the default notice was not rendered defective by alleging an amount which was in excess of the sum necessary to remedy the breach"

 

Now, what is "de minimis" would seem to be a question of fact. (It isn't clear from the ruling!) The question of fact, in your case being, does the application of unlawful penalty charges mean that the Default Notice is sufficiently inaccurate to render it unlawful?

 

Personally, this is why I think your case won't see a Court room - they won't want a precedent being set saying what is/isn't unlawful with regards to Default Notices. Bar the OFT TC outcome, they can't show the penalty charges are lawful neither. In either case, you can argue that, with penalty charges then contractural interest being applied, the impact of the charges was so great that the Notice should be unlawful, IMHO.

 

Incidentally, I got a response to my S.A.R - (Subject Access Request) yesterday. Despite the fact that I gave them a comprehensive list of the types of record I required, they chose to assume that it was in relation to a bank charges claim and forwarded 6 years worth of bank statements and nothing else. I've replied advising them they have only 8 days left to comply with my request or they will be in default and will have committed an offence under the Data Protection Act.

 

Don't take any prisoners on this one;

 

http://www.consumeractiongroup.co.uk/forum/bank-templates-library/6986-data-protection-act-non.html

 

and you might want to consider a separate action?;

 

http://www.consumeractiongroup.co.uk/forum/bank-templates-library/6971-data-protection-act-non.html

[car2403]

Depends on how fast you want it removed. You aren't guaranteed success with the FOS, especially on this issue, as I believe they will close ranks on you, IMO. (which is why I didn't go that way) Remember also that the DPA arguments won't wash with the FOS, as this is "outside their remit", as the ICO is the DPA regulator! (Their words, not mine)

 

I don't see the Judge viewing your case differently because you've been to FOS first, so I can't see value in doing it really.

 

It's your case though, so don't let me sway you - I will help either way - but just be aware you could go to FOS then have to go to Court to move the Default. The Court is the only way to take a hollistic approach, with a combined CCA/DPA argument, IMHO.

 

The fact this lot always peddle the "you can now refer your complaint to the FOS" strapline does make me wonder what their intentions are. You won't hear them saying "fine, take us to Court", will you?... (Here we go with the conspiracy theories!)

 

[car2403]

They've totally ignored you again, Chris.

 

They also haven't fully complied with your DPA notices, as they haven't explained the reasons why they are refusing to comply with them, IMHO.

[car2403]

Chris, understand how these "complaints" are managed - I see them being constructed from standard responses and mashed together in a vicious attempt to make sense. This just shows the level of contempt they have for their customers - they can't even write a letter in proper English.

 

Have a look at my Barclays thread - post 8 seems the most relevant, perhaps - then post up what you're thinking of sending and I'll have a look.

 

I would do this for you, but you know more about this than me and I'm really busy with claims/other threads and I don't want to tell you how to suck eggs

[car2403]

I couldn't recommend the book, because I haven't read/used it myself, but I didn't find a need to use it - CAG is a fuller resource, IMHO, which is free and has everything you need. If I don't know the answer, someone else will.

 

It is daunting, but it's not as hard as it seems.

[car2403]

Very good Chris. I don't know how you haven't lost your temper yet. I suppose I'm just more used to dealing with this monkeys, so I don't give them a centimeter, never mind a mile.

[car2403]

You would be proving it to the Judge by bringing the same issue to Court to get them to adjudicate on the issue of the accuracy of the Default Notice by questioning the lawfullness of the penalty charges.

 

This could be dodgy ground, as you've accepted an offer, presumably in full and final settlement, without prejudice, on that particular issue.

 

Having said that, without prejudice works both ways, so you can use that to your advantage. The problem will be with the wording of the "settlement agreement", as if it states it covers all claims, whether known or not at that time, this could scupper you.