why you shouldnt use section 77/78 CCA 1974 if you want the signed agreement

[basa48]

Hi do you want me to reply to this personally i would rather look at patricks post.

 

peter

 

Trust me, patrick's post (and the judgment it contains) does not advance anyones knowledge one jot (except maybe to reinforce the fact that CMCs are idiots, or in reality working for the creditors!).

 

Sorry, that reads like a criticism of patrick - it isn't, only the judgment.

[Peterbard]

INTRODUCTION

His Honour Judge Waksman QC, sitting in the High Court, handed down judgment on 22 July 2010 in Joseph Sternlight & Others v Barclays Bank plc & Others [2010] EWHC 1865 (QB) on the enforceability of regulated running-account consumer credit agreements and other ancillary issues arising out of the Consumer Credit Act 1974 (the “CCA 1974”) and the Consumer Credit (Agreements) Regulations 1983 (the “CCAR 1983”). This emphatic decision is further justification for the robust approaches taken by lenders defending unmeritorious enforceability challenges.

BACKGROUND

Five test cases came before the High Court in July 2010 concerning credit card agreements. Because the rate of interest was variable, the lenders were required to state (as a prescribed term) the “rate of interest on the credit to be provided under the agreement” by Paragraph 4 of Schedule 6 to the CCAR 1983. If this was mis-stated then, because the agreements pre-dated the repeal of Section 127(3) of the CCA 1974, all the agreements would be irredeemably unenforceable.

Each agreement stated a rate of interest (either monthly or annually) and the annual percentage rate (the “APR”). The borrowers obtained an expert report from Neil Young, a mathematician and computer expert, who calculated the rate of interest on the assumption that the APR was the “driver” for the rate of interest. After undertaking his calculation, Mr Young expressed the view that each agreement had wrongly stated the “rate of interest” as required by Paragraph 4. It therefore followed, said the borrowers, that the agreements were irredeemably unenforceable.

The lenders, which were Barclays Bank plc, Bank of Scotland plc, Royal Bank of Scotland plc, Capital One Bank (Europe) plc and HSBC Bank plc, applied for summary judgment arguing that the claims failed to disclose a real prospect of success.

THE ISSUES

The Court had to determine the following issues:

 

1. Whether the borrowers’ approach, of treating the APR as the “driver” for the rate of interest, led to this rate being wrongly stated and therefore rendering the agreements irredeemably unenforceable.
   
2. Whether the agreements were irredeemably unenforceable where they stated the monthly rather than the annual rate of interest.
   
3. Whether there was a failure to state the total charge for credit.
   
4. Whether the borrowers were entitled to a pre-emptive order under Section 142 preventing the lenders for applying to the Court for a enforcement orders under Section 127 of the CCA 1974.
   
5. Whether an improperly executed agreement created an unfair relationship within the meaning of Section 140A of the CCA 1974.
   
6. If the Court decided that the agreements were irredeemably unenforceable, whether the lenders were prevented from registering adverse credit entries, requesting payment, issuing proceedings to recover monies due or taking steps before issuing proceedings.
   

RATE OF INTEREST & APR

Readers of our earlier review discussing His Honour Judge Tetlow’s decision in Jessica Catherine Brooks v Northern Rock (Asset Management) plc (formerly Northern Rock plc) [2010], Oldham County Court, 16 April 2010, where we acted for the successful lender, will be familiar with the issues raised in this case. In short, the Court dismissed in Brooks (again on an application for summary judgment) the borrower’s claims that the rate of interest stated on a consumer credit agreement must be the “nominal” rate of interest. Northern Rock had used the “effective” rate of interest meaning, after recalculating the figures, every other figure was wrong so the agreement was irredeemably unenforceable. HHJ Tetlow said, justifiably, that such an approach was “looking through the wrong end of the telescope.”

In a very robust judgment in Sternlight, HHJ Waksman QC rejected the borrowers’ argument that the APR was the “driver” for the rate of interest and decided that the rate of interest was the rate stated on the agreement. His reasons were:

 

• the borrowers’ proposition had a “surreal quality to it” as it led to the position that the borrower had agreed Mr Young’s re-calculated rate and not the contractually agreed rate of interest;
  
• there was a very clear difference between the nature and function of the APR and the rate of interest: indeed, the CCAR 1983 treats them as separate things. The borrowers’ argument meant that a prescribed term would be “driven” by prescribed information which was plainly contrary to the importance prescribed terms had been given in the CCAR 1983 and Section 127 of the CCA 1974 (before its appeal);
  
• the APR need only be stated at the start of the agreement when it is produced and signed: it is therefore a guide for borrowers at that date. Lenders are, however, allowed to change the rate of interest. In such a case, the APR cannot act as the driver any more when the rate is varied;
  
• the view expressed by HHJ Tetlow in Brooks that the borrower’s argument was “looking through the wrong end of the telescope” was approved and applied by analogy to these cases: the rate of interest had been contractually agreed and there was no reason to say it should be any other figure.
  

OTHER ISSUES

The Court also robustly, and shortly, dealt with the other issues raised by the borrowers. It decided that:

 

1. The borrowers’ argument that the agreement must state the annual rate of interest rather than the monthly rate was flawed. Paragraph 4 of Schedule 6 to the CCAR 1983 simply requires a term stating “the rate of interest”: it does not say the “annual” rate of interest.
   
2. There was no requirement by Paragraph 10 of Schedule 1 to the CCAR 1983 to state the total charge for credit but, even if there were, it would not render the agreement irredeemably unenforceable as suggested by the borrowers.
   
3. Even if there was a breach of Schedule 1 to the CCAR 1983, there was no evidence of prejudice or culpability put forward by the borrowers meaning the Court could not, and should not, decide whether to make a declaration under Section 142 of the CCA 1974.
   
4. Even if the agreement was improperly executed, it did not create an unfair relationship following the High Court’s decision in Carey & Others v HSBC Bank plc & Others [2009] EWHC 1681.
   
5. Even if the agreement was irredeemably unenforceable, the lenders were not prevented from registering adverse credit entries, requesting payment, issuing proceedings to recover monies due or taking steps before issuing proceedings following McGuffick v The Royal Bank of Scotland plc [2010] 1 All ER 634.
   

COMMENT

The Court’s stern approach to the borrowers’ claims, particularly on an application for summary judgment, is most welcome. Lenders will take considerable comfort from the fact that speculative enforceability claims like the ones raised in this decision, and the recent decision in Brooks, will be scrutinised and robustly dealt with by the Court. It is also pleasing that the Court approved HHJ Tetlow’s decision in Brooks on similar issues meaning the rate of interest and APR issue should now be beyond doubt. It therefore seems likely that future consumer credit challenges should quickly decline. It must also be the case that after the event insurers, who have been actively funding the adverse costs orders on these cases, will seriously review their position in the market. This can only be further icing on the cake for lenders.

 

 

HI

Interesting one this Patrick.

Personally I think this is wrongly decidedat least not entirely correctly.

There is a fairly straight forward relationship between APR and interest on credit card agreements because there are usually no other items (other than interest) in the total charge for credit. The APR can be calculated directly from the monthly interest rate.

True the interest rate may vary, but surely that is not the issue it should be correct on the agreement at execution.

This is very much a chicken and egg situation, if as the court says the interest rate is the driver for the calculation then this must mean that the APR is wrong, this is not a prescribed term but it is still a breach and the court could find under section127(1)

Peter

[basa48]

HI

Interesting one this Patrick.

Personally I think this is wrongly decidedat least not entirely correctly.

There is a fairly straight forward relationship between APR and interest on credit card agreements because there are usually no other items (other than interest) in the total charge for credit. The APR can be calculated directly from the monthly interest rate.

True the interest rate may vary, but surely that is not the issue it should be correct on the agreement at execution.

This is very much a chicken and egg situation, if as the court says the interest rate is the driver for the calculation then this must mean that the APR is wrong, this is not a prescribed term but it is still a breach and the court could find under section127(1)

Peter

 

Don't agree, This is de minimus, arguing over small percentage differences in interest is not overly prejudicial to the debtor. As you say it comes under 127(1) where the judge has discretion. Maybe a less prejudicial judge might have gone the other way, but I wouldn't have bet on it.

[Peterbard]

Trust me, patrick's post (and the judgment it contains) does not advance anyones knowledge one jot (except maybe to reinforce the fact that CMCs are idiots, or in reality working for the creditors!).

 

Sorry, that reads like a criticism of patrick - it isn't, only the judgment.

 

CMCs working for creditors how would that work?

 

Peter

Edited August 6, 2010 by Dodgeball
spell

[Peterbard]

Don't agree, This is de minimus, arguing over small percentage differences in interest is not overly prejudicial to the debtor. As you say it comes under 127(1) where the judge has discretion. Maybe a less prejudicial judge might have gone the other way, but I wouldn't have bet on it.

 

Hi

How do you know i cant see any figures on the judgement forgive me if i have missed them.

 

Anyway the APR on an agreement is certainly not de minimus, in fact it may be of more use to people challenging post 2007 agreements than the prescribed terms.

This is the main indicator to most consumers of value of the credit bargain.

Peter

[Peterbard]

Don't agree, This is de minimus, arguing over small percentage differences in interest is not overly prejudicial to the debtor. As you say it comes under 127(1) where the judge has discretion. Maybe a less prejudicial judge might have gone the other way, but I wouldn't have bet on it.

HI

Sorry to correct you again but if it was the interest the judge would have no discretion because it would be a breach under section 127(3) only if it was the APR that is incorrect.

Petr

[diddydicky]

CMCs working for creditors how would that work?

 

Peter

 

it would not be as barmy a suggestion as it might at first appear

 

the creditors- getting fed up with defendants actually defending instad of rolling over

 

set up a cmc operation at arms length

 

gives them inside information into some claims and allows them to manufacture weak appeals knowing they will be defeated and thus set precedents- then quietly slip back into the abyss. job done

[lexis200]

Seeing as CRA's appear to be in the pocket of banks and DCA's it's not a big stretch to imagine CMC's being in the same boat.

[patrickq1]

in effect if it ever came to light that it was a manufactured cmc and client for that matter this would be perverting the court of justice, i can imagine the ructions that would cause i could see jailtime for top bankers and everyone involved

as for the 127(1) yes post 2007 peter

worse still i can see waksy getting hauled over the coals as well ,he seems to be very pro bankers ime wondering why he is being the chosen one

[paulwlton]

Hi

How do you know i cant see any figures on the judgement forgive me if i have missed them.

 

Anyway the APR on an agreement is certainly not de minimus, in fact it may be of more use to people challenging post 2007 agreements than the prescribed terms.

This is the main indicator to most consumers of value of the credit bargain.

Peter

 

The APR is important and misstating said has led to a criminal conviction in one case.

[paulwlton]

Hi

How do you know i cant see any figures on the judgement forgive me if i have missed them.

 

Anyway the APR on an agreement is certainly not de minimus, in fact it may be of more use to people challenging post 2007 agreements than the prescribed terms.

This is the main indicator to most consumers of value of the credit bargain.

Peter

 

The APR is important and misstating said has led to a criminal conviction in one known case.

[basa48]

Hi

How do you know i cant see any figures on the judgement forgive me if i have missed them.

 

Anyway the APR on an agreement is certainly not de minimus, in fact it may be of more use to people challenging post 2007 agreements than the prescribed terms.

This is the main indicator to most consumers of value of the credit bargain.

Peter

 

What I understand the claimants were arguing is that they have calculated the interest rate using the stated APRs and find this does not equal the stated interest rate. Thus they claim a prescribed term is mis-stated. As Waksman says this is maths 'arse about face'. You should really start with the interest rate and calculate the APR from that. If that gives an incorrect result it is only a 127(1) fault.

 

The other argument was that the lender had quoted monthly interest rates, not annual - - - - What!!!

[vint1954]

of course my knowledge is gleaned from historic and other avenues of research- - and yours is not?

Every ones knowledge is. Can't say thats a bad thing, so long as the wheat is sorted from the chaff.

 

Peter,

 

We all see our letters and thoughts trotted out accross the forum as though they had just been invented, and indeed those thoughts and letters are in turm plagerised from others previous experience. I know I have pinched some of DD's work and ideas. Thats what this forum was about, shared knowledge, debate and help for those in a desparate situation. From fresh, you can only learn from others knowledge and experience.

 

Vint

[diddydicky]

Thinking about this it sounds that this is not your first time on this site, i have never found it nesesary to change my name on here how about you.

 

Peter

 

 

ah, i have just been pointed this comment- missed it first time

 

well, 'm i getting on a bit and the old grey matter is not what it was

 

however, to the best of my recollection i joined the site around march 2009 and although it is possible- i'm dammed if i can remember having started out with a different user name- it's possible but i cant think why i would have done so

 

no doubt the site team could verify that

 

apart from which - I i certainly have never had any other account or separate user name on the forum, and all my posts on this forum have been under the same account

 

nor have never "had to " or been "required to" change my user name for some "problem" on the forum - if that is what you are getting at

 

nor- prior to march 2009 had i ever heard of, let alone posted on this or any other debt advice forum either as diddydicky or anything else

 

so do please enlighten me (and anyone else reading the thread and to whom you obviously intended to cast doubt as to my intergrity) what the purpose of your comment was

 

or, as i often say to creditors

 

"Put up" or "Shut up"

 

 

 

As i recall, such a veiled accusation is what started your campaign against PT and he did not fully rebutt your allegation

 

so please do enlighten me and the others on the site so that this matter can be "nipped in the bud" right at the outset

[Peterbard]

What I understand the claimants were arguing is that they have calculated the interest rate using the stated APRs and find this does not equal the stated interest rate. Thus they claim a prescribed term is mis-stated. As Waksman says this is maths 'arse about face'. You should really start with the interest rate and calculate the APR from that. If that gives an incorrect result it is only a 127(1) fault.

 

The other argument was that the lender had quoted monthly interest rates, not annual - - - - What!!!

 

 

Hi Yes that is correct

 

The problem is now of course that there is now way to prove that an interst rate on a credit card agreement is incorrect.

 

This means really if the interest rate is there on a credit card agreement it is unchallengable in regard to enforceability and breach of 127(3)

Edited August 7, 2010 by Dodgeball
bloody computer and my spelling

[Peterbard]

ah, i have just been pointed this comment- missed it first time

 

well, 'm i getting on a bit and the old grey matter is not what it was

 

however, to the best of my recollection i joined the site around march 2009 and although it is possible- i'm dammed if i can remember having started out with a different user name- it's possible but i cant think why i would have done so

 

no doubt the site team could verify that

 

apart from which - I i certainly have never had any other account or separate user name on the forum, and all my posts on this forum have been under the same account

 

nor have never "had to " or been "required to" change my user name for some "problem" on the forum - if that is what you are getting at

 

nor- prior to march 2009 had i ever heard of, let alone posted on this or any other debt advice forum either as diddydicky or anything else

 

so do please enlighten me (and anyone else reading the thread and to whom you obviously intended to cast doubt as to my intergrity) what the purpose of your comment was

 

or, as i often say to creditors

 

"Put up" or "Shut up"

 

 

 

As i recall, such a veiled accusation is what started your campaign against PT and he did not fully rebutt your allegation

 

so please do enlighten me and the others on the site so that this matter can be "nipped in the bud" right at the outset

YOu remember incorrectly

I new PT way back when istarted on the site.

 

By the way i have never lead a campaign agains anybody

 

Peter

[Peterbard]

Hi Yes that is correct

 

The problem is now of course that there is now way to prove that an interst rate on a credit card agreement is incorrect.

 

This means really if the interest rate is there on a credit card agreement it is unchallengable in regard to enforceability and breach of 127(3)

 

I am of course refering to on the grounds of interest rate

[Peterbard]

Of course,

Soory mist remember to use that quote button

 

Reply to vints post

 

peter

[Peterbard]

HI

 

Yes patrick

 

Seems a little far fetched to me still stranger things n

have happned

 

Peter

[Peterbard]

What I understand the claimants were arguing is that they have calculated the interest rate using the stated APRs and find this does not equal the stated interest rate. Thus they claim a prescribed term is mis-stated. As Waksman says this is maths 'arse about face'. You should really start with the interest rate and calculate the APR from that. If that gives an incorrect result it is only a 127(1) fault.

 

The other argument was that the lender had quoted monthly interest rates, not annual - - - - What!!!

 

Hi

I think it is worth mentioning that the same is not true of a fixed sum loan.

On one of these the APR is more important than the interest.

Because with the apr you can calculate the correct Total credit and repayments, iff you know the TAP

Peter

[Peterbard]

The APR is important and misstating said has led to a criminal conviction in one known case.

 

 

Yes i remember, ithink it would be worth starting to look at this in relation to section 140 of the 2006.It seems to me like this is the way forward

 

Peter

[basa48]

Hi Yes that is correct

 

The problem is now of course that there is now way to prove that an interst rate on a credit card agreement is incorrect.

 

This means really if the interest rate is there on a credit card agreement it is unchallengable in regard to enforceability and breach of 127(3)

 

I can't see how you could ever challenge any quoted interest rate in an agreement. It is for the lender to set whatever rate he feels fit and vary it at will.

[Peterbard]

I can't see how you could ever challenge any quoted interest rate in an agreement. It is for the lender to set whatever rate he feels fit and vary it at will.

 

If its a fixed sum agrement it will have a direct effecton the total amount paid.

 

And as said it will also have an effect on the APR in a credit card agreemetn but as said that wil now not be useful

 

You know you dont have to dissagree with everything i say.

 

just a though

 

Peter

[Peterbard]

I can't see how you could ever challenge any quoted interest rate in an agreement. It is for the lender to set whatever rate he feels fit and vary it at will.

I think i may have slightly missunderstood your point.

 

If an agreement has a vereable rate interest it does not make any difference to the enforceability of the agreement. It has to be correct at the moment of execution.

 

Peter

[paulwlton]

I can't see how you could ever challenge any quoted interest rate in an agreement. It is for the lender to set whatever rate he feels fit and vary it at will.

 

What if the interest rate charged (before any variation) differs from what's stated in the executed agreement?......now then.