Unenforceability Cases on hold until further notice

[Readalot]

Let's consider what banks could do if they continue to act in their usual way i.e. not following the letter of law but doing what the can get away with.

 

The banks now have an option to not comply with s77/78 request in cases where they know they do not have proper agreements.

 

After that they will engage in 'non enforcement' i.e. payment demands, usual harassment, issuing DN, placing black marks on credit record, threatening court action.

 

What a consumer can do to stop it? So far the tactic was to let them to take us to court where we can defend and they have to proof that the agreement exists and enforceable. Now we will have to take them to court an obtain a declaration that a corresponding agreement does not exists or unenforceable and get an injunction in order to stop any further 'non enforcement' of such unenforceable agreements. In other words, somehow in cases of abusive "unenforcement" of credit agreements the burden of proof of unenforceability of debt is some how being shifted to the debtor.

 

Frankly, I am very confused about all of this and probably need some more time to digest...

[Mistermind]

 

Wow, so now it looks like now reporting to CRA's factual information is not enforcement and therefore can be and will be done by the creditors in cases of unenforceable agreements.

 

I personally found reasoning provided by the judge in this case very compelling.

 

 

Looks to me a deal of confusion has arisen with adverse consequences due to the casual use of the word "unenforceable" (not by Readalot), covering two situations:

 

1. Unenforced to date - the agreement looks defective according to the Act, or the creditor cannot or will not supply the agreement yet (as in the recent case). This does not rule out the possibility of enforcement ordered by the court at a future date. It is not yet unenforceable for all time due to it being eligible for enforcement by a judge at a future date.

 

2. Unenforceable - enforcement in court has been attempted by the creditor in court but quashed. Unless there is an appeal against this verdict this agreement is irredeemably unenforceable.

 

Looks like it is the judge's perorgative to say what is "....able".

[WelshMam2009]

Once ONE creditor has F***ed up the debtors credit file- there is no reason why the debtor should not then take the view that as his credit rating is well and truly F***d already then threats by another one to do the same thing are no longer relevant

 

In fact it is a postive encouragement for the debtor to say to himself

 

OK if i am going to be F****d for 6 years- lets default on the whole goddam lot of them at the same time and get them all done and dusted

 

 

To be honest Diddy...that's exactly the approach I took....collected at least 6 defaults that I know of and possibly more that DCA's may have added without me knowing.

 

In my case I'm not looking for a mortgage and never want to borrow any money ever again.

 

However, I guess the position may not be as simple for others, especially if they work in a profession where an adverse credit history may prevent them for occupying their posts and/or wish to move up/on the property ladder.

 

Forgot to add that it actually gave me great pleasure telling a Citi Rep that I wasn't at all bothered by the prospect of a default!!

[shakespeare62]

you are IMO absolutely right!

 

the wording of a DN refers to "further enforcement action" therefore clearly intimating that creditor believes the DN itself to be "enforcement action" for if it were not then the reference to "further enforcement action" would be meaningless

 

Here's a detailed post by SurfaceAgentX20's on the fact that the wording of the Statute Itself (CCA 1974) confirms that judgment would be part of enforcement :-

 

Stop standing order payments after 12 +2 days?

 

[begin snippet]

 

dog,

You could show the judge the default notice itself. The DN is a prescribed form containing prescribed language to include the following words:

 

"IF THE ACTION REQUIRED BY THIS NOTICE IS TAKEN BEFORE THE DATE SHOWN NO FURTHER ENFORCEMENT ACTION WILL BE TAKEN IN RESPECT OF THE BREACH".

 

If Parliament intended that the action which will be taken where the DN is not complied shall constitute 'Further Enforcement Action', then Parliament also intended that when the DN was served there had been 'Enforcement Action'. If that were not so, then the subsequent action would not constitute 'Further Enforcement Action'. There must have been some original enforcement action for the later action to constitute 'Further' Enforcement Action. If no enforcement action can be identified and which originated earlier than the DN, the DN must constitute the original enforcement action.

 

I am aware of Rankine and the opinion of HHJ Simon Brown that beginning legal proceedings did not even amount to enforcement action. Unfortunately Brown carefully dodged saying what would constitute enforcement action. Taking his train of thought to its logical conclusion, if prosecuting legal proceedings does not constitute enforcement, then evidently only steps taken pursuant to a judgment could be treated as enforcement. But then that would be enforcement of the judgment, not of the agreement. The only remaining alternative would be enforcement by means other than the recovery of money, ie goods. But as we know, the recovery of goods is permissable only following service of a DN and where the goods are protected goods, under a judgment of the court.

 

[end snippet]

[angry cat]

REGULATORY COMPLIANCE AND ENFORCEMENT

The 'section 25 test'

8.1 Section 25 of the Consumer Credit Act 1974 (the Act) provides that, in considering fitness to hold a consumer credit licence, the OFT takes into account any circumstances which appear to it to be relevant and in particular any evidence tending to show that an applicant, licensee, or its employees, agents or associates,48 past or present, have:

• committed offences involving fraud or other dishonesty or violence

• failed to comply with the Act or any other enactment regulating the provision of credit to individuals or other consumer protection legislation

• failed to comply with the requirements of Part 16 of the Financial Services and Markets Act 2000 so far as they relate to the consumer credit jurisdiction operated by the Financial Ombudsman Service

• practiced discrimination in connection with the carrying on of their business

• engaged in business practices appearing to the OFT to be deceitful, oppressive or otherwise unfair or improper, whether unlawful or not.

8.2 The Act also requires that in determining whether a person is fit to hold a licence to operate a consumer credit business, the OFT shall have regard to the skills, knowledge and experience in relation to consumer credit businesses of that person and other persons who will participate in any business carried on by him under a licence and any practices and procedures to be implemented in connection with any such business.

48 Including 'business associates' within the meaning of section 25(3) of the Act.

OFT1107con 54

8.3 In considering a person's fitness to hold a consumer credit licence, the OFT will also take account of whether he has complied with all relevant OFT guidance.

8.4 If a creditor chooses to do business and/or continues to do business with a third party which it knows, or reasonably ought to have known, is engaged in behaviour which is inconsistent with fitness to hold a licence, its own fitness can be called into consideration.49 Licensed businesses can not ignore the unfair practices of those acting on their behalf – whether in-house or external.

Evidence of compliance

8.5 The OFT expects creditors to take all reasonable steps to ensure that they have suitable business practices and procedures in place to ensure compliance (for example through training, auditing, disciplinary policies/procedures, or any other means necessary and appropriate to the business), implementing any changes as necessary.

8.6 If the OFT requires them to do so, it will be incumbent on creditors to be able to positively demonstrate to the OFT's satisfaction that their polices and procedures:

49 It is not for the OFT to specify in this guidance how creditors' choices about third party selection are made nor to advise on desired conduct between creditors and third parties. However, the OFT would expect creditors to take care in selecting third parties with whom to form business associations, complaints about any such third parties to be properly investigated by creditors and firm action to be taken by creditors in respect of any such complaints as appropriate.

OFT1107con 55

• ensure appropriate explanations50 of credit products are provided to actual and potential borrowers and that they are adequate to enable the borrower to assess whether he can afford the credit commitment

• are appropriate to assess a prospective borrower's ability to be able to afford to meet repayments over the life of a loan in a sustainable manner

• deal appropriately with borrowers whose accounts have fallen into arrears

• have been implemented in practice and are effective51

• are proactively monitored to assess their ongoing effectiveness

• have been appropriately amended on the basis of the results of such monitoring as and when appropriate to do so.

8.7 These policies and procedures should be documented and capable of being made available for inspection by the OFT and/or the relevant local authority Trading Standards Service. They should contain sufficient detail52 in respect of the actual procedures employed to allow the OFT to be able to form a view as to whether the procedures appear appropriate.

50 Such explanations would need to take account of the circumstances of the borrower and the nature of the financial product. The 'circumstances of the borrower' would not necessarily only include his financial standing, income, outgoings etc., but may also include such matters as his apparent financial capability and/or mental capacity.

51 In considering 'effectiveness', the OFT may, for example, require data on the number of loans that have resulted in arrears/defaults within a specified period.

52 A document outlining the business' policies and procedures for assessing affordability, for example, which simply stated that 'appropriate means are employed to assess affordability and ability to repay', or words of similar effect, would not be considered to contain sufficient detail in the absence of more information on the specific means employed.

OFT1107con 56

8.8 Similar assessments may be made of applicants for consumer credit licences.

8.9 Creditors should keep a record of the checks they undertake to assess compliance with this guidance.

8.10 The OFT may use its information gathering powers in order to seek evidence of compliance with this guidance in appropriate cases. In addition to its power to require information generally under section 36B of the Consumer Credit Act 1974 ('the Act'), in accordance with section 36C of the Act, the OFT may, by notice to a licensee, require him to facilitate access to his business premises by an officer of the OFT or a trading standards officer, in order to allow them to observe the carrying on of the licensed business or to inspect documents of the licensee which are specified or described in the notice.

Enforcement principles

8.11 The OFT is committed to fair, effective and proportionate enforcement. In practice this means that where we identify non-compliance with the law and/or relevant OFT guidance, we will decide on the appropriate regulatory response in the light of the facts and circumstances of the individual case, including the risk of detriment to consumers.

8.12 Where we think it sufficient just to ensure that conduct is changed, and we do not have fundamental concerns about integrity or other aspects of fitness, we will use one of the appropriate compliance tools available to us.

8.13 It may, for example, be appropriate for the OFT to take action under Part 8 of the Enterprise Act 2002 in respect of domestic or Community infringements falling within sections 211 or 212 of that Act. Our approach to the use of these powers is discussed in Enforcement of consumer protection legislation – Guidance on Part 8 of the Enterprise

OFT1107con 57

Act (OFT512). We also co-ordinate such actions undertaken by other enforcers. The OFT also has both civil and criminal enforcement powers under the Consumer Protection from Unfair Trading Regulations 2008, which came into force on 26 May 2008.

8.14 Alternatively, we may consider it appropriate to impose specific 'requirements' on a trader where we are dissatisfied with certain aspects of conduct or that of any associates. Failure to comply with a Consumer Credit Act section 33A requirement can lead to the imposition of a financial penalty of up to £50,000 per instance. We may also compulsorily vary a licence, for instance to limit the activities for which a trader is licensed, or limit the life of the licence.

8.15 In cases of serious misconduct and/or where there are concerns about integrity, and the OFT has evidence tending to show that a person is unfit to hold a consumer credit licence, it can take action with a view to refusing or revoking the credit licence of the person concerned. Engaging in irresponsible lending practices would constitute grounds for the OFT to consider fitness to hold a licence.

[angry cat]

The Enterprise Act 2002 (Part 8 Designated Enforcers: Criteria for Designation, Designation of Public Bodies as Designated Enforcers and Transitional Provisions) Order 2003

 

Looks like its back to the OFT and local weights & measures (TS)!

 

AC

[Readalot]

Consider such tactic for a creditor.

 

1. Do not comply with any s77/78 demands, whether you have proper agreement or not.

2. Once debtor stops payments, start 'non enforcement' all the way from payment demands to LBA (as per the judgment).

3. Produce valid agreement (if any) at the last possible moment.

4. Negotiate full and final settlement using threat of legal fees payable.

 

The only way to counter this would be obtaining a declaration that there is no (or no enforceable) consumer credit agreement using DPA or CPR. This effectively would make s77/78 practically useless for consumer i.e. not sufficient to make informed decision whether an account can be disputed and payment can be stopped.

 

Just thinking aloud...

[Undercover-Elsa]

Good one, AC

Hopefully Saddler will be sending that letter from Amex's sols to the OFT ASAP asking for their pronouncement on it's contents?

[pedross]

Hi readalot

 

I don't think it's as cut and dried as that. It will be difficult to stop them reporting the information whilst the dispute is ongoing but there could be circumstances which enable you to get the default removed if it is settled in your favour. The same applies to the payment information that they report.

 

Its a long haul and its not easy but the end result is well worth while. What is right for one person might not be the right way forward for the next.

[diddydicky]

To be honest Diddy...that's exactly the approach I took....collected at least 6 defaults that I know of and possibly more that DCA's may have added without me knowing.

 

In my case I'm not looking for a mortgage and never want to borrow any money ever again.

 

However, I guess the position may not be as simple for others, especially if they work in a profession where an adverse credit history may prevent them for occupying their posts and/or wish to move up/on the property ladder.

 

Forgot to add that it actually gave me great pleasure telling a Citi Rep that I wasn't at all bothered by the prospect of a default!!

 

quite

[shakespeare62]

This effectively would make s77/78 practically useless for consumer

 

Not quite ...it would usually be in the interests of a creditor / DCA who has an enforceable agreement to produce a copy of the original in response to a s77-79 request why ? To get the debtor to pay up, and save litigation.

 

For copy agreement requests that are ignored etc. there is a useful CPR Pre-Action Template request for the original :-

 

The point is over costs. Costs are what their legal teams live for. You are trying under CPR- pre action behaviour to ascertain whether there is a legally enforcable agreement in place, and thereby avoid uncessary Court Costs.

 

If they don't co-operate under CPR they may incur cost penalties. The Allocation Questionaire, which the Court sends prior to allocating a case to track specifically asks each party whether they have complied with CPR pre-action behaviour requirements.

CPR_Pre_Action_request_template.doc

[diddydicky]

correct as shakespeare62 has said- and i think we are getting carried away too much and making too many assumptions

 

ALL the judgment has confirmed is that the reporting of data to CRA's is information reporting and does not constitute "enforcement"

 

We all know of course that some lenders will do so out of spite if they cant win the day in any other way but thats just something caggers will have to live with until such time as they can show that the agreement and therefore permission re data was not valid.

 

if you cant stand the heat- get out of the kitchen!

[Readalot]

Ok after reading a lot the judgment and relevant comments on this thread and elsewhere. I made the following conclusion (if I contradict myself in my previous posts that was my error, sorry)

 

 

The judgment, which can be (for now at least) considered as law of the land states that

typical actions of creditors such as demanding payments, issuing DN, reporting negative information to CRA's, threatening legal action, and starting legal action is not enforcement of consumer credit agreement for purposes of CCA1974.

 

 

This is the only thing which really matters for us in this case and this is the thing I now cannot agree with.

 

 

The worst implication of this for consumers is that now when a creditor does not comply with a valid s77/78 request, it now does not mean that consumer can safely stop payments and if at a later date the creditor comes up with the goods (CCA) than everything simply resets to a status quo i.e. consumer is not at fault for not complying with the agreement while the creditor is in default.

 

 

In other words, with new meaning of 'enforcement' creditors can safely ignore s77/78 request and engage in usual noneforcement after defaulting on s77/78. At the same time simply by virtue of default on s77/78 consumer now cannot safely stop payments until creditors default is over. Because default on s77/78 is now inconclusive and not sufficient information for further action. Instead to be safe before stopping payments consumers now have to issue a Subject Access Request and maybe even follow up via ICO or courts to get information about their CCA. This would cost much more and take much more time.

Edited October 9, 2009 by Readalot
removed last paragraph

[johnerog]

I have tried to disect this thread and there seems to be several arguments. For me the the most important are;

 

1. The agreement, in this case, was enforceable.

 

2. When was it signed?

 

3. The banks etc. seemed to get their act to-gether after 2006 with regard to contracts.

 

4. If the agreements have a signature it allows them to share your info with whoever, whether enforceable or not.

 

5. If the agreement is unenforceable due to no signature; there is no agreement. As stated in the Wilson case, (paraphrase) 'its up to the Banks etc. to get the agreements right. If the agreements are wrong there is no entitlement to collection as there never was an agreement.

 

6. There is no moral high ground. We are talking about the Law and the law should be neutral. (But some judges are not).

 

If we as individuals want to fight our corner in court we have to get 'ALL' the facts and use the courts, if necessary, to get them both defensively and offensively.

 

Happy to be shot down here; just my opinion.

[shakespeare62]

The Court can only issue Judgment on the issues raised in the claim. In this instance, the question being asked is "should a Creditor be able to Default a debtor when they are in breach of their obligations to supply copy documentation under s.77/s.78?" - the Court decided that they can, simple. Judgment for the Defendant, on the issues raised.

 

The issue of enforceability of the agreement wasn't raised, as, it seems, it was universally agreed that the agreement was enforceable. This is where the confusion starts, for all of us, so get on that band wagon

 

As the enforcement of the agreement wasn't in question, then, the Judgment given here can't be considered to apply to instances of where a Creditor has sought Judgment on the debt - that is clearly enforcing the agreement, but wasn't an issue to be decided, here.

 

The question raised was that of a Creditor recording a Default against the Debtor while in default of the CCA request, only, so that is all it applies to.

 

In para 85 of his judgement here he states

 

"It follows that, in my judgment the reporting to CRAs and related activities do not constitute enforcement for the purposes of the Consumer Credit Act."

 

Does that mean that para 81 of his judgment can be considered obiter dicta ? (comments / observations only by the judge, and not part of his actual judgment)

 

"Once it is recognised that the bringing of proceedings is not enforcement, it necessarily follows that activities (iii) to (vi) do not constitute enforcement, since they are all steps taken prior to the commencement of proceedings and therefore by definition, at most, steps taken with a view to enforcement"

Edited October 9, 2009 by shakespeare62

[shakespeare62]

I ask because in para 15 of his the judgment, he lays out a list of the relief sought by the claimant (the debtor), which does not request a decision on whether judgment is enforcement.

 

Yet in para 22 and 23 the judge itemises a list of issues which remain for decision. In para 22 he apparently concedes that the list is taken from the Defendants Skeleton (the Bank) and that certain matters are not pursued by the claimant (the debtor)

Edited October 9, 2009 by shakespeare62

[shakespeare62]

I believe anyway, that statute takes higher precedence, over a precedent set by court cases, so the quotes on enforcement in post #928 above represent a powerful argument for the definition of judgment and enforcement.

[shakespeare62]

The statute above, combined with Lord Nichols definition of enforcement albeit ,obiter dicta, from the Wilson Case, should make a compelling argument ...

[shakespeare62]

Unless I misunderstood (which to be fair is more than likely!) there was a section in the Mcguff judgement regarding these issues - in which the judge stated that it had been appropriate that RBS had ceased collection activity during the period of non-compliance with s77. (Aside from one collections letter which was issued 'in error')

 

Leads me to belive that the judge did interpret those actions (defaulting, initiating proceedings etc) as enforcement (being as they were disallowed during non-compliance with s77).

 

In para 12 of his judgment (the McGuffick Case – High Court), has the judge not contradicted himself on his own interpretation of enforcement when he states :

 

“In cases where the bank has confirmed that it is unable to enforce the agreement, its standard practice is not to pursue legal action against the customer and to put a stop to all collection activity, so as not to give the false impression that it is entitled to obtain a judgment. That practice has been followed in this case. ”

 

He apparently interprets judgment as being part of enforcement. Whereas in para 80 he doesn't. Is this a “Rankine Mk 2 ?”

Edited October 9, 2009 by shakespeare62

[Mistermind]

 

“In cases where the bank has confirmed that it is unable to enforce the agreement, its standard practice is not to pursue legal action against the customer and to put a stop to all collection activity, so as not to give the false impression that it is entitled to obtain a judgment. That practice has been followed in this case. ”

 

 

Legal contracts invariably start with a definition of terms, but in this situation there is appalling loose use of language, with one word "enforcement" hijacked to denote two different actions.

 

Only the court has powers to "enforce payment". In the absence of which it can grant charge orders, impose attachment on earnings, and authorise bailiffs etc. Creditors have no such legal powers and so no possibility to "enforce compliance". Regrettably I believe creditors sometimes use "enforce" to signal they mean to seek "enforcement by court".

 

Legal enforcement outside of the court is by definition impossible, unless the creditor is one Al Capone carrying a violin case. Perhaps the quote would be less ambiguous if edited with qualifications in parentheses:

 

“In cases where the bank has confirmed that it is unable to enforce the agreement in court, its standard practice is

not to pursue legal action against the customer,

not to put a stop to all collection activity so as not to give the false impression that it is entitled to obtain a judgment.

 

That practice has been followed in this case. ”

 

I.e. Extra-legal measures to encourage payment continued irrespective of legal enforcement -- I think.

[shakespeare62]

In para 85 of his judgement here he states

 

"It follows that, in my judgment the reporting to CRAs and related activities do not constitute enforcement for the purposes of the Consumer Credit Act."

 

Does that mean that para 81 of his judgment can be considered obiter dicta ? (comments / observations only by the judge, and not part of his actual judgment)

 

"Once it is recognised that the bringing of proceedings is not enforcement, it necessarily follows that activities (iii) to (vi) do not constitute enforcement, since they are all steps taken prior to the commencement of proceedings and therefore by definition, at most, steps taken with a view to enforcement"

 

Is para 81 obiter dicta ? Anyone ?

[sequenci]

I concurr with what Mistermind said 100%

[saddler68]

Even more 'test-cases' to come. Cant wait:-o

 

Credit Today online

[sequenci]

Is para 81 obiter dicta ? Anyone ?

 

I think he is simply reinforcing the decision made in Rankine via that statement.

[angry cat]

In para 12 of his judgment (the McGuffick Case – High Court), has the judge not contradicted himself on his own interpretation of enforcement when he states :

 

“In cases where the bank has confirmed that it is unable to enforce the agreement, its standard practice is not to pursue legal action against the customer and to put a stop to all collection activity, so as not to give the false impression that it is entitled to obtain a judgment. That practice has been followed in this case. ”

 

He apparently interprets judgment as being part of enforcement. Whereas in para 80 he doesn't. Is this a “Rankine Mk 2 ?”

 

The following are two examples of RBS letters sent to a customer:

 

"We regret to advise you that the card agreement has been misfiled and despite searching of our records we have been unable to locate it. Our record of the setting up of the card account has insufficient detail to enable us to recreate the agreement with the required degree of certainty this course of action requires.

 

In the circumstances we appreciate that under s78(6) of the CCA if you decide not to meet your obligations under the card agreement as they fall due we will be unable to take steps to enforce repayment of the debt. However, we consider that your should continue to meet your obligations under the agreement bearing in mind that the agreement isn't void, it remains valid and your continuing default will be reported to the CRA'.

Payments must continue to be paid using your monthly statement which will be sent to you.

Section 78(6) only prevents us from pursuing recovery of the debt through the courts

 

RBS Senior Recoveries Officer."

 

AND Later:

 

"I write with reference to your recent request under section 78(1) to supply copies of the original agreement set out under the CCA.

 

We regret to advise that the agreement has been misfiled and despite searching our records we have been unable to locate it. Regrettably we are unable to comply with your request made under section 78(1) of the CCA.

 

Notwithstanding this the agreement remains valid, and we expect you to continue to meet your obligations under the agreement.

The default registered against you will continue to show on your credit file until the account is repaid. This may have an effect on your ability to obtain credit in the future.

 

Section 78(6) 'unenforceable' only prevents us from pursuing recovery of the debt through the courts.

 

I trust this clarifies the matter for you.

 

RBS Senior Recoveries officer.

 

AC