Dissecting the Manchester Test Case....

[dp77]

I think you will find that this is being appealed.

 

The Rankines were mugs and the Judge saw through them.

 

There is a thread on here about the Rankine case and all is not as it first appears.

 

The Flaux judgement on enforcement (McGuffick v RBS) is being appealed? Is there a thread that gives more info?

[babybear39]

[eagleforms]

You are quite right IMO that the govt controls the courts and will let the banks get away with murder. The question is why? Perhaps the answer is that when they get chucked out of parliament, what are they hoping to do - get some tasty directorships in the city, that's what. So why did the govt not put restrictions on bonuses paid to bankers? Could it be that it could be cutting off their noses to spite their faces because they would like some of it for thyemselves when they get out of politics and into the city. To upset the financial institutions could mean that they might not get the highly lucrative directorships they will be looking for? I could go on but I think you get the drift of what I am suggesting!

[PriorityOne]

You are quite right IMO that the govt controls the courts and will let the banks get away with murder. The question is why? Perhaps the answer is that when they get chucked out of parliament, what are they hoping to do - get some tasty directorships in the city, that's what. So why did the govt not put restrictions on bonuses paid to bankers? Could it be that it could be cutting off their noses to spite their faces because they would like some of it for thyemselves when they get out of politics and into the city. To upset the financial institutions could mean that they might not get the highly lucrative directorships they will be looking for? I could go on but I think you get the drift of what I am suggesting!

 

The Old Boys' Network... and because they move in the same social circles. I worked in the City some years ago and one of the bank directors where I was temping was involved in setting up all the NHS Trusts that we now have.... wish I'd had more knowledge in those days, but it was an eye-opener anyway. Nicholas Soames was also one of the directors there and Sir Edward Adine (not sure of spelling) was a private something-or-other to Prince Charles.

 

[dp77]

Okay I've read through the Waksman rulings. I must admit I'm still confused about one issue, whether the creditor has to supply a copy of the Terms and Conditions (especially the prescribed terms).

 

Some paragraph's seem to suggest these must be provided, others seem to suggest something different. The same applies to whether a creditor has to send a copy of any other document referred to in the agreement.

 

A specific example; in response to a s78 a creditor sends back a copy of the application form, which itself contains no Terms & Conditions, it says there are "Important Personal Details Overleaf" but otherwise fives no clues as to where the Terms and Conditions are.

 

Does that comply with s78, post Waksman, or is the creditor in breach of section s78 for not including the Terms and Conditions, specifically the prescribed terms?

[means2anend]

Vint, are you saying that a reconstructed CCA is allowed in response to s78 but NOT in response to a CPR request for document disclosure?

 

 

Hi BTM!

 

In answer to your reply check this out only first page needed to be read:-excellent clarification by by PT2537

 

why you shouldnt use section 77/78 CCA 1974 if you want the signed agreement - The Consumer Forums

 

happy reading!!!

 

m2ae:-)

[paulwlton]

Hi BTM!

 

In answer to your reply check this out only first page needed to be read:-excellent clarification by by PT2537

 

why you shouldnt use section 77/78 CCA 1974 if you want the signed agreement - The Consumer Forums

 

happy reading!!!

 

m2ae:-)

 

A section 77-79 request allows the lender to recreate an enforceable document when in fact the original is unenforceable. There are instances where the document has been tampered with after execution rendering the contract unenforceable. However, this was concealed under a CCA request but came to light under CPR.

 

PW

[bustthematrix]

Hi BTM!

 

In answer to your reply check this out only first page needed to be read:-excellent clarification by by PT2537

 

why you shouldnt use section 77/78 CCA 1974 if you want the signed agreement - The Consumer Forums

 

happy reading!!!

 

m2ae:-)

Thanks m2ae. It is indeed an excellent legal point to raise. However, what I've experienced in this regard in the past is that a lender is then wont to respond by saying "well, though your request is outside of the CCA 1974, our agreement with you is governed by the CCA 1974 so we are only obliged to comply with the S77-79 terms when providing evidence of the contract." On that basis, they may then proceed to send you their reconstituted rubbish, which of course they do their best to ensure is enforceable.

[vint1954]

Vint, are you saying that a reconstructed CCA is allowed in response to s78 but NOT in response to a CPR request for document disclosure?

Correct, they should supply a copy of the original under CPR31.14 and have the original available in court, but Judges let them get away with reconstructions if not challenged.

 

Try using CPR 31.15, where you can demand to inspect the original.

[vint1954]

The Flaux judgement on enforcement (McGuffick v RBS) is being appealed? Is there a thread that gives more info?

Not that I know of, but members of the site team often refer to the appeal.

[bustthematrix]

That said, there are boundaries around the creation of the reconstituted agreement in that it has to be a True Copy etc. However, as lenders and DCAs have already shown, they very capable of 'disappearing' an unenforceable original because it was improperly drafted and executed and amazingly 'manufacturing' a reconstituted but enforceable alleged True Copy.

 

This of course is deception and fraud and sadly has already taken place.

 

The point is, people have to know how to bring this to light.

[vint1954]

That said, there are boundaries around the creation of the reconstituted agreement in that it has to be a True Copy etc. However, as lenders and DCAs have already shown, they very capable of 'disappearing' an unenforceable original because it was improperly drafted and executed and amazingly 'manufacturing' a reconstituted but enforceable alleged True Copy.

 

This of course is deception and fraud and sadly has already taken place.

 

The point is, people have to know how to bring this to light.

Again, here is the full response from the OFT. A similar response was issued by the Director of OFT, in reply to a letter from the Chancellor.

 

THE CONSUMER CREDIT ACT 1974 - Sections 77 and 78

 

Summary

On request and when accompanied by £1, a consumer has the right to:

 

• a copy of their executed agreement

• any other document referred to in it

• a statement showing

- the total sum paid under the agreement by the debtor

- the total sum which has become payable under the agreement by the debtor but remains unpaid, and the various amounts comprised in that total sum, with the date when each became due, and

- the total sum which is to become payable under the agreement by the debtor, and the various amounts comprised in that total sum, with the date, or mode of determining the date, when each becomes due. If the creditor is unable to give this information, he can state instead how the dates and amounts fall to be ascertained.

 

The copy of the executed agreement need not be an exact copy but it must be a ‘true copy’ and not some reconstruction of what the original might have been and it must contain the same terms as the original. Where the terms have been varied as provided for within the agreement, the copy of the original agreement must be accompanied by a document setting out the current terms, as varied. Certain details may be omitted from the original agreement eg the signature but the debtor must be in no doubt as to the true nature of his obligations under the loan.

 

Should no original agreement be in existence it is very hard to say that the copy the creditor offers to the debtor is, in fact, a true copy as there would be no original with which to compare it. In our view the onus of proof would be on the creditor to show that the copy is a true one and where none existed he may have difficulty discharging this. Neither should creditors suggest that a consumer has signed a credit agreement where they are unable to provide evidence to support this — to do so is likely to be a misleading action under Regulation 5 of the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) and would also constitute an unfair or improper business practice.

 

In our view a debt collector who has bought the debt is the ‘creditor’ and as such takes on the liabilities of section 77.

 

Under section 77(4), if the creditor is unable to provide this information, he is not entitled to enforce the debt while he remains in default (Decriminalised from 26 May 2008 on the coming into force of the CPRs).

 

Legal Argument

 

A copy of the executed agreement

 

Under the prescribed condition, section 77 of the Act requires the debtor to (Typo, she means Creditor I think) ‘...give the debtor a copy of the executed agreement (if any)....‘. The ‘if any’ most naturally refers to the exception for agreements older than 1985 (Not sure this is correct, "if any" was inserted to cover Verbal Agreements).

 

Where a creditor receives a request to supply a copy of the executed agreement, the Consumer Credit (Cancellation Notices and Copies of Documents) Regulations 1983 (‘1983 regs’) apply. Regulation 3(1) sets out the basic position that ‘every copy of an executed agreement... shall be a true copy’.

 

Regulation 3(2) goes on to concede that there may be omitted from this true copy various information such as details which are not required to be in the agreement by law: the signature box, signature (it should be noted that sub-ss 3-5 of section 127 do not apply to agreements entered into after 1 April 2007.A Court may then, for example, enforce unsigned agreements if it considers it is just to do so.) and date of signature. In our view the effect of Regulation 3(2) is that the creditor is only obliged to send out a generic copy of the agreement the debtor has signed up to. The creditor is not obliged to make an actual photocopy of the agreement.

 

However, the copy does have to be a ‘true copy’. This is a technical term, which has been discussed in a number of cases, mostly relating to bills of sale and the need to register a ‘true copy’ of the bill with the High Court. These cases come from the days before typewriters, when copies were made by hand. The consequences of filing a copy which was not a true copy were severe, since the bill would then be void and the creditor deprived of his security.

 

Meaning of ‘true copy’

 

In this context, the courts decided that a ‘true copy’ need not necessarily be an ‘exact copy,’ but it must be ‘so true that nobody reading it can by any possibility misunderstand it’ or be misled by it (In re Hewer ex parte Kahen (1882) LR 21 Ch.D. 871 at 875). The copy must contain ‘every material provision which is contained in the original’ (except that if the defect is made good by reading the document as a whole, the omission will not be fatal) (Court of Appeal in Burchell v Thompson [1920] 2 KB 80 at 98-99). Further, it is not sufficient for the copy merely ‘to state with complete accuracy in a summary form the effect of the stipulations contained in the original. It is not merely a document that is to state the true legal effect of the original; it is to be a copy of the original’ (per Atkin LJ in Burchell at 105).

 

Hewer, ex parte Kahen - the filed copy of the bill omitted the precise day of the month on which payment was to be made. The court held this was trivial, and no debtor would be misled by it.

Sharp v McHenry (1888 ) LR 38 Ch.D. 427- the copy contained blanks which were not in the original. The court decided that the blanks were unimportant, since the omitted words were not required for the original bill to be valid.

Burchell v Thompson [1920] 2 KB 80 - the copy failed to include the words ‘per annum’ after the interest rate of 55%. The reader of the copy would have to guess whether the interest was per annum, per month or something else but as one could sensibly assume, correctly, that it was per annum it was a true copy.

Commercial Credit Company of Canada Ltd v Fuiton [1923] AC 798 - suggested further that where there are a raft of smaller differences in a bill of exchange copy, this could prevent it being a true copy. However where the differences were such as to make the copy contract actually different to the original, the copy will not be true. Lord Sumner, speaking of the man who may wish to refer to the copy, concluded that ‘the Act promises him ... a true copy, not a puzzle. He is to inspect it, not to recover the original by a process of conjectural emendation’ (at 807).

 

Terms and Conditions

 

Regulation 7(1) of the 1983 Regs requires that a requested copy of an agreement which has been unilaterally varied under section 82(1) of the Act, shall be accompanied either by the latest notice of variation or a copy of the terms and conditions as varied. Regulation 7(2) extends the principle to copies of varied securities supplied either to the consumer or the surety.

 

Debt collectors as creditors

 

A consumer credit debt can be assigned in two ways: in law under the Law of Property Act 1925 or in equity but in practice we need to be concerned only with statutory assignments.

 

For a debt to be assigned in law, there are three conditions:

 

• the assignment must be absolute.

 

• the assignor must make the assignment in writing.

 

• express notice of the assignment must be given in writing to the debtor (see section 136 of the Law of Property Act 1925).

 

The reason the debt is assigned is immaterial. For instance, books of loans may be sold on to be collected as an asset rather than as a discounted debt.

 

In some instances, the debt collector may have purchased a debt but not have the relevant agreement. Whilst, in general, ‘liabilities’ cannot be assigned there must be a question mark over whether ‘duties’ are the same. This is important since there is a rule, expressed in Tito v Waddell (No 2) [1977] Ch 106 at 289 to 302, that where a benefit is conditional upon some burden, the assignee must also take the burden. An example is where the contractor has the right to mine on condition that they pay compensation to those disrupted by the mining. If they assign their right to mine, the assignee takes this right subject to the duty to pay compensation.

 

Therefore, there is a strong argument that under the Act, the right to payment is never absolute. It is always subject to duties (many of which are imposed under the Act). For instance, the right to enforce the credit agreement at all is subject to the duty to comply with section 77 or 78. This duty is not a ‘liability’ as such under the credit agreement but is a condition of the right to repayment.

 

There has been a suggestion that debt collectors can avoid complying with section 77 and 78 by claiming that the agreement is no longer `live’ in some way as it has been ‘terminated’ based on section 103 of the Act. This talks of a ‘trader’ who was the creditor under a regulated agreement, implying that ‘trader’ is no longer a creditor once an agreement is ended. Section 103, however, deals with where the customer no longer owes any money at all and therefore it is correct to say that he is no longer a debtor and the trader is no longer his creditor. Where money is still owed, section 103 would not apply, since the consumer would not be entitled to a termination statement.

 

The first issue on when the debt collector becomes the creditor is relatively simple. Section 189(1) of the Act defines ‘creditor’ as ‘the person providing credit under a consumer credit agreement or the person to whom his rights and duties under the agreement have passed by assignment or operation of law.’

 

Where the debt collector is not acting as the creditor’s agent, or otherwise on his behalf, the only legal basis he can have for demanding payment from the debtor is if the creditor’s rights and duties have been assigned to him. Therefore we can be reasonably confident that a debt collector who has bought the debt is the ‘creditor’.

 

Unpalatable though section 77 and 78 may be for some creditors, if the debt collector is unable to prove the debt, they should be more careful about the debts they buy. They cannot complain that the sections are somehow unfair as it is in the Act and so must be complied with. It is up to them to ensure they purchase and maintain sufficient records to be able to prove the debt and comply with the other requirements of the Act.

 

Misleading statements to debtors

 

Sections 77 and 78 refer to supplying a copy of the ‘executed’ agreement within 12 working days of receiving a written request from the debtor. Failure to do so makes the agreement unenforceable against the debtor until a copy is provided. In addition, if the default continues for a period of 1 month the creditor is in breach of the Act.

 

Execution involves signing the agreement. If no agreement has been executed, it is impossible to supply a true copy of the agreement. Should a creditor supply a copy agreement, even though the debtor has never signed any agreement with that creditor, no indication should be given that it is a true copy or a copy of an executed agreement. To do so may contravene Regulation 5 of the CPRs and be an unfair or improper business practice.

 

The consequence of the debtor not having signed a credit agreement with the creditor is that the agreement is unenforceable except where the court orders that enforcement may take place. Where the agreement was made before 6th April 2007 the court is not able to make such an order unless the agreement was signed by the debtor.

 

Therefore it is misleading to state, when complying with a section 77 or 78 request, that the debtor has signed or would have signed (or similar) the enclosed agreement where the debtor has not done so. From 26 May 2008 such a statement will be a breach of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). Regulation 5 of the CPRs states that a commercial practice is a misleading action if it contains false information in relation to the main characteristics of the product (amongst other matters) and is likely therefore to cause the average consumer to take a transactional decision he would not have taken otherwise. The product in question is the credit agreement and the main characteristics include the ‘execution of the product’ (Regulation 5(5)(d) of the CPRs).

 

Telling a consumer that he signed such an agreement is also a misleading statement about his rights and the risks he might face as covered by Regulation 5(4)(k) of the CPRs. It is our view that it is likely that a consumer will take a transactional decision to make a payment under the credit agreement or to refrain from exercising his rights under the agreement as a result of being misled about whether he signed it.

 

Breach of Regulation 5 of the CPRs is a criminal offence under Regulation 9 and can also be enforced under Part 8 of the Enterprise Act 2002. Under section 218A of the Enterprise Act, where an application for an Enforcement Order is made the court may require the Respondent ‘to provide evidence of the accuracy of any factual claim’ (such as a claim that a debtor has signed a credit agreement).

 

In addition, it should be noted that threats to take action that cannot be taken is listed as one of the factors that will be considered in assessing aggressive practices in Regulation 7(2) of the CPRs.

 

May 2008

 

Susan Edwards

Head of Credit Investigations and Enforcement, Office of Fair Trading

[babybear39]

Great stuff Vint, been looking for that one everywhere

[bustthematrix]

Brilliant stuff Vint, thank you.

[Dotty50]

Ah Vint,

 

Now you have posted that, I may be able to make head and tail of what Barclaycard say in their letter to my OH stating why they do not have to supply a copy of the CCA (4 pages of regulations!)

 

Thank you

[means2anend]

I remember you having already posted this earlier elsewhere...

 

....But timely reminders and reinforcing faith in those of us whose faith diminishes quickly...once again thank you for taking the time!!!

 

Rgds

 

m2ae:)

[GirlAloud]

I don't know if this is of any interest:

 

http://www.oft.gov.uk/shared_oft/consultations/OFT1175con.pdf

 

 

found on another thread. Not read it in detail - but appears to give all the power to the creditors??

[angry cat]

I don't know if this is of any interest:

 

http://www.oft.gov.uk/shared_oft/consultations/OFT1175con.pdf

 

 

found on another thread. Not read it in detail - but appears to give all the power to the creditors??

 

That is just the consulation!

 

We await the result, which is due this month.

[GirlAloud]

Yes, saw that but fairly grim reading - seems give all the power to the creditors with reconstituted agreements the order of the day!

[angry cat]

The consultation was open until 21 April 2010;

the OFT will then have to assimilate the results and;

then release the final guideance.

[angry cat]

Yes, saw that but fairly grim reading - seems give all the power to the creditors with reconstituted agreements the order of the day!

 

Do not agree, in fact the consultation makes matters quite clear, especially if read alongside HHJ Waksman's judgement re: reconstituted credit agreements:

Consumer Credit (Cancellation Notices and Copy docs) Regs 1983;

Regulation 7!

[means2anend]

Thanks m2ae. It is indeed an excellent legal point to raise. However, what I've experienced in this regard in the past is that a lender is then wont to respond by saying "well, though your request is outside of the CCA 1974, our agreement with you is governed by the CCA 1974 so we are only obliged to comply with the S77-79 terms when providing evidence of the contract." On that basis, they may then proceed to send you their reconstituted rubbish, which of course they do their best to ensure is enforceable.

 

 

BTM

 

I understand fully what you are saying.However CPR 31:6 and 16 says ''WHEN IN OR BEFORE any PROCEEDINGS ''

...note the timing

 

The whole purpose for requesting the documents (ORIGINALS) at pre-action hearings is to decide on whether to DISPOSE of the action BEFORE trial.If they provide it then YOU are not going to trial (obviously)...if they don't provide original THEY don't want to go to trial (obviously)..and hopefully that's where it is disposed of.

 

A s78 can be requested at ANY TIME not less than a month before the previous request...the request is not with a view to proceedings and is not within the context of any pre-action hearings/conduct not at this point anyway. It is only for informational purposes only..subject to it being an Honest and Accurate and True copy.

 

Proof of execution is effectively what is being asked for within the context of CPR 31:6 and 16...before (contemplated) or in any proceedings

 

m2ae

Edited April 22, 2010 by means2anend

[dp77]

Do not agree, in fact the consultation makes matters quite clear, especially if read alongside HHJ Waksman's judgement re: reconstituted credit agreements:

Consumer Credit (Cancellation Notices and Copy docs) Regs 1983;

Regulation 7!

 

I'm inclined to agree, the OFT guidelines seem fair and reasonable to me, and at least they provide some clarity.

 

Especially the concluding part which says non compliance is no longer an automatic criminal act but could still be an offence under the Enterprise Act 2002 as it constitutes "a failure to provide information".

[angry cat]

Again, here is the full response from the OFT. A similar response was issued by the Director of OFT, in reply to a letter from the Chancellor.

 

THE CONSUMER CREDIT ACT 1974 - Sections 77 and 78

 

Summary

On request and when accompanied by £1, a consumer has the right to:

 

• a copy of their executed agreement

• any other document referred to in it

• a statement showing

- the total sum paid under the agreement by the debtor

- the total sum which has become payable under the agreement by the debtor but remains unpaid, and the various amounts comprised in that total sum, with the date when each became due, and

- the total sum which is to become payable under the agreement by the debtor, and the various amounts comprised in that total sum, with the date, or mode of determining the date, when each becomes due. If the creditor is unable to give this information, he can state instead how the dates and amounts fall to be ascertained.

 

The copy of the executed agreement need not be an exact copy but it must be a ‘true copy’ and not some reconstruction of what the original might have been and it must contain the same terms as the original. Where the terms have been varied as provided for within the agreement, the copy of the original agreement must be accompanied by a document setting out the current terms, as varied. Certain details may be omitted from the original agreement eg the signature but the debtor must be in no doubt as to the true nature of his obligations under the loan.

 

Should no original agreement be in existence it is very hard to say that the copy the creditor offers to the debtor is, in fact, a true copy as there would be no original with which to compare it. In our view the onus of proof would be on the creditor to show that the copy is a true one and where none existed he may have difficulty discharging this. Neither should creditors suggest that a consumer has signed a credit agreement where they are unable to provide evidence to support this — to do so is likely to be a misleading action under Regulation 5 of the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) and would also constitute an unfair or improper business practice.

 

In our view a debt collector who has bought the debt is the ‘creditor’ and as such takes on the liabilities of section 77.

 

Under section 77(4), if the creditor is unable to provide this information, he is not entitled to enforce the debt while he remains in default (Decriminalised from 26 May 2008 on the coming into force of the CPRs).

 

Legal Argument

 

A copy of the executed agreement

 

Under the prescribed condition, section 77 of the Act requires the debtor to (Typo, she means Creditor I think) ‘...give the debtor a copy of the executed agreement (if any)....‘. The ‘if any’ most naturally refers to the exception for agreements older than 1985 (Not sure this is correct, "if any" was inserted to cover Verbal Agreements).

 

Where a creditor receives a request to supply a copy of the executed agreement, the Consumer Credit (Cancellation Notices and Copies of Documents) Regulations 1983 (‘1983 regs’) apply. Regulation 3(1) sets out the basic position that ‘every copy of an executed agreement... shall be a true copy’.

 

Regulation 3(2) goes on to concede that there may be omitted from this true copy various information such as details which are not required to be in the agreement by law: the signature box, signature (it should be noted that sub-ss 3-5 of section 127 do not apply to agreements entered into after 1 April 2007.A Court may then, for example, enforce unsigned agreements if it considers it is just to do so.) and date of signature. In our view the effect of Regulation 3(2) is that the creditor is only obliged to send out a generic copy of the agreement the debtor has signed up to. The creditor is not obliged to make an actual photocopy of the agreement.

 

However, the copy does have to be a ‘true copy’. This is a technical term, which has been discussed in a number of cases, mostly relating to bills of sale and the need to register a ‘true copy’ of the bill with the High Court. These cases come from the days before typewriters, when copies were made by hand. The consequences of filing a copy which was not a true copy were severe, since the bill would then be void and the creditor deprived of his security.

 

Meaning of ‘true copy’

 

In this context, the courts decided that a ‘true copy’ need not necessarily be an ‘exact copy,’ but it must be ‘so true that nobody reading it can by any possibility misunderstand it’ or be misled by it (In re Hewer ex parte Kahen (1882) LR 21 Ch.D. 871 at 875). The copy must contain ‘every material provision which is contained in the original’ (except that if the defect is made good by reading the document as a whole, the omission will not be fatal) (Court of Appeal in Burchell v Thompson [1920] 2 KB 80 at 98-99). Further, it is not sufficient for the copy merely ‘to state with complete accuracy in a summary form the effect of the stipulations contained in the original. It is not merely a document that is to state the true legal effect of the original; it is to be a copy of the original’ (per Atkin LJ in Burchell at 105).

 

Hewer, ex parte Kahen - the filed copy of the bill omitted the precise day of the month on which payment was to be made. The court held this was trivial, and no debtor would be misled by it.

Sharp v McHenry (1888 ) LR 38 Ch.D. 427- the copy contained blanks which were not in the original. The court decided that the blanks were unimportant, since the omitted words were not required for the original bill to be valid.

Burchell v Thompson [1920] 2 KB 80 - the copy failed to include the words ‘per annum’ after the interest rate of 55%. The reader of the copy would have to guess whether the interest was per annum, per month or something else but as one could sensibly assume, correctly, that it was per annum it was a true copy.

Commercial Credit Company of Canada Ltd v Fuiton [1923] AC 798 - suggested further that where there are a raft of smaller differences in a bill of exchange copy, this could prevent it being a true copy. However where the differences were such as to make the copy contract actually different to the original, the copy will not be true. Lord Sumner, speaking of the man who may wish to refer to the copy, concluded that ‘the Act promises him ... a true copy, not a puzzle. He is to inspect it, not to recover the original by a process of conjectural emendation’ (at 807).

 

Terms and Conditions

 

Regulation 7(1) of the 1983 Regs requires that a requested copy of an agreement which has been unilaterally varied under section 82(1) of the Act, shall be accompanied either by the latest notice of variation or a copy of the terms and conditions as varied. Regulation 7(2) extends the principle to copies of varied securities supplied either to the consumer or the surety.

 

 

***INSERT Quote by OFT/TS:

 

reg 3 of the consumer credit cancellation notices & copies of documents regulations 1983 states that signatures and names may be omitted.

 

However;

 

In respect of regulation 7 which states;

 

7(1) Where an agreement has been varied in accordance with section 82(1) of the Act, every copy of the executed agreement given to a debtor, hirer or surety under any provision of the Act other than section 85(1) shall include either -

 

a) an easily legible copy of the latest notice of variation given in accordance with section 82(1) of the Act relating to each discrete term of the agreement which has been varied;

 

or

 

b) an easily legible statement of the terms of the agreement as varied in accordance with section 82(1) of the Act.

 

We are of the opinion that reg 7 refers to a copy of the executed agreement and that sub sections a) or b) are in addition to this and not any alternative to sending the "actual executed agreement".***

 

 

Debt collectors as creditors

 

A consumer credit debt can be assigned in two ways: in law under the Law of Property Act 1925 or in equity but in practice we need to be concerned only with statutory assignments.

 

For a debt to be assigned in law, there are three conditions:

 

• the assignment must be absolute.

 

• the assignor must make the assignment in writing.

 

• express notice of the assignment must be given in writing to the debtor (see section 136 of the Law of Property Act 1925).

 

The reason the debt is assigned is immaterial. For instance, books of loans may be sold on to be collected as an asset rather than as a discounted debt.

 

In some instances, the debt collector may have purchased a debt but not have the relevant agreement. Whilst, in general, ‘liabilities’ cannot be assigned there must be a question mark over whether ‘duties’ are the same. This is important since there is a rule, expressed in Tito v Waddell (No 2) [1977] Ch 106 at 289 to 302, that where a benefit is conditional upon some burden, the assignee must also take the burden. An example is where the contractor has the right to mine on condition that they pay compensation to those disrupted by the mining. If they assign their right to mine, the assignee takes this right subject to the duty to pay compensation.

 

Therefore, there is a strong argument that under the Act, the right to payment is never absolute. It is always subject to duties (many of which are imposed under the Act). For instance, the right to enforce the credit agreement at all is subject to the duty to comply with section 77 or 78. This duty is not a ‘liability’ as such under the credit agreement but is a condition of the right to repayment.

 

There has been a suggestion that debt collectors can avoid complying with section 77 and 78 by claiming that the agreement is no longer `live’ in some way as it has been ‘terminated’ based on section 103 of the Act. This talks of a ‘trader’ who was the creditor under a regulated agreement, implying that ‘trader’ is no longer a creditor once an agreement is ended. Section 103, however, deals with where the customer no longer owes any money at all and therefore it is correct to say that he is no longer a debtor and the trader is no longer his creditor. Where money is still owed, section 103 would not apply, since the consumer would not be entitled to a termination statement.

 

The first issue on when the debt collector becomes the creditor is relatively simple. Section 189(1) of the Act defines ‘creditor’ as ‘the person providing credit under a consumer credit agreement or the person to whom his rights and duties under the agreement have passed by assignment or operation of law.’

 

Where the debt collector is not acting as the creditor’s agent, or otherwise on his behalf, the only legal basis he can have for demanding payment from the debtor is if the creditor’s rights and duties have been assigned to him. Therefore we can be reasonably confident that a debt collector who has bought the debt is the ‘creditor’.

 

Unpalatable though section 77 and 78 may be for some creditors, if the debt collector is unable to prove the debt, they should be more careful about the debts they buy. They cannot complain that the sections are somehow unfair as it is in the Act and so must be complied with. It is up to them to ensure they purchase and maintain sufficient records to be able to prove the debt and comply with the other requirements of the Act.

 

Misleading statements to debtors

 

Sections 77 and 78 refer to supplying a copy of the ‘executed’ agreement within 12 working days of receiving a written request from the debtor. Failure to do so makes the agreement unenforceable against the debtor until a copy is provided. In addition, if the default continues for a period of 1 month the creditor is in breach of the Act.

 

Execution involves signing the agreement. If no agreement has been executed, it is impossible to supply a true copy of the agreement. Should a creditor supply a copy agreement, even though the debtor has never signed any agreement with that creditor, no indication should be given that it is a true copy or a copy of an executed agreement. To do so may contravene Regulation 5 of the CPRs and be an unfair or improper business practice.

 

The consequence of the debtor not having signed a credit agreement with the creditor is that the agreement is unenforceable except where the court orders that enforcement may take place. Where the agreement was made before 6th April 2007 the court is not able to make such an order unless the agreement was signed by the debtor.

 

Therefore it is misleading to state, when complying with a section 77 or 78 request, that the debtor has signed or would have signed (or similar) the enclosed agreement where the debtor has not done so. From 26 May 2008 such a statement will be a breach of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). Regulation 5 of the CPRs states that a commercial practice is a misleading action if it contains false information in relation to the main characteristics of the product (amongst other matters) and is likely therefore to cause the average consumer to take a transactional decision he would not have taken otherwise. The product in question is the credit agreement and the main characteristics include the ‘execution of the product’ (Regulation 5(5)(d) of the CPRs).

 

Telling a consumer that he signed such an agreement is also a misleading statement about his rights and the risks he might face as covered by Regulation 5(4)(k) of the CPRs. It is our view that it is likely that a consumer will take a transactional decision to make a payment under the credit agreement or to refrain from exercising his rights under the agreement as a result of being misled about whether he signed it.

 

Breach of Regulation 5 of the CPRs is a criminal offence under Regulation 9 and can also be enforced under Part 8 of the Enterprise Act 2002. Under section 218A of the Enterprise Act, where an application for an Enforcement Order is made the court may require the Respondent ‘to provide evidence of the accuracy of any factual claim’ (such as a claim that a debtor has signed a credit agreement).

 

In addition, it should be noted that threats to take action that cannot be taken is listed as one of the factors that will be considered in assessing aggressive practices in Regulation 7(2) of the CPRs.

 

May 2008

 

Susan Edwards

Head of Credit Investigations and Enforcement, Office of Fair Trading

 

Vint, I have added the above marked with ***:

 

reg 3 of the consumer credit cancellation notices & copies of documents regulations 1983 states that signatures and names may be omitted.

 

However;

 

In respect of regulation 7 which states;

 

7(1) Where an agreement has been varied in accordance with section 82(1) of the Act, every copy of the executed agreement given to a debtor, hirer or surety under any provision of the Act other than section 85(1) shall include either -

 

a) an easily legible copy of the latest notice of variation given in accordance with section 82(1) of the Act relating to each discrete term of the agreement which has been varied;

 

or

 

b) an easily legible statement of the terms of the agreement as varied in accordance with section 82(1) of the Act.

 

We are of the opinion that reg 7 refers to a copy of the executed agreement and that sub sections a) or b) are in addition to this and not any alternative to sending the "actual executed agreement".

 

 

AC

[angry cat]

I'm inclined to agree, the OFT guidelines seem fair and reasonable to me, and at least they provide some clarity.

 

Especially the concluding part which says non compliance is no longer an automatic criminal act but could still be an offence under the Enterprise Act 2002 as it constitutes "a failure to provide information".

 

The following will of course, be of benefit:

 

The Office of Fair Trading's (OFT) draft guidance (“the guidance”) on the rights and obligations of creditors and debtors under sections 77-79 of the Act and under the Regulations.

 

The OFT’s decision to prepare this guidance primarily resulted from their concern that debtors are being misled and on the other hand concern that some creditors appear not to understand the nature and extent of their obligations under these sections.

 

The OFT considers that where there has been a sale of the debt it is an unfair business practice to seek to take advantage of any confusion...

 

The OFT is clear that if a contract is unenforceable under sections 77-79, and that it is apparent to the creditor or owner, then not only must the creditor or owner not obtain judgement or take any of the steps listed in sections 76(1) and 87(1), it must not in any way mislead debtors or hirers, either by action or omission, into thinking that it will be able to obtain a judgement on a debt or to recover possession of goods or otherwise enforce any rights under the agreement.

Misleading debtors as to unenforceability is very likely to be seen as an unfair or improper business practice under the Act.

 

The creditor or owner should make it clear in communications to the debtor that the debt is in fact unenforceable. Failure to do so, where the creditor or owner is aware of unenforceability, would in the OFT’s view unfairly mislead the debtor by omission.

 

Unfair or improper business practices may form the basis for action by the OFT under the Act, including by licensing action or the imposition of formal requirements. In addition, to mislead debtors into making a payment may in certain circumstances amount to an unfair commercial practice under the Consumer Protection from Unfair Trading Regulations 2008."

 

Clear as day, methinks!

 

However, most DCA's/Bank's are choosing to ignore this, preferring rather to send out meaningless waffling correspondence in attempts to mislead the; General Consumer...