Cap1 & CCA return

[Guest Battleaxe]

It is a generic mailer, where it says this is a copy of your Agreement, it does not say a copy of your 'executed' Agreement.

 

 

 

Under the section IMPORTANT - YOU SHOULD READ THIS CAREFULLY - YOUR RIGHTS The Consumer Credit Act 19974 covers this Agreement and lays down certain requirements for your protection which must be statisfied when the Agreement is made. if they are not the Bank cannot enforce the Agreement without a Court Order.

 

So back to Section 85, the copy supplied must a copy of the EXECUTED AGREEMENT, not the Industry standard of a generic mailer purporting to be your Agreement. How do we know what was in our ofrignal Agreement of they will not supply a copy of the EXECUTED AGREEMENT when requested under Section 77-78 or the SAR? Our case a photcopy of a faxed copy with our signatures but NO signature by the bank and there never was, it is not a case of it being blanked out - no signature - narda- zilch, so just our signatures and not theres, so it is not a properly executed Agreement. That Your Honour is my case. The bank remains in default.

[m55dlc]

Absolutely BA, how can they purport the card mailer to be a copy of an executed agreement when such a thing does not exist? This smacks of subjective conjuncture your honour on behalf of MBNA. In addition to this, your honour, that also means MBNA are in breach of section 63, subsection 4 of the Consumer Credit Act 1974, as they have not complied, therefore I now require ALL interest charged under this unexecuted agreement to be refunded to me immediately!

 

63 Duty to supply copy of executed agreement

 

(1) If the unexecuted agreement is presented personally to the debtor or hirer for his signature, and on the occasion when he signs it the document becomes an executed agreement, a copy of the executed agreement, and of any other document referred to in it, must be there and then delivered to him.

 

(2) A copy of the executed agreement, and of any other document referred to in it, must be given to the debtor or hirer within the seven days following the making of the agreement unless—

 

(a) subsection (1) applies, or

 

(b) the unexecuted agreement was sent to the debtor or hirer for his signature and, on the occasion of his signing it, the document became an executed agreement.

 

 

(3) In the case of a cancellable agreement, a copy under subsection (2) must be sent by post.

 

(4) In the case of a credit-token agreement, a copy under subsection (2) need not be given within the seven days following the making of the agreement if it is given before or at the time when the credit-token is given to the debtor.

 

 

Now, they're going to argue that they don't have to provide signatures on copy agreements, but how can you tell it has been executed if you don't?

 

Also, if they haven't executed the agreement, how can they send a copy of it? Erm, they can't. The law doesn't say 'provide me with a copy of an executed agreement or what one would have looked like (without the signatures) if one existed'. You can't comply with s63.4 in exactly the same way as you can't comply with s85 FULL STOP!

[Joa]

I am sorry if I am repeating previous info but considering that this is post number 47942576890 (lol) I shouldn't be expected to go through all the posts!

Anyway, found the following link and wondered if this could be of any use:

PRACTICE DIRECTION – CONSUMER CREDIT ACT CLAIM - This Practice Direction Supplements CPR Rule 7.9

[Guest The Terminator]

Unfair relationships between borrower and lender

 

September 2006

Proposed changes to the Consumer Credit Act could see more borrowers challenging credit agreements with lenders due to their relationship being deemed to be unfair. Steven Clifford reports

The term “unfair relationship” may seem like an allegation made in the divorce courts. In fact, as most lenders will by now know, it is a new concept introduced by the Consumer Credit Act 2006. Essentially, a borrower is able to challenge a credit agreement on the grounds that the relationship between the borrower and the lender is unfair to the borrower.

In June this year, the Office of Fair Trading released a consultation document containing draft guidance on how it proposes to use its powers of enforcement in relation to unfair relationships.

This article examines the new concept in the light of the draft guidance.

The unfair relationship provisions are set out in sections 140A to 140D of the Consumer Credit Act 1974 (as inserted by the Consumer Credit Act 2006). When in force, they will replace the “extortionate credit bargain” provisions in sections 137 to 140 of the 1974 Act. These latter provisions have been interpreted very narrowly by the courts and are generally regarded as having been relatively ineffective in terms of consumer protection.

Under the new provisions, a court may decide there is an unfair relationship between a lender and a borrower because of:

• any of the terms of the credit agreement (or any related agreement);
  
• the way in which the lender has exercised any rights under the agreement (or related agreement); or
  
• anything else done (or not done) on behalf of the lender.

In making its decision the court must take into account all matters it considers relevant. These may include anything done by an associate of the lender.

What is unfair?

Looking at the three areas mentioned above, what are the sorts of things they are intended to cover? At first sight, they would seem to include issues such as the cost of the credit, the manner in which the lender has exercised any right to vary the interest rate, and the circumstances in which the loan was sold. However, from the OFT's comments in the draft guidance, the position in relation to interest rates and other costs may not be clear-cut. I will return to this point further on.

This point apart, it is clear that the matters that can be taken into account by the court are potentially very wide indeed. It should also be noted that the relevant considerations can be unique to the case in question. For example, the conduct of a lender in relation to one particular borrower could give rise to an unfair relationship with that borrower, without necessarily doing so in relation to any other borrowers.

The new provisions will apply from 6 April 2007 in relation to credit agreements entered into after then. For agreements made before that date, the provisions will apply from 6 April 2008 unless the loan has been repaid by then. (The Secretary of State is empowered to extend this transitional period, and there may be further consultation on this.)

There is a widely held misconception that the Consumer Credit Act only applies to “regulated agreements.” On the contrary, although many of the provisions of the Act apply to regulated agreements, others apply equally to non-regulated agreements (such as exempt agreements and - until this limit is abolished - agreements for credit exceeding £25,000). The new provisions apply to all consumer credit agreements other than FSA-regulated mortgage contracts.

If a court finds a relationship is unfair to the borrower it can do a number of things. For example, it may require repayment of sums already paid by the borrower, or the reduction of any sum payable by the borrower in the future. It may require the release of any security, or the alteration of the terms of the agreement or any related agreement. Or it may require the lender or any associate of it to take, or to refrain from taking, any particular action.

A provision that has caused quite a few raised eyebrows is Section 140B, which says that if a borrower alleges that a relationship is unfair, it is up to the lender to show that it is not. This shifting of the burden of proof is relatively uncommon, though. However, it is potentially worrying for lenders, since, generally speaking, it can be difficult to prove a negative. In practice, it may be that this shift will not make as much difference as appears on first sight. The borrower (being the person making the claim) will still have to show at least that there is an arguable case.

The consultation paper considers how the OFT may exercise its rights to enforce these provisions. As is the case currently with its enforcement powers in relation to the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR), the OFT cannot seek compensation or other remedies for individual consumers. Enforcement powers (contained in Part 8 of the Enterprise Act 2002) are intended to be used to stop practices and conduct that harm the collective interests of consumers.

This does not mean that the OFT will not be able to take action on the basis of one instance of an unfair relationship, if such an instance prompted the OFT to consider that the circumstances in question had the potential to affect other borrowers.

Unfair examples

The consultation paper does not contain any formal guidance on the exact meaning of the unfair-relationship test. As regulators such as the OFT and FSA (understandably) never tire of pointing out, only the courts can ultimately interpret the legislation. The paper does, however, discuss how the following issues may give rise to an unfair relationship.

• Unfair contract terms. Under the UTCCR, a contractual term is unenforceable against a consumer if it is unfair. Some terms are, however, not subject to the fairness test - those that have been individually negotiated, and those that are core terms (if in plain, intelligible language). But even these terms can be taken into account in establishing whether there is an unfair relationship.
  
• Interest rates and other charges. Interestingly, the OFT focuses largely on transparency here. The paper states that the OFT “considers that, in practice, a court may be unwilling to find there to be an unfair relationship solely on the basis of high interest rates or charges. When an agreement has been entered into freely, without the customer being in any way deceived or exploited, the court might not see a basis for treating the relationship as unfair by virtue of cost alone.” (This would follow the line taken by the UTCCR.) If there has been a lack of real transparency, then high costs may be something the OFT will focus on. However, the OFT appears to be reserving its judgement on this to some extent, as it says that it cannot rule out the possibility that rates or charges may be so high in a particular case as to make the relationship unfair without any other factors - for example, where the costs are oppressive or exploitative. (This looks suspiciously similar to the existing extortionate credit bargain-type test.)
  
• Breaches of current laws. Examples may be failure to comply with advertising requirements, or harassing debtors.
  
• Practices not necessarily in breach of the current law. Examples given here are beaches of guidelines (such as those of the OFT on non-status lending) and matters relevant to the question of fitness to hold a consumer credit licence.
  
• Regulatory breaches, such as under the FSA's Treating Customers Fairly initiative.
  
• Breaches of future laws. The main example given here is the Unfair Commercial Practices Directive, which will shortly be implemented into UK law.

In terms of its policy on enforcement, the OFT indicates that it may take a similar line to that it has done in relation to unfair contract terms. That is to say, this policy will generally be to contact the lender, giving details of the OFT's concerns, and in appropriate cases try to obtain undertakings from lenders before any formal enforcement action is launched.

Potential impact

The OFT intends to keep its guidance under review on the basis of ongoing experience and details of any relevant court judgements.

It is too early to know how much of an impact the new provisions will have. If the UTCCR are anything to go by, the effect may be quite low-key to begin with but gradually the confidence of the OFT in investigating practices and taking action will grow and things will gain momentum. The very width of the possible grounds for complaint by individual consumers, coupled with the extension of the Financial Ombudsman Service jurisdiction to cover consumer credit cases, may well mean that we see more individual cases than we have under UTCCR. Certainly, we should see more cases than under the present extortionate credit bargain provisions.

As for lenders, it is difficult to see how they can ever be totally fireproof against such a claim, given the width of the undefined term “unfair”. It may be that the courts will have to regard how this term has been interpreted under other legislation, such as the UTCCR, in which case the test may be whether the lender's (or its associate's) conduct has been contrary to generally accepted good market practice, or contrary to good faith. However, we won't know until we have some judicial authority. In the meantime, the uncertainty may, it has been suggested, deter new entrants into the market, and could affect secondary markets such as securitisations.

Lenders cannot afford simply to watch this space. Fairness as a concept has been with for some time now, in other guises. Lenders should have reviewed their trading terms in the light of UTCCR: all other aspects of their (and their associate's) credit operations should now be subjected to a similar, ongoing review.

Steven Clifford is a partner at law firm Thomas Eggar

Executive summary

• After 6 April 2007 borrowers can challenge lenders on credit agreements if they feel they have been treated unfairly. For agreements made before that date, the provisions will apply from 6 April 2008 unless the loan has been repaid by then.

• The new provisions apply to all consumer credit agreements other than FSA regulated mortgage contracts.

• The borrower making the claim that a relationship is unfair will have to show that there is an arguable case. However, it is up to the lender to prove that it is not.

• The consultation paper does not contain any formal guidance on the exact meaning of the unfair relationship test. Regulators such as the OFT and FSA point out that only the courts can decide.

• An unfair relationship may arise due to unfair contract terms, interest rates and other charges, breaches of current and future law, breaches of guidelines and regulation.

[Joa]

Term; where is that quote from?

[FANTASY CHARGES]

Unfair relationships between borrower and lender

 

September 2006

Proposed changes to the Consumer Credit Act could see more borrowers challenging credit agreements with lenders due to their relationship being deemed to be unfair. Steven Clifford reports

The term “unfair relationship” may seem like an allegation made in the divorce courts. In fact, as most lenders will by now know, it is a new concept introduced by the Consumer Credit Act 2006. Essentially, a borrower is able to challenge a credit agreement on the grounds that the relationship between the borrower and the lender is unfair to the borrower.

In June this year, the Office of Fair Trading released a consultation document containing draft guidance on how it proposes to use its powers of enforcement in relation to unfair relationships.

This article examines the new concept in the light of the draft guidance.

The unfair relationship provisions are set out in sections 140A to 140D of the Consumer Credit Act 1974 (as inserted by the Consumer Credit Act 2006). When in force, they will replace the “extortionate credit bargain” provisions in sections 137 to 140 of the 1974 Act. These latter provisions have been interpreted very narrowly by the courts and are generally regarded as having been relatively ineffective in terms of consumer protection.

Under the new provisions, a court may decide there is an unfair relationship between a lender and a borrower because of:

• any of the terms of the credit agreement (or any related agreement);
  
• the way in which the lender has exercised any rights under the agreement (or related agreement); or
  
• anything else done (or not done) on behalf of the lender.

In making its decision the court must take into account all matters it considers relevant. These may include anything done by an associate of the lender.

What is unfair?

Looking at the three areas mentioned above, what are the sorts of things they are intended to cover? At first sight, they would seem to include issues such as the cost of the credit, the manner in which the lender has exercised any right to vary the interest rate, and the circumstances in which the loan was sold. However, from the OFT's comments in the draft guidance, the position in relation to interest rates and other costs may not be clear-cut. I will return to this point further on.

This point apart, it is clear that the matters that can be taken into account by the court are potentially very wide indeed. It should also be noted that the relevant considerations can be unique to the case in question. For example, the conduct of a lender in relation to one particular borrower could give rise to an unfair relationship with that borrower, without necessarily doing so in relation to any other borrowers.

The new provisions will apply from 6 April 2007 in relation to credit agreements entered into after then. For agreements made before that date, the provisions will apply from 6 April 2008 unless the loan has been repaid by then. (The Secretary of State is empowered to extend this transitional period, and there may be further consultation on this.)

There is a widely held misconception that the Consumer Credit Act only applies to “regulated agreements.” On the contrary, although many of the provisions of the Act apply to regulated agreements, others apply equally to non-regulated agreements (such as exempt agreements and - until this limit is abolished - agreements for credit exceeding £25,000). The new provisions apply to all consumer credit agreements other than FSA-regulated mortgage contracts.

If a court finds a relationship is unfair to the borrower it can do a number of things. For example, it may require repayment of sums already paid by the borrower, or the reduction of any sum payable by the borrower in the future. It may require the release of any security, or the alteration of the terms of the agreement or any related agreement. Or it may require the lender or any associate of it to take, or to refrain from taking, any particular action.

A provision that has caused quite a few raised eyebrows is Section 140B, which says that if a borrower alleges that a relationship is unfair, it is up to the lender to show that it is not. This shifting of the burden of proof is relatively uncommon, though. However, it is potentially worrying for lenders, since, generally speaking, it can be difficult to prove a negative. In practice, it may be that this shift will not make as much difference as appears on first sight. The borrower (being the person making the claim) will still have to show at least that there is an arguable case.

The consultation paper considers how the OFT may exercise its rights to enforce these provisions. As is the case currently with its enforcement powers in relation to the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR), the OFT cannot seek compensation or other remedies for individual consumers. Enforcement powers (contained in Part 8 of the Enterprise Act 2002) are intended to be used to stop practices and conduct that harm the collective interests of consumers.

This does not mean that the OFT will not be able to take action on the basis of one instance of an unfair relationship, if such an instance prompted the OFT to consider that the circumstances in question had the potential to affect other borrowers.

Unfair examples

The consultation paper does not contain any formal guidance on the exact meaning of the unfair-relationship test. As regulators such as the OFT and FSA (understandably) never tire of pointing out, only the courts can ultimately interpret the legislation. The paper does, however, discuss how the following issues may give rise to an unfair relationship.

• Unfair contract terms. Under the UTCCR, a contractual term is unenforceable against a consumer if it is unfair. Some terms are, however, not subject to the fairness test - those that have been individually negotiated, and those that are core terms (if in plain, intelligible language). But even these terms can be taken into account in establishing whether there is an unfair relationship.
  
• Interest rates and other charges. Interestingly, the OFT focuses largely on transparency here. The paper states that the OFT “considers that, in practice, a court may be unwilling to find there to be an unfair relationship solely on the basis of high interest rates or charges. When an agreement has been entered into freely, without the customer being in any way deceived or exploited, the court might not see a basis for treating the relationship as unfair by virtue of cost alone.” (This would follow the line taken by the UTCCR.) If there has been a lack of real transparency, then high costs may be something the OFT will focus on. However, the OFT appears to be reserving its judgement on this to some extent, as it says that it cannot rule out the possibility that rates or charges may be so high in a particular case as to make the relationship unfair without any other factors - for example, where the costs are oppressive or exploitative. (This looks suspiciously similar to the existing extortionate credit bargain-type test.)
  
• Breaches of current laws. Examples may be failure to comply with advertising requirements, or harassing debtors.
  
• Practices not necessarily in breach of the current law. Examples given here are beaches of guidelines (such as those of the OFT on non-status lending) and matters relevant to the question of fitness to hold a consumer credit licence.
  
• Regulatory breaches, such as under the FSA's Treating Customers Fairly initiative.
  
• Breaches of future laws. The main example given here is the Unfair Commercial Practices Directive, which will shortly be implemented into UK law.

In terms of its policy on enforcement, the OFT indicates that it may take a similar line to that it has done in relation to unfair contract terms. That is to say, this policy will generally be to contact the lender, giving details of the OFT's concerns, and in appropriate cases try to obtain undertakings from lenders before any formal enforcement action is launched.

Potential impact

The OFT intends to keep its guidance under review on the basis of ongoing experience and details of any relevant court judgements.

It is too early to know how much of an impact the new provisions will have. If the UTCCR are anything to go by, the effect may be quite low-key to begin with but gradually the confidence of the OFT in investigating practices and taking action will grow and things will gain momentum. The very width of the possible grounds for complaint by individual consumers, coupled with the extension of the Financial Ombudsman Service jurisdiction to cover consumer credit cases, may well mean that we see more individual cases than we have under UTCCR. Certainly, we should see more cases than under the present extortionate credit bargain provisions.

As for lenders, it is difficult to see how they can ever be totally fireproof against such a claim, given the width of the undefined term “unfair”. It may be that the courts will have to regard how this term has been interpreted under other legislation, such as the UTCCR, in which case the test may be whether the lender's (or its associate's) conduct has been contrary to generally accepted good market practice, or contrary to good faith. However, we won't know until we have some judicial authority. In the meantime, the uncertainty may, it has been suggested, deter new entrants into the market, and could affect secondary markets such as securitisations.

Lenders cannot afford simply to watch this space. Fairness as a concept has been with for some time now, in other guises. Lenders should have reviewed their trading terms in the light of UTCCR: all other aspects of their (and their associate's) credit operations should now be subjected to a similar, ongoing review.

Steven Clifford is a partner at law firm Thomas Eggar

Executive summary

• After 6 April 2007 borrowers can challenge lenders on credit agreements if they feel they have been treated unfairly. For agreements made before that date, the provisions will apply from 6 April 2008 unless the loan has been repaid by then.

• The new provisions apply to all consumer credit agreements other than FSA regulated mortgage contracts.

• The borrower making the claim that a relationship is unfair will have to show that there is an arguable case. However, it is up to the lender to prove that it is not.

• The consultation paper does not contain any formal guidance on the exact meaning of the unfair relationship test. Regulators such as the OFT and FSA point out that only the courts can decide.

• An unfair relationship may arise due to unfair contract terms, interest rates and other charges, breaches of current and future law, breaches of guidelines and regulation.

 

 

i saw a vanquis card application form yesterday {I PICK UP EVERY APPLICATION FORM FOR CREDIT I SEE} (admitEdly it was printed on carbon neutral paper) but the APR WAS TYPICAL 39.9% apr (MONTHLY INTEREST RATE 2.84 %) ( PERHAPS FOR THOSE SPECIAL CUSTOMERS)

ISSUED BY VANQUIS BANK LIMITED REGISTERED NUMBER 2558509 REGISTERED OFFICE COLONNADE SUNBRIDGE ROAD BRADFORD BD1 2LQ (FSA MEMBER)

........................ LEAVES MONUMENT "standing still"

how about seriously someone trying to get the highest APR into the guiness book of records !!!

 

 

so here is the marker the link to the site is here please form an orderly queue.

 

Vanquis – get the credit you deserve

 

39.9 % to beat

 

[Guest Battleaxe]

39.9% USURY

[Smoothy]

177%!!

The NEW Provident Visa Card - Provident Personal Credit

 

[FANTASY CHARGES]

177%!!

 

The NEW Provident Visa Card - Provident Personal Credit

 

 

 

drattt and double drattt

 

well here is the link to the challenge i have just set on a new thread

 

you know the press are bound to pick up on this !

http://www.consumeractiongroup.co.uk/forum/general-debt/70041-guinness-book-records-vanquis.html#post602203

[Guest The Terminator]

Term; where is that quote from?

 

That was taken from one of the various newsletters we get through at work updating us on the law.I'll find out which one and provide the link.It is also in the CCA(2006) s140(A)

[Guest The Terminator]

Absolutely BA, how can they purport the card mailer to be a copy of an executed agreement when such a thing does not exist? This smacks of subjective conjuncture your honour on behalf of MBNA. In addition to this, your honour, that also means MBNA are in breach of section 63, subsection 4 of the Consumer Credit Act 1974, as they have not complied, therefore I now require ALL interest charged under this unexecuted agreement to be refunded to me immediately!

 

Now, they're going to argue that they don't have to provide signatures on copy agreements, but how can you tell it has been executed if you don't?

 

Also, if they haven't executed the agreement, how can they send a copy of it? Erm, they can't. The law doesn't say 'provide me with a copy of an executed agreement or what one would have looked like (without the signatures) if one existed'. You can't comply with s63.4 in exactly the same way as you can't comply with s85 FULL STOP!

 

Without the signiture you wouldn't know if it's been lawfully executed and let's face it they could send any mailer purporting that this is the agreement you signed and you wouldn't know any different.I would be asking them where's your evidence that I signed this agreement so I would agree with M55dlc and I quote" You can't comply with s63.4 in exactly the same way as you can't comply with s85 FULL STOP"

[Guest The Terminator]

HBOS cautious on lending | Business | Money | Telegraph

 

Another one that has made a big profit

[m55dlc]

Term, it's been bugging me for a while....

 

Why do you live near Android City when you're a cyborg?

[FANTASY CHARGES]

Term, it's been bugging me for a while....

 

Why do you live near Android City when you're a cyborg?

 

m55dlc

AND JUST WHEN youthought you had finished with data !!!

 

hoW does a "pin number" and say the expiry date field and those numbers on the back feature in the data protection act ? . If say we called it a piece of data then

 

could we set a precedent because then not all data can be passed to CRA'S ... just testing ...

[Guest The Terminator]

Term, it's been bugging me for a while....

 

Why do you live near Android City when you're a cyborg?

 

It's away of getting around the council tax yer know sending baliff's to the wrong address:D Anyway as I've paid this years I've changed my address for the avoidence of confusion:D

[m55dlc]

m55dlc

AND JUST WHEN youthought you had finished with data !!!

 

hoW does a "pin number" and say the expiry date field and those numbers on the back feature in the data protection act ? . If say we called it a piece of data then

 

could we set a precedent because then not all data can be passed to CRA'S ... just testing ...

 

I'm guessing here, but as a card remains the property of the bank, the data such as the expiry date and the three digits on the back are the property of the bank and are not personal in nature. The pin number, hmmmm, let me think about that one for a while.......

 

The pin number is a 4 digit number which in itself does not constitute data when taken out of context from the card, and also there are not very many combinations and many people have the same pin. Expiry dates are the same .... so must the 3 digits on the back.

 

When taken together with the card number, these constitute a risk not only to you (and your account) but also to the bank, so they have an interest in non-disclosure.

 

That one is a tricky one. There are provisions in the act that cover financial details, but I'm coming from a junk mail and data processing angle and I kind of didn't pay too much attention to the financial stuff (now I wish I had, but at the time I was more worried about junk mail).

 

I'm a little bit perplexed as to how you think you can use this angle? Some bits are not passed to DCA's, down to trade secrets and working practices.... Where are you going with this?

[Peterbard]

He used to live in cyborg city, but "he'll be back"

 

Just feeling left out

Peter

[ladybird17]

Serves you bloomin' right, you were horrible to me yesterday:(

[m55dlc]

Oh, and data pays reasonably well, I deal with it all day. I've been dealing with reference data within data warehousing where ETL processes are padding fields, then not matching back to the reference data, and the like getting sucked into a perpetual loop.....

[m55dlc]

Serves you bloomin' right, you were horrible to me yesterday:(

Pray tell who was m'lady and I shall have them lashed to within an inch of their life!

[Peterbard]

Serves you bloomin' right, you were horrible to me yesterday:(

 

When not me look even used the quote

 

Peter

[un1boy]

Unfair relationships between borrower and lender

 

September 2006

Proposed changes to the Consumer Credit Act could see more borrowers challenging credit agreements with lenders due to their relationship being deemed to be unfair. Steven Clifford reports

The term “unfair relationship” may seem like an allegation made in the divorce courts. In fact, as most lenders will by now know, it is a new concept introduced by the Consumer Credit Act 2006. Essentially, a borrower is able to challenge a credit agreement on the grounds that the relationship between the borrower and the lender is unfair to the borrower.

In June this year, the Office of Fair Trading released a consultation document containing draft guidance on how it proposes to use its powers of enforcement in relation to unfair relationships.

This article examines the new concept in the light of the draft guidance.

The unfair relationship provisions are set out in sections 140A to 140D of the Consumer Credit Act 1974 (as inserted by the Consumer Credit Act 2006). When in force, they will replace the “extortionate credit bargain” provisions in sections 137 to 140 of the 1974 Act. These latter provisions have been interpreted very narrowly by the courts and are generally regarded as having been relatively ineffective in terms of consumer protection.

Under the new provisions, a court may decide there is an unfair relationship between a lender and a borrower because of:

• any of the terms of the credit agreement (or any related agreement);
  
• the way in which the lender has exercised any rights under the agreement (or related agreement); or
  
• anything else done (or not done) on behalf of the lender.

In making its decision the court must take into account all matters it considers relevant. These may include anything done by an associate of the lender.

What is unfair?

Looking at the three areas mentioned above, what are the sorts of things they are intended to cover? At first sight, they would seem to include issues such as the cost of the credit, the manner in which the lender has exercised any right to vary the interest rate, and the circumstances in which the loan was sold. However, from the OFT's comments in the draft guidance, the position in relation to interest rates and other costs may not be clear-cut. I will return to this point further on.

This point apart, it is clear that the matters that can be taken into account by the court are potentially very wide indeed. It should also be noted that the relevant considerations can be unique to the case in question. For example, the conduct of a lender in relation to one particular borrower could give rise to an unfair relationship with that borrower, without necessarily doing so in relation to any other borrowers.

The new provisions will apply from 6 April 2007 in relation to credit agreements entered into after then. For agreements made before that date, the provisions will apply from 6 April 2008 unless the loan has been repaid by then. (The Secretary of State is empowered to extend this transitional period, and there may be further consultation on this.)

There is a widely held misconception that the Consumer Credit Act only applies to “regulated agreements.” On the contrary, although many of the provisions of the Act apply to regulated agreements, others apply equally to non-regulated agreements (such as exempt agreements and - until this limit is abolished - agreements for credit exceeding £25,000). The new provisions apply to all consumer credit agreements other than FSA-regulated mortgage contracts.

If a court finds a relationship is unfair to the borrower it can do a number of things. For example, it may require repayment of sums already paid by the borrower, or the reduction of any sum payable by the borrower in the future. It may require the release of any security, or the alteration of the terms of the agreement or any related agreement. Or it may require the lender or any associate of it to take, or to refrain from taking, any particular action.

A provision that has caused quite a few raised eyebrows is Section 140B, which says that if a borrower alleges that a relationship is unfair, it is up to the lender to show that it is not. This shifting of the burden of proof is relatively uncommon, though. However, it is potentially worrying for lenders, since, generally speaking, it can be difficult to prove a negative. In practice, it may be that this shift will not make as much difference as appears on first sight. The borrower (being the person making the claim) will still have to show at least that there is an arguable case.

The consultation paper considers how the OFT may exercise its rights to enforce these provisions. As is the case currently with its enforcement powers in relation to the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR), the OFT cannot seek compensation or other remedies for individual consumers. Enforcement powers (contained in Part 8 of the Enterprise Act 2002) are intended to be used to stop practices and conduct that harm the collective interests of consumers.

This does not mean that the OFT will not be able to take action on the basis of one instance of an unfair relationship, if such an instance prompted the OFT to consider that the circumstances in question had the potential to affect other borrowers.

Unfair examples

The consultation paper does not contain any formal guidance on the exact meaning of the unfair-relationship test. As regulators such as the OFT and FSA (understandably) never tire of pointing out, only the courts can ultimately interpret the legislation. The paper does, however, discuss how the following issues may give rise to an unfair relationship.

• Unfair contract terms. Under the UTCCR, a contractual term is unenforceable against a consumer if it is unfair. Some terms are, however, not subject to the fairness test - those that have been individually negotiated, and those that are core terms (if in plain, intelligible language). But even these terms can be taken into account in establishing whether there is an unfair relationship.
  
• Interest rates and other charges. Interestingly, the OFT focuses largely on transparency here. The paper states that the OFT “considers that, in practice, a court may be unwilling to find there to be an unfair relationship solely on the basis of high interest rates or charges. When an agreement has been entered into freely, without the customer being in any way deceived or exploited, the court might not see a basis for treating the relationship as unfair by virtue of cost alone.” (This would follow the line taken by the UTCCR.) If there has been a lack of real transparency, then high costs may be something the OFT will focus on. However, the OFT appears to be reserving its judgement on this to some extent, as it says that it cannot rule out the possibility that rates or charges may be so high in a particular case as to make the relationship unfair without any other factors - for example, where the costs are oppressive or exploitative. (This looks suspiciously similar to the existing extortionate credit bargain-type test.)
  
• Breaches of current laws. Examples may be failure to comply with advertising requirements, or harassing debtors.
  
• Practices not necessarily in breach of the current law. Examples given here are beaches of guidelines (such as those of the OFT on non-status lending) and matters relevant to the question of fitness to hold a consumer credit licence.
  
• Regulatory breaches, such as under the FSA's Treating Customers Fairly initiative.
  
• Breaches of future laws. The main example given here is the Unfair Commercial Practices Directive, which will shortly be implemented into UK law.

In terms of its policy on enforcement, the OFT indicates that it may take a similar line to that it has done in relation to unfair contract terms. That is to say, this policy will generally be to contact the lender, giving details of the OFT's concerns, and in appropriate cases try to obtain undertakings from lenders before any formal enforcement action is launched.

Potential impact

The OFT intends to keep its guidance under review on the basis of ongoing experience and details of any relevant court judgements.

It is too early to know how much of an impact the new provisions will have. If the UTCCR are anything to go by, the effect may be quite low-key to begin with but gradually the confidence of the OFT in investigating practices and taking action will grow and things will gain momentum. The very width of the possible grounds for complaint by individual consumers, coupled with the extension of the Financial Ombudsman Service jurisdiction to cover consumer credit cases, may well mean that we see more individual cases than we have under UTCCR. Certainly, we should see more cases than under the present extortionate credit bargain provisions.

As for lenders, it is difficult to see how they can ever be totally fireproof against such a claim, given the width of the undefined term “unfair”. It may be that the courts will have to regard how this term has been interpreted under other legislation, such as the UTCCR, in which case the test may be whether the lender's (or its associate's) conduct has been contrary to generally accepted good market practice, or contrary to good faith. However, we won't know until we have some judicial authority. In the meantime, the uncertainty may, it has been suggested, deter new entrants into the market, and could affect secondary markets such as securitisations.

Lenders cannot afford simply to watch this space. Fairness as a concept has been with for some time now, in other guises. Lenders should have reviewed their trading terms in the light of UTCCR: all other aspects of their (and their associate's) credit operations should now be subjected to a similar, ongoing review.

Steven Clifford is a partner at law firm Thomas Eggar

Executive summary

• After 6 April 2007 borrowers can challenge lenders on credit agreements if they feel they have been treated unfairly. For agreements made before that date, the provisions will apply from 6 April 2008 unless the loan has been repaid by then.

• The new provisions apply to all consumer credit agreements other than FSA regulated mortgage contracts.

• The borrower making the claim that a relationship is unfair will have to show that there is an arguable case. However, it is up to the lender to prove that it is not.

• The consultation paper does not contain any formal guidance on the exact meaning of the unfair relationship test. Regulators such as the OFT and FSA point out that only the courts can decide.

• An unfair relationship may arise due to unfair contract terms, interest rates and other charges, breaches of current and future law, breaches of guidelines and regulation.

 

Interesting...I like the way it mentions the lenders acting transparently and also where it says that the contract has been entered into under false pretneses - isn't that basically most of the contracts that have been issued though?

[Peterbard]

Pray tell who was m'lady and I shall have them lashed to within an inch of their life!

 

Yuck

To much

Just get back to the typwriter and do some work.

Oh and dont forget to read the bailiff threadd and vote.vote.vote.

 

Peer

[Peterbard]

Oh, and data pays reasonably well, I deal with it all day. I've been dealing with reference data within data warehousing where ETL processes are padding fields, then not matching back to the reference data, and the like getting sucked into a perpetual loop.....

 

What you need is a job

How about a lumberjack. I know a song about that if you like.

 

Peter

[angry cat]

A contract entered into under false pretences...

MBNA consider that my credit card credit agreement is my application form?

However, when I applied for the credit card I filled out their application form, but did not know as to whether the application would be accepted!

Therefore, factually I was signing a contract blind-

meaning that I did not realise that the MBNA application form would be deemed as the contract between MBNA and myself.

 

Inidentally, I sent it back to MBNA-

No, you have not complied Mr. MBUSA...they are now in default.

 

AC