Prescribed terms in an agreement

[DonkeyB]

Chaps and chapesses

 

I have a technical query regarding ‘prescribed terms’.

 

Carey v HSBC reinforced that a failure of prescribed terms to be in a recon is fatal under s 127(3). However, I have found a situation where the recon is different to the actual (newly found) original.

 

HHJ Waksman in Carey described it at para 15 thus:

 

15. Then, by Regulation 6 and Schedule 6 the following terms had to be contained in a regulated agreement for running account credit if it was not to be an IEA, and were prescribed for the purposes of s61 (1) (a):

 

"A term stating the credit limit or the manner in which it will be determined or that there is no credit limit" (paragraph 3 of Schedule 6);

 

"A term stating the rate of any interest on the credit to be provided under the agreement" (paragraph 4 of Schedule 6);

 

"A term stating how the debtor is to discharge his obligations under the agreement to make the repayments, which may be expressed by reference to a combination of any of the following:

— number of repayments;

— amount of repayments;

— frequency and timing of repayments;

— dates of repayments;

— the manner in which any of the above may be determined;

— or in any other way, and any power of the creditor to vary what is payable." (paragraph 5 of Schedule 6).

 

I shall refer to these as "the Prescribed Terms".

 

 

Note my boldening.

 

It has always been my understanding that these phrases encompass certain charges, such as a tariff of charges imposed for late payments and over limit, for example. Because adding a charge is certainly varying the amount payable.

 

So first question – is my assumption correct?

 

 

If I am correct, move on...

 

The original T&Cs do not refer to specific charges, but under a heading ‘Consequences of breach’ refer to ‘we may debit your account with the costs of our arrears letters to you for any breach and also add any collection charges incurred’ (I have paraphrased).

 

There are other vague references to charging you for our costs due to your breaches, but nowhere does it state what those charges are.

 

Second question – is this a breach of the ‘prescribed terms’?

 

 

If it is, move on...

 

The recon agreement has different terms. There is a list of the actual charges, which would conveniently make the T&Cs enforceable. So under Carey, this fails to satisfy s 78.

 

I’ll leave it to you to work out why a company would want to produce inaccurate T&Cs...

 

Hope someone has the knowledge to advise. Someone has a lot riding on this.

[DonkeyB]

Anyone?

[AndyOrch]

Your not confusing Prescribed Terms with Terms and Conditions Donkey?

 

What are the Prescribed Terms for an Unenforceable Credit Agreement?

 

For a credit agreement to be enforceable in a court of law it must contain a number of prescribed terms. If any contract is missing any of these prescribed terms then it can be deemed ‘unenforceable’ and the debt cannot legally be collected by the lender.

In section 127(3) of the Consumer Credit Act 1974 it clearly states;

(3) The court shall not make an enforcement order under section 65(1) if section 61(1) (a)(signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner).

Here is an overview of the requirements of section 127(3) of the Consumer Credit Act 1974. For a credit agreement to be enforceable it must contain the following prescribed terms;

1) Amount of credit

There must be a term on the agreement which states the amount of credit which has been issued

2) Credit Limit

The agreement must include regarding a credit limit or if a credit limit is not required (i.e. in the case of a loan)

 

3) Repayments

The agreement must contain information on how the debtor is to make repayments. This could be in the form of any of the following points;

a. Amount of repayments to be made

b. Date the repayments are to be made

c. Timing of payments

d. Frequency of payments

e. Total number of repayments (For instance, when a loan is required)

f. The power of the creditor to vary any of the above mentioned

f. The manner in which any of the above is to be determined.

4) Rate of interest

There must be a term referring to the rate of interest to be applied to the credit agreement

Credit Cards;

If you have a credit card then sections 2, 3, and 4 apply to you.

 

Loans;

If you have a loan sections 1 and 2 apply.

What if my credit agreement does not contain any or one of these points?

You credit agreement does not comply with the Consumer Credit Act 1974 and is invalid. If you credit agreement was to be taken to a court the judge would not be able to make an enforcement order to enable to debt to be collected by the lender.

When this happens the debt effectively sits in ‘limbo’ as it cannot be legally collected and you are not obliged to repay it. Most lenders don’t want loose ends or debts sat in ‘limbo’ as it takes up more of their resources maintaining dormant accounts so in the majority of cases the lender will write the debt off.

Section127(3) also provides that the court may not make an enforcement order unless a document containing all the prescribed terms of the agreement was signed by the debtor. This basically means a lender needs to be able to supply a ‘true copy’ signed copy of a credit agreement, along with signed terms and conditions in order for it to be enforceable in a court of law. If a lender cannot supply this then the debt can also be rendered unenforceable.

Andy

[DonkeyB]

My reference is to 3(f) and 3(g).

 

How should they be described?

 

The prescribed terms are often found within the T&Cs, so there’s often no difference.

[AndyOrch]

My reference is to 3(f) and 3(g).

 

How should they be described?

 

The prescribed terms are often found within the T&Cs, so there’s often no difference.

 

Depends on the age of the agreement the Prescribed Terms use to be within the signatory area.T&Cs or key information was usually overleaf.

[DonkeyB]

How about 2003?

[AndyOrch]

Pre 2007 so yours should be within the 4 corners ie Sig area.

 

Andy

[DonkeyB]

The agreement front page refers to the T&Cs elsewhere.

[molly13]

Hi

 

1) Amount of credit

There must be a term on the agreement which states the amount of credit which has been issued

 

 

Please forgive my ignorance, but are you saying that it must state an actual amount of credit?

 

In my case, (a reconstituted agreement) it says: We will determine the credit limit and notify you direct.

I don't remember if they ever did notify me at all.

Does that then make the agreement unenforceable?

BTW it is from 1997.

 

Thanks in advance.

 

Regards

 

Molly:-)

[Guest]

s127 cca (now repealed) requires there to be a signed 'document' that contains all of the prescribed terms.

Edited February 6, 2012 by Ford

[KASHKARD]

The one question that does not appear to have been adequately answered within any of these threads, is whether or not one of the prescribed terms on a credit card has to state a monitory credit limit. I've scoured the net and found this refering to the case of Brophy v HFC Bank in June 2010.

The correspondent states:

Mr Justice Flaux held that the reference in a credit card agreement manner in which it will be determined or that there is no credit that “your credit limit will be determined by us from time to time and notified to you” did comply with both schedule 1 and schedule 6 of the 1983 Regulations. The creditor was entitled to leave it to its absolute discretion to decide how to determine the credit limit.

Robert Rosenberg, Barrister

I thought this point should be made clear to everyone to help avoid fighting the wrong battles!

Keep up the good work everyone!

Regards

K