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Default Notices Possible challenge?


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Removal of Default & Termination Notices

Accurate Default Notices are vital

Businesses engaged in lending or hiring regulated by the Consumer Credit Act 1974 should be aware of a recent Court of Appeal case highlighting the potential pitfalls of creditors failing to ensure that their documentation complies with the regulations.

In the vast majority of cases, before a lender or hirer can take action against a debtor or borrower, a default notice has to be served. The default notice has to comply with the Act and the relevant regulations (Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1993). If a default notice in the proper form is not served, the action cannot proceed.

In this case*, the defendant hired a photocopier but failed to pay a quarterly instalment of its rent. The plaintiff served a default notice which substantially overstated the arrears which were then due. Despite this, the judge at first instance held that the default notice was valid and entered judgement for the plaintiff.

On appeal, Lord Justice Kennedy held that the Act was enacted to protect consumers, most of whom were likely to be individuals. When contracting with a financial organisation, a consumer was bound to be at a disadvantage. The contract was likely to be in standard form and complex. His Lordship said that if it was said that a consumer had broken the terms of the agreement, the consumer needed to know precisely what had been done wrong and what was needed to put matters right. The lender has the ability and resources to do this and, if it does not do so accurately, it is only right that it should not take the next step. Under s88(1) of the Act there is a requirement that the lender should 'specify' not only the nature of the breach, but also what action is required to remedy it. In the context of this case, that meant specifying with reasonable accuracy what sum the hirer had to pay to remedy the breach.

The Court went on to say that an error that could be described as minimal might be overlooked, but the substantial inaccuracy in this case rendered the default notice ineffective, so the appeal should be allowed.

Tens, if not hundreds, of thousands of default notices are issued every day. This case illustrates how vitally important it is that any default notice is correct in form, as well as in substance. It is likely that the Court would take the same view with regard to the form and contents of regulated agreements.

*Case reference

Woodchester Lease Management Services Ltd v Swain & Co NLD 14 July 1998

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Could that apply in the following case:

 

I have a default registered on my credit file which never even went as far as court, it was paid in full in 2004 but remains on my file marked satisfied, but still showing as a default. I don't even recall ever having received their original notice of default, I'd only found out about it a few years after, when trying to apply for credit - at which point I promptly settled it. Are there any grounds would you think for having the entry removed?

Settled Claims:

Abbey: £4025 Claimed 27/02/06 - Paid in full 19/06/06

NatWest: £4529 Claimed 10/05/06 - Paid in full 1/08/06

Halifax: £1150 lba 18/05/06 - Paid in full 07/06/06

Natwest CC: £420 Initial letter 25/07/06 - Paid in full 08/06

Woolwich: £1100 Paid in full 28/2/07 + Default removed

NatWest Pt 2: £1700 Claimed 10/05/06 - Paid in full 7/2/07 + Defaults removed

 

Current Claims:

Abbey Pt 2: £2300 + adverse credit removal claimed 23/03/07

Alliance & Leicester: £1421 + adverse credit removal claimed 23/03/07

 

Refunds pending:

Capital Bank: Swift Advances: Halifax

 

Son's Refunds pending:

Abbey: HSBC

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If the default refers to a failure to pay money which was comprised of unlawful charges then we believe that yes the deafult notice is inaccurate and should be challenged.

You first have to win on the issue of penalties.

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  • 12 years later...

This topic was closed on 03/06/19.

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Please note that this topic has not had any new posts for the last 5376 days.

If you are trying to post a different story then you should start your own new thread. Posting on this thread is likely to mean that you won't get the help and advice that you need.

If you are trying to post information which is relevant to the story in this thread then please flag it up to the site team and they will allow you to post.

Thank you

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