Unfair Credit Agreements

It is estimated that up to 80 percent of credit agreements may be classed as unfair and unenforceable. These are agreements regulated by the Consumer Credit Act 1974 which were signed before 6th of April 2007.

We will review and audit your agreements in conjunction with our solicitors and if there are major breaches of the Consumer Credit Act 1974, our solicitors will challenge the agreement with a view to either the debt being completely written off or reduced.

Take our quick and simple test to see if you qualify; if you have questions, browse our FAQ section...

History

The Consumer Credit Act of 1974 was enacted to offer consumers and lending institutions legal protection. Unclear and complicated terms and passage of time resulted in some of the important parts of the act being interpreted differently and in consequence “credit agreements” moved away from the spirit of the act. This was allowed to go on for decades without any resistance or challenges by the consumers.

Notable Cases

Following are some of the cases that were brought against the lenders by the consumers.

• McGinn v Grangewood Securities Ltd (Court of Appeal 23 April 2002 ) - The court of appeal ruled that this loan agreement was unenforceable due to amount of credit being improperly stated (s127(3) of the Consumer Credit Act 1974).

• Wilson v First County Trust (House of Lords 10 July 2003) - in this case House of Lords ruled that the breaches of Consumer Credit Act 1974 make the agreement unenforceable except on an order of court (s.65(1)).

• Mr and Mrs Griffiths-Peet v Yes Car Credit (settled in 2007) - In this case a Hire Purchase agreement was found to be mis-stated and the agreement was irredeemably unenforceable.

Legislative Changes

The Consumer Credit Act 2006 enhanced the consumers’ ability to refer the disputes to the Financial Ombudsman Service (FOS) and to challenge the unfair credit agreements in courts to obtain redress. All agreements taken on or after 6th April 2007 are governed by the new act.

Following are a few points, amongst many, that may render a credit agreement unfair

• Use of unfair terms and conditions in the underwriting of agreements.

• Annual Percentage Rate (APR) being unclear or wrong.

• Important information missing from the agreement.

• Use of misleading and / or incorrect information or figures.

Following agreements are not covered by the Consumer Credit Act 1974

• Agreements with limited companies.

• Agreements in excess of £25,000 limit pursuant to Section 8(2). This limit is to be removed, and the exemptions relating to high net worth debtors/hirers and businesses set out in Section 16A and 16B will be brought into force at a future date.

• Exempt agreements within Section 16. These relate to where the creditor is a local authority or a body specified, or of a description specified, in an order made by the Secretary of State, i.e. a charity.

• Small agreements within Section 17. These are credit agreement for credit not exceeding £50, other than a hire purchase or conditional sale agreement; or a regulated consumer hire agreement, which does not require the hirer to make payments exceeding £50.

Nothing stated here should be taken as professional advice or recommendation. Please contact us to receive free personalised advice.