Another day another blog……………this time one which didnt need a County Court to decide. The case turned on a Bank of Scotland credit card. The story went something like this………………………………………..
A customer receives an invitation to apply for a credit card. Customer completes the application form and gives the bank all of their financial information. Bank takes that information and misapplies it, instead of setting aside income for Housing Benefit, the bank includes this in the customers financial info, thus over-inflating their income.
The bank on the back of this offers a credit card, which it knows plainly would be unaffordable.
The credit agreement that the customer signed up to was not signed by the bank ( we had disclosure of the original) and also did not have the necessary prescribed terms within it.
So we placed the bank on notice of the numerous errors, citing everything from irredeemable unenforceability through to irresponsible lending creating an unfair relationship.
The bank denied liability, denied everything in fact, but then in a moment of guilt maybe decided that nevertheless it would write off the whole debt, discharge the customer from their contractual obligations, and consider the matter closed.
Now ill leave it up to you to make your mind up on who was right, but id say that if someone owed me money and i thought they legally had to pay it back i wouldnt be writing off nothing, would you?
I have found quite a few cases being litigated lately where the underlying debt arises out of an overdraft. The general approach that seems to be adopted when defending these claims seems to overlook section 140A Consumer Credit Act 1974.
I dealt with a case recently where Hoist Portfolio Holding 2 limited had purchased a debt that was made up of overdraft / bounced direct debit charges. The charges had created a cycle of debt, yet the advice given on one of the other forums that i dont get on was that a s79 CCA 1974 request should be made and there was some waffle about the fact there was no signed agreement meant that the debt was unenforceable…….. now back in the real world the advice given was utter nonsense.
So the client consulted me and after considering the facts of the case it was clear that there was an unfair relationship, the way the creditor had added the charges were clearly unfair, most were added when the debtor was waiting for funds to come in and despite requests the creditor refused to defer payment of the charges thus creating an ever increasing cycle.
So a Defence was drafted, and the Claim proceeded to trial. The Claimant seemed to bizarrely think that they couldn’t be touched by these charges. However s140B Consumer Credit Act is clear that the Court can make an order directing an assignee to repay monies even though the monies werent paid to them.
In addition, s140B(9) CCA 1974 also prescribes that where there is an allegation of unfairness, it is the opponent who carries the burden of proving the relationship is not unfair.
So, the matter came to trial, not only did the Claimant lose the Claim, they were ordered to repay all of the bank charges added to the account.
Section 140A is often overlooked, undervalued and it is a powerful provision. I used s140A back in 2010 when i took the Harrison v Link Financial case to the High Court when all the advice was to challenge the creditor under the Protection from Harassment Act 1997 i decided to use the CCA and the result speaks for itself. The provision of s140A covers a broad spectrum and im surprised that it isnt used more often to reclaim charges and to Defend proceedings.
Yesterday a hearing took place in the County Court that many may overlook as being the norm, a debt purchaser lost its case and failed to recover any money. Indeed a very regular occurrence in our world.
However, while this was a County Court decision, it does have the potential to unlock doors for consumers. Why? well heres the thing.
In this case, we had a consumer who had an overdraft with their bank account. The bank had acted entirely unreasonably and had created a cycle of debt which the consumer couldnt escape from. The charges were in our view unfair (yes were aware of the UKSC ruling on bankcharges) however while bank charges can be challenged post OFT v Abbey, i had always been of the view that there was scope under the Consumer Credit Act 1974 to challenge assignees such as debt purchasers and to seek the return of those charges from them even though the debtor never paid the debt purchaser the charges in the first place.
Cue s140A Consumer Credit Act 1974. Overdrafts are clearly credit. They are clearly within the scope of s140A if the relationship has been made unfair as a result of any of the points in s140A.
The case yesterday brought before the Court the question as to whether the previous creditors conduct in creating that cycle of debt among other things was sufficient to cause an unfair relationship.
The Court concluded yes it was, and whats more the Creditor was ordered to repaid the monies to the Defendant with interest.
It seems a door has been opened, albeit ajar at present, but it seems there may well be scope to seek redress with bankcharges under the Consumer Credit Act as well as using the arguments deployed in Oliver Foster Burnell v Lloyds TSB bank plc.