I was asked the question by a lawyer at another firm recently as they were unsure whether the creditor had to issue a default notice or not. There is no one size fits all answer to this question, it is often very fact specific and depends on the circumstances, however there are some times when a creditor will not need a default notice under s87 (1) Consumer Credit Act.
So, what are these circumstances, well they are often missed by consumers but i thought it would be worth listing one or two.
- A creditor does not need a Default notice if he is seeking to recover the outstanding balance due under a fixed sum fixed term loan when the loan agreement has come to an end due to the term expiring.
- The creditor does not need a default notice if he is seeking arrears only, arrears are due and payable in normal circumstances so a default notice is not needed.
- When the creditor wishes to terminate the agreement for non breach situations, such as the creditor is exiting the market place and wishes to terminate the credit agreement for a credit card, in those circumstances he may need a s98A Notice but not a default.
Consumers also miss the fact that while a Default notice is needed for any of the situations in s87(1) Consumer Credit Act 1974, they breach itself doesn’t always mean a failure to pay a specific sum, a creditor under a Hire purchase agreement for example will need to serve a Default notice if the debtor fails to insure the vehicle fully comprehensive, as this would be considered a breach too.
It is also very important not to overlook the guidance of the Court of Appeal in PRA Group v Doyle, the outcome of Doyle was disappointing obviously, but the case made it clear that a default notice is far more important than debt purchasers have thought. From now on, fail to plead a default notice if your claim relates to breach, and you’re failing to plead part of what the Court said was the cause of action and thus the Claim is left open to being struck out.
The best advice i can give to anyone with an issue surrounding their case and default notices is get some advice, these pesky little notices can be the difference between winning and losing, and are often overlooked. If in doubt, shout!!!