Court ruling could be nail in the coffin for claims firms
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A High Court judgement which has ruled a lender does not need to provide an exact copy of an original credit card agreement is a further nail in the coffin for claims management companies, says international law firm Eversheds.
Claims firms and solicitors on their panels have been arguing that courts should declare credit agreements unenforceable where the lender can’t produce the original photocopy of the agreement following a formal request under s.78 of the Consumer Credit Act 1974.
However on December 23 a judge dismissed a number of cases which claimed such loans were unenforceable.
In his judgement, his Honour Judge Waksman QC, says: “Many claims now made under s78 may properly be regarded as unattractive and merely fishing for a case of unenforceability”.
He says if a creditor is in breach of section 78 this does not of itself give rise to an unfair relationship within the meaning of section 140A.
The judge also ruled that claims there was an unfair relationship and an improperly executed agreement should be struck out or dismissed.
In his summary Judge Waksman says the s78 copy must contain the name and address of the debtor as it was at the time of the agreement. But the creditor can provide the name and address from whatever source it has of those details. It does not have to take them from the agreement itself.
He says many consumers will have paid fees to CMCs to try and clear their debts but will now have to face the fact that the debts are repayable.
Chris Busby, partner at international law firm Eversheds, says: “This High Court decision is binding on County Courts and it will therefore allow the courts to dispose of the many cases that have been brought by claims management companies and their panel solicitors alleging that agreements are unenforceable either because the copy of the agreement provided under s.78 isn’t a photocopy of the original or because an unfair relationship is alleged. It should stem the flow of these sort of claims going forward.”
“Consumers should beware of paying up-front fees to claims management companies to pursue these sort of claims for them because many of them are unsuccessful and following the McGuffick v RBS decision in October 2009, if customers stop repaying credit card debts, it is likely to adversely affect their credit rating, even if the agreement is unenforceable”.
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Readers' comments (8)
Anonymous | 6 Jan 2010 1:49 pm
Well another kick in the teeth although it was only a matter of time
Wonder what the next gravy train will be?
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Anonymous | 6 Jan 2010 2:18 pm
Good about time - never got involved in this and alot of my clients that had seen this thought it was to good to be true - some unfortunatley had already paid up front fees to other companies - people have to accept they borrowed the money therefore they should have to pay it back
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Anonymous | 6 Jan 2010 4:06 pm
Borrow money then expect to pay it back.
Why has this industry grown which is based on people trying to get out of repaying money that is owed.
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Anonymous | 7 Jan 2010 8:23 am
This is going to leave some brokers with seriously large amounts of egg on their faces and they will lose client relationships and credibility. This could all turn very ugly indeed with lawsuits flying around between debtors, brokers and claims management companies. Well done to those who steered clear of this inevitable mess!
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Anonymous | 7 Jan 2010 9:21 am
Companies setting up to make things even worse for struggling lenders via loopholes is disgraceful - I know of at least one claims firm that was formally lenders! You borrow, you pay back. Simple!
Divine retribution for the greedy.
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Anonymous | 7 Jan 2010 9:37 am
I agree with the above comments entirely. If you borrow money then you should expect to have to pay it back.
My only concern is that these locusts will now move on to another area of financial services to try and exploit.
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Anonymous | 7 Jan 2010 10:01 am
Alot of my friends/colleagues went into "selling" this concept, and from day one I warned them against it. Why should anyone borrow money and then not expect to pay it back???
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Anonymous | 9 Jan 2010 6:36 pm
To the ignorance above. Please don't believe all you read in the newspapers. A section77/78 request may now permit a lender to reconstitute an agreement in order to satisfy the 77/78, but when the case reaches a court room they have no choice but to deliver the original.
If they are unable to, or if the terms and conditions do not adhere to the Consumer Credit Act then they are breaking an act of parliament.
It's hardly surprising that all the national newspaper are so negative in their reporting of this when they rely so heavily on financial institutions for advertising revenue and huge overdrafts.
I'm a broker who has been selling this for the past tweleve months. I use a ccompany that takes claims on a no win no fee basis.
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