Press releases 2010 – Consumers warned on 'unenforceable debt' claims
The OFT is warning consumers that businesses that claim to be able to use sections 77/78/79 of the Consumer Credit Act 1974 to wipe out their debts are misleading them.
The OFT has today published a guide on the rights consumers have to request information under these sections of the Act. This explains that for a fee of £1 consumers can request a copy of their credit or hire agreement and information on their account so that they can find out:
• what was originally agreed
• what the agreement is now (if it has changed)
• how much is still owed.
If the lender fails to provide the requested information the agreement becomes ‘unenforceable’ which means the lender cannot get a court judgment against the borrower, take back hired items or items bought on credit, or take anything used as security (like a car) when the agreement was made.
However, the guide warns that, even if a credit or hire agreement becomes ‘unenforceable’, consumers would still owe any outstanding money to the lender, interest could be added to their loan or hire agreement, default charges could be made, and any failure to pay could impact on their credit record. The guide also explains that the debt is enforceable again as soon as the lender provides this information.
Ray Watson, Director of the OFT’s Consumer Credit Group, said:
‘Consumers have a right to information on debts they owe, but it is important that they realise that these sections of the Act cannot be used to write off legitimately owed debts.
‘Although the debt can be classified as unenforceable until the right paperwork is provided, people are encouraged to seek advice and help on how they can continue to repay the money they owe. Consumers can get free advice on debt by contacting Citizens Advice or the Consumer Credit Counselling Service.’
1. See guidance for consumers and a separate guide for the credit lending sector on the unenforceable credit agreements page.
2. The guidance incorporates the findings of recent High Court cases. Sections 77-79 of the Consumer Credit Act 1974 (the CCA) allow a consumer to request (amongst other things) a ‘true copy’ of his/her agreement. The High Court ruled that a true copy does not have to be a photocopy or an exact copy of the original. The lender is allowed to provide a reconstituted agreement, as long as that version is accurate and contains all the original information apart from the few exceptions that the law allows (which include the signature, signature box and date of signature). The judgment in Carey v HSBC Bank Plc  EWHC 3417 can be found on the Judiciary of England and Wales website.
3. At the beginning of this year, the OFT prepared and consulted on draft guidance, after it became clear that there were a number of misunderstandings about lenders’ obligations under Sections 77-79 of the CCA, and the impact on the enforceability of debts. Today’s final guidance clarifies the OFT’s position.
4. Under the CCA, businesses that offer goods or services on credit or lend money or are involved in activities relating to credit or hire must be licensed by the OFT. The OFT has a duty to protect the interests of consumers by monitoring the fitness of those holding or applying for licences.
5. Consumer can find general information about debt management from www.directgov.uk