Triumph of common sense – copy of consumer credit agreement

Can debtors avoid paying their debts under the Consumer Credit Act 1974 (“the Act”) if a bank is unable to provide an exact copy of the agreement? 

 Judge David Waksman held that the banks could satisfy its duty sunder s78 by providing a reconstituted version of the executed agreement which may be from sources other than the actual signed agreement itself.

It is estimated that claims management companies have been looking at  thousands of cases in an attempt to exploit s78 of the Act.  S78 imposes an obligation on the bank to provide a copy of the executed agreement under a regulated agreement for running-account credit within 12 days after receiving a request in writing from the debtor and a payment of a fee of £1.

Sometimes the banks were unable to provide an exact copy of the agreement and these claims management companies sought to claim that the debts were not enforceable.  The Judge disagreed although held that the s78 copy must contain the name address of the debtor as it was at the time of the execution of the agreement.  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 executed agreement itself.  If an agreement has been varied by the creditor under a unilateral power of variation, the creditor must still provide a copy of the original agreement, as well as the varied terms.

The Judge also decided that a breach of s78 this does not of itself give rise to an unfair relationship within the meaning of section 140A of the Act thus defeating a significant number of claims.

 This decision is truly a triumph of common sense.  When introduced, the aim of the Act was to release the credit industry from outdated restrictions and allow it to develop a framework to encourage competition whilst at the same time providing consistent and adequate protection for consumers across the whole spectrum of credit transactions.  The attempts by the claims management companies to exploit the provisions of the Act achieved none of these goals.

 This decision is certainly good news for the banks and what with the failure of the OFT in the Supreme Court to challenge bank charges, 2010 will have a more optimistic start.