Unenforceable Credit Agreement | Write Off Debt | Consumer Credit Act 1974

The Rankines had 13 credit cards

As more people find themselves in debt, one couple found loopholes in their credit agreements to avoid paying tens of thousands of pounds. But a High Court judge had the final word.

Amanda and Basil Rankine ran up debts of £120,000 after their mortgage advice business collapsed and they found themselves unable to afford their monthly payments.

Their debts were spread over 13 credit cards, four loans, car finance and an overdraft. They decided to study the Consumer Credit Act and contacted lenders claiming they had found mistakes in their credit agreements.

The Act lays down the rules which companies have to follow when they advertise or sell credit.

"I studied the Act and decided that there were things that didn't match so I put together a bit of a letter to HSBC, thought I had everything correct, and sent it off," Mr Rankine told the BBC's Panorama programme.

"They wrote back, and after a few months said we're prepared to write balance off."

The Rankines, from Rugeley in Staffordshire, looked at all their credit agreements and identified potential loopholes.
These included whether the correct annual percentage rate (APR) was used, whether the forms had actually been signed and if the lenders had kept a copy of the paperwork.

In this way, they managed to have a number of their 13 credit cards and loans written off, to the tune of £37,000, including the sum from HSBC.

Sir Roy Goode, an eminent commercial lawyer who was instrumental in drafting the Act, said the rules relating to credit agreements were "extremely complex".

"So any slip that is made entitles the consumer to refuse to pay unless the court gives leave to enforce the agreement," explained Sir Roy.

Mr Rankine said: "Now more people challenge agreements, and more people will realise%u2026 the law is there so they have a choice. Challenge or repay at their level, or challenge and repay at your level.

The couple decided to take their remaining creditors to court over loopholes they believed they had spotted, and in an attempt to set a legal precedent that may benefit others. But the case was dismissed by a High Court judge, who said the couple were wriggling out of debt.

Despite the judgement, a legal technicality - which meant the lenders could only claim the money back while the court proceedings were going on - meant the couple still managed to get most of their debts frozen.

That took their total debt clearance to £100,000, leaving more than £20,000 outstanding. However, a legal bill of £100,000 left the Rankines back where they started.

They don't accept they lost the case and they say they would prefer to be paying a legal bill than paying a debt they thought was unlawful.

The Rankines did their own work in scrutinising their credit agreements, but a whole industry is emerging online of companies claiming to get debts written off, and securing compensation, by rendering credit agreements unenforceable.

Have you suffered from an Unfair Credit Card or Loan Agreement?

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Debt is a huge problem and is set to worsen. If financial problems are an issue, write off debt as a result of unenforceable credit card agreements.

If a credit card was taken out prior to April 2007 there's a significant chance that it is an unlawful credit card agreement and it is possible to write off the debt. The Consumer Credit Act 1974 has a fundamental requirement that any agreement must comply with certain prescribed terms.

Examples of Unenforceable Credit Card Agreements

The interest has been incorrectly calculated.
The credit charges are not deemed to be fair.
No rate of APR is displayed.
There is no mention of any 'cooling off' period.
Settled Debts Cannot be Successfully Challenged

It is unlikely that settled debts can be recovered. A number of test cases have gone through the courts and none have been successful to date. Credit card debts that have been included in Debt Management Plans can be challenged.

What Happens if the Credit Card Agreement is Lost?

The lender has to send any information it holds on the debtor within a period of 40 days or it has committed a criminal offence. If the lender cannot provide a copy of the actual, signed credit agreement they aren't in a position to enforce the debt as it is an illegal credit card agreement.

Will This Have a Negative Impact on Credit Ratings?

Provided payments are kept up during the legal challenge, no credit rating will be affected. Those who have adverse credit could actually improve their credit rating. This is because the debt was deemed to have never technically existed so no adverse credit entries can be registered for a debt that doesn't exist. These entries can be removed when a case is successful.

How Long Will it be Before the Outcome?

The duration of any case does vary depending upon the institution and complexity of the case. Most cases are usually settled within 3 to 9 months, sometimes a lot sooner.

What Happens if the Unlawful Credit Card Agreement Case is Successful?

If it is decided that there is an illegal credit agreement, it is possible that the entire debt will be written off. This will mean that the balance is completely wiped and the solicitor will be able to advise how to get any adverse credit entries removed in relation to the debt.

What About Credit Card Debt that Cannot be Written Off?

For more recent credit card debts that cannot be written off, it is worthwhile considering a Debt Management Plan or even an Individual Voluntary Arrangement (IVA). It is imperative the serious debt problems are dealt with as efficiently as possible.

Whilst technically possible to handle the case personally, most financial institutions are unlikely to take any case seriously without the threat of legal action. A Solicitor will assess any agreement and put together a breakdown of any transgressions. Should they feel that it is an unenforceable credit card agreements, everything will be handled by them.

The Author is a huge fan of Write Off Debt Under The Consumer Credit Act 1974

Visit www.unfaircreditagreement.org.uk