Around 150,000 people who are currently using solicitors or claim management companies are waiting for a test case in the Manchester High Court to see if they can get any credit cards and personal loans written off through various ‘legal loopholes’.
The case mainly centres on whether consumers should pay their debts if the lender fails to produce an original agreement within a certain time limit of the request.
If the Court finds in favour of consumers, then lenders may be forced to write the debts off.
Chance to make a fast buck?
Seeing an opportunity to make some quick money many firms have sprung up claiming to be able to get consumers out of credit card or personal loan debt commitments. Much of the hype and information surrounding this issue is incorrect or misleading.
There are companies that claim 80% of agreements are unenforceable; they charge consumers up front fees of up to £495 to get rid of their debt, sometimes a percentage of the amount they have 'saved'. Some may also claim to get consumers compensation.
Mis-leading statements
If a firm makes such statements and are unable to provide evidence to justify them, then they could be considered misleading, some examples would be;
Potential outcomes
"We can write off all your outstanding debt, all previous payments could be returned, and you could keep any goods purchased."
Timescales
"We'll get your credit cards written off within 6 weeks!"; "Fast results guaranteed!"
In my view, these companies should not be giving guarantees or making promises to get consumers out of their debt.
While in certain circumstances some agreements may be unenforceable, this is not always the case. If consumers mistakenly believe their agreement is unenforceable and, therefore, stop making repayments then they may be incurring additional default charges and legal costs - and they could damage their credit record for six years.
Lenders also have the right to threaten legal action if a loan is enforceable and the customer refuses to pay up.
OFT speaks out
Recently the Office of Fair Trading showed their hand and their guidance clearly conflicts with some of the claims promoted by claims management companies; it says that it is both legal and acceptable for a bank that has lost the original loan agreement (or whose copy is illegible) to supply an accurate reconstituted version instead in order to demonstrate that the agreement did in fact contain the information specified by the Consumer Credit Act.
The regulator does, however, point out to lenders that they are acting unfairly, and potentially in breach of their consumer credit licenses, if they misled borrowers by:
• Hiding or disguising the fact that there was never a properly signed agreement in the first place
• Providing only a copy of the current terms and conditions, not the original ones
• Failing to preserve data so the borrower cannot be given an up-to-date statement of their account
If you are struggling to repay your debts then think about getting some professional advice on how you can manage the payments. There is no guarantee you will be successful in getting the debts written off and there is also the moral issue of paying back the lender that advanced you the money in good faith.
The outcome of the test case is expected in early next year, some reports indicate 7th January.
Scale of unenforceability market
“80% of credit agreements are unenforceable”; “50 million credit agreements are created every year, at least 25 million are unenforceable”.
