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Many firms have sprung up claiming on their websites or in their advertisements to be able to get you out of your credit card or personal loan debt.  How can this be done you may ask? And it may be difficult to discover the true position.   

Much of the hype and information surrounding this issue is incorrect or misleading but it is true that in some cases lenders are unable to issue legal proceedings to recover monies they claim are owed to them. This is because some of their credit agreements lack 'prescribed terms' and are 'irredeemably unenforceable'. Mike has spoken with solicitors and been to the Law Society and can now report the facts as follows:

Background

The Consumer Credit Act 1974 (The Act) was brought in to safeguard the public from unscrupulous lenders. It requires most businesses that offer goods or services on credit or lend money to consumers to be licensed by the Office of Fair Trading. Trading without a licensing arrangement is a criminal offence and can result in a fine and/or imprisonment. 

The Act also requires certain credit and hire arrangements to be set out in a particular way and to contain certain information in order to be enforceable. 

Until 6 April 2008, credit agreements were excluded from control if the amount of credit or hire exceeded £25,000. However, this financial limit was removed for all new credit and hire agreements by the Consumer Credit Act 2006. 

Pre-existing agreements above £25,000 remain outside CCA regulation.

The Act was so worded that if lenders did not comply with the provisions of the Act, they would be unable to enforce repayment of the loan in a court, it was not however, the intention to trip up major banks or credit card companies which may have unintentionally failed to observe all the rules by not containing the prescribed terms, and thereby render their credit agreements unenforceable. 

The current Position 

In such cases where the agreement was signed before 6 April 2007 the lender can apply to a court for an enforcement order. However there are certain circumstances in which the court does not have power or jurisdiction to enforce the agreement. It therefore remains unenforceable and the lender is unable to recover any money, in legal proceedings, from the borrower.