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Would you credit it?

By J

Some of you might have seen in the news recently some rather confused reports that HHJ Halbert at Chester County Court was dealing with various attempts by people to write off debts owed under credit agreements, see, for example, this from the BBC or this from the MoJ.

We here at NL were not too sure what to make of these reports but, thanks to our friends at Garden Court North, we’ve managed to shed some light on matters.

HHJ Halbert has given judgment in a case called Southern Pacific Personal Loans Ltd v Walker (12 March 2009, Chester County Court) and has determined that Southern Pacific (“SP”) cannot enforce a particular loan against Mr & Mrs Walker. The reasoning is, one imagines, of general application to SP loans.

The case will be heard in the Court of Appeal shortly and therefore I’m only going to summarise the case so far.

The Consumer Credit Act 1974 sets down various conditions which must be fulfilled in order for a “regulated agreement” (one to which the 1974 Act applies) to be enforced. Since April 2007, an improperly executed agreement can be enforced with the leave of the court. In respect of any loans granted prior to April 2007, an improperly executed agreement was not capable of being enforced against the borrower.

The conditions include inter alia stating the full amount of the credit.

In Walker, SP loaned £17,500, to which was added £875 “broker fee”, giving a “total amount financed” of £18,375, on which interest was charged. The loan documentation referred only to £17,500 as the “amount of the credit”. Hence, it was argued on behalf of Mr & Mrs Walker that the full amount of the credit was not correctly stated and, hence, the loan was unenforceable.

HHJ Halbert accepted this argument, with the result that, unless the Court of Appeal decide differently, Mr & Mrs Walker would appear to be in the clear.

Of course, the importance of the case isn’t just that it relates to Mr & Mrs Walker but is likely to significantly affect most SP 1974 Act loans, and, one suspects, the loans granted by many other such lenders.

[Edit 12/11/2009 – judgment reversed in the Court of Appeal. See here.]

(with thanks to Andrew Byles at Garden Court North and Jonathon Davidson at Jackson and Canter solicitors).

J is a barrister. He considers housing law to be the single greatest kind of law known to humankind and finds it very odd that so few people share this view.


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