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Unenforceable Credit Card Agreements? -Write them off!

Whether it’s to spread the cost of an expensive purchase over several months, treat ourselves or to gain points towards a reward item, UK consumers are using credit cards more than ever – and owing close to £180 billion as a result. The balance has historically been heavily weighted in favour of the lenders who have been allowed to increase interest rates at will, charge any amount of fees they choose and increase credit limits without having us sign new agreements. A recent report by the Citizens Advice Bureau ‘Daylight Robbery’ looks at the extent of the problem of ‘extortionate credit’ and has as one of its conclusions:- “This report argues that the existing legislation on extortionate credit is neither effective nor accessible to consumers. The current ‘test’ that determines whether a credit agreement is extortionate is heavily weighted in favour of lenders.

Moreover, the test can only be invoked if a borrower is prepared to risk heavy legal costs in taking the initiative and making an application to the court.” This is no longer the case! You don’t have to risk heavy legal costs in taking the initiative. Its no-win-no-fee! And you certainly won’t have to go to court. Most lenders do not go to court and even if they do your solicitor will attend for you. If your credit card was taken out before 7Th April 2007 it is regulated by the Consumer Credit Act of 1974. This law requires ‘proper execution’ of the finance agreement you signed. It is not properly executed if it does not contain all the prescribed terms and conform to the regulations made under section 60 (1) of the act. It is in breach of the act. There is a long list of prescribed terms and regulations which credit finance agreement must adhere to – see below. Crucially you must have signed a document containing ALL the prescribed terms as described in the 1974 Act. If not your finance agreement is not enforceable without an order of the court and section 127 (3) requires the court to dismiss the application for the enforcement order. It may be considered ‘irredeemably unenforceable’.

The Act was so complex and difficult that many lenders were caught out by its detail or simply chose to ignore the requirements of the law.

The Process

1.You need the account number of the cards you are claiming for. If doesn’t matter if you don’t have the agreement as your claims manager will request this from your lender.

2. Sign a request called a Section 77/78 which gives authority for your claims manager to request the information your lender holds on the account together with your original credit finance agreement.

3. Write a cheque for £10 payable to your lender so that your claims manager can request your credit finance agreement and account file.

4. NOW YOU WAIT! Your lender, under the Data Protection Act has 16 days to comply then is given a seven day warning – then another 28 day warning. In total 51 days! So be patient. At this point some lenders employ ‘dirty tricks’ in an attempt to delay matters. It is important to keep a record of the time scales involved and it may be quicker if YOU also request a copy of the agreement you signed. Keep checking with your claims manager to see if the information they need from your lender has been supplied.

5. When the lender sends back your account details claims manager will then be in a position to ‘audit’ the agreement. Some claims managers use ‘in house’ solicitors belonging to the company; some use a ‘panel’ solicitor who works for several claims companies and some use ‘auditors’ trained in assessing finance agreements. The audit of a credit finance agreement is straightforward. It is checked against a list of prescribed terms and regulations and scores as a ‘breach’ or ‘compliance’. You must have signed an agreement showing for example;-the annual simple and compound interest rates for purchases, balance transfers and cash advances together with the APR. It is not acceptable for these to have been supplied in a separate document. Your audit should show exactly why your agreement is non compliant.

6. If your agreement is unenforceable it will be allocated to a solicitor who will be responsible for your case. If you wish to keep a clean credit history it is best to continue making payments as although the agreement is unenforceable and therefore you cannot be required to make anymore payments, lenders put default marks on your file anyway. Some claims management companies claim to have any adverse credit marks removed and some do not. This is a grey area at the moment and it is important to discuss it with your solicitor first. If you want to keep your credit file clean keep on making your monthly repayments. Although you will possibly not get these back.

7. You sign a ‘conditional fee agreement’ with the solicitor who lodges a breach of the 1974 consumer credit act with your lender and prepares the case for court. You will not pay any costs than the intial fees.

8. It is unlikely that the lender will go to court. You may be made offers of ‘substantial reductions’ such as 60% off your balance. You must inform your solicitor of any correspondence with the lender and take advice. If you do accept an offer without consulting your solicitor and taking his or her advice you will become eligible to pay your solicitors fees. This is because the solicitors’ costs are funded by claiming against your credit card lender. If you receive an offer of a reduction in the balance rest assured it is a matter of time until the lender writes of your debt!

UK Credit Cards

It was announced at the beginning of 2009, that Capital One, one of the UK’s largest credit card providers, will be increasing credit card rates by 14 per cent. The company justified the rate hike in a notice to clients claiming that it’s costing them more money to lend funds due to “changes in the credit environment.” There is certainly a change in the economy that is affecting Brits across the nation. This is a fact that’s difficult to dispute. The changes are hitting households in a variety of ways. British consumers that have found themselves in financial trouble with credit debt are being offered a lifeline.

The UK government has recently intervened on their behalf with some new directives. They have outlined new regulations that give credit cardholders a 30 day grace period to consult with the Citizens Advice Bureau in reference to their money woes. There is an additional 30 day period in which payment demands will remain on hold while consumers attempt to work out repayment plans with creditors.The Citizens Advice Bureau is a charity organization that helps people resolve legal and money problems by providing free, independent and confidential counseling.

The organization has over 3,200 locations throughout the UK. The group also works to influence policymakers concerning consumer issues, debt problems, and other areas of public concern.The government is also forbidding credit card companies from changing their interest rates during the first 12 months of a new customer’s business. This protection has been enacted due to complaints surrounding major increases in interest rates only weeks or months after accepting a promotional offer by a credit card company. This is good news for most credit card consumers. There will probably be far fewer lower introductory offers with rock-bottom interest rates extended to prospective new customers as a result, however.There are signs that we are starting to take notice of the seriousness of the current credit crunch. Research by Abbey credit cards show that more than 50 per cent of those in the UK have cut back on dining out at restaurants and pubs. The survey also reflects a reduction in British carry out trends as well. Many are opting to cook meals at home in an effort to cut back on living costs.

Most credit counselors agree that paying on a credit card for  restaurant meals is not a good financial practice so this is an encouraging trend.According to an Abbey Banking study in October 2008, disposable income has decreased 29 percent compared to two years ago. The study indicated that most Brits are spending about 75 per cent of their cash on “essential” items such as rent or a mortgage, food, and other household bills. Two thirds of UK citizens typically are out of money before payday according to the report. These are some disturbing statistics but are a true reflection of many individuals’ financial situation. This report makes it clear that individuals need to improve in the areas of budgeting and planning.

There are many changes occurring in the present economy. UK citizens are feeling the pressures of the credit crunch along with many other countries throughout the world. There is some amount of hope on the horizon, however, as people in the UK adjust their attitudes and the government reaches out to consumers with new regulations.