Credit cards 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!
