SAVE £500 – DON’T TRY TO GET YOUR DEBT WRITTEN OFF
People hoping to get their credit card debts written off have been dealt a blow by the High Court. These are not people who had been mis-sold or misled. They knew what they were taking on and generally could afford the debt. But they were hoping a legal technicality would make the debt unenforceable.
The loophole was simple. The Consumer Credit Act says that a lender must provide a ‘true copy’ of the original credit agreement if the borrower asks for it and must do so within twelve working days. Many banks and other lenders have purged paper from their systems and often do not have a photocopy or an image of the original application on their computer. So, the argument went, they couldn’t provide a ‘true copy’. And if they didn’t do so within 12 days the debt was unenforceable forever.
But His Honour Judge David Waksman disagreed. He ruled that as long as the lender could provide the borrower’s original name and address it could ‘reconstitute’ the credit agreement from its standard terms and conditions as they applied at the time. And even if it couldn’t do that within twelve days, as soon as it did provide the copy then the agreement became enforceable again. Meanwhile the failure to pay could go on the customer’s credit record making future borrowing much more difficult. Three nil to the banks.
Most of the people taking these cases have been encouraged by professional complainers known as ‘claims management companies’. They sprang up originally to help people get compensation after being mis-sold a financial product. They worked on a ‘no win, no fee’ basis – if the client gets nothing they do not get paid. But if the client does get compensation they take a big chunk – up to 40%.
Recently a new sort of outfit has sprung up which charges an upfront flat-rate fee. Many of them also get more if you win. But they still get a significant amount – up to £500 – even if you do not. In other words, whether their clients win or lose they still make a lot of money if enough people sign up hoping to avoid their debts.
Judge Waksman’s ruling means that anyone tempted to spend hundreds of pounds in the hope of getting a debt written off should never even consider it. Even if the case is appealed and his judgment is eventually overturned anyone who wants to escape their debts on a loophole will be able to do the work themselves, for nothing.
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