Effect of unenforceability of regulated consumer credit agreement against debtor on connected agreements between creditor and third party

In this article, Howard Johnson comments on the recent Court of Appeal decision in Conister Trust Limited, John Hardman & Co v McClure Naismith [2008] EWCA Civ 841, where the arrangements built around a conditional fee scheme ran into difficulties involving regulated credit agreements.

Howard Johnson, Bangor Law School

Introduction

In a recent BBC 1 Panorama programme, ‘Can’t Pay, Won’t Pay’ (17 November 2008), a couple claimed to have avoided repayment of some £100,000 worth of debts to creditors largely relying on the lack of enforceability of their regulated consumer credit agreements under the Consumer Credit Act 1974 – though they had proceeded to incur a broadly equivalent amount of debt in legal costs in pursing a claim too far! A new industry of ‘claims handlers’ has emerged promising that they can force credit card companies and banks to wipe out what debtors owe – often based on simple and basic administrative errors by the creditor such as inability to locate a ‘true copy’ of the agreement (see ‘Can you really dodge your debts’, Tony Levene, The Guardian, 29 November 2008 – www.guardian.co.uk/money/2008/no/29/debt-creditcards/print ). It has been asserted that up to one in four of regulated consumer credit agreements contain a flaw which render them ‘improperly executed’ (s65 CCA 1974) and potentially unenforceable by the creditor (s127 CCA 1974). Consumer protection is purchased at the price of considerable complexity in the UK consumer credit regime and has been a fruitful area for exploiting ‘technical infringements’ – particularly in areas where the court had no option but to refuse an ‘enforcement order’ under ss127(3)-(5) CCA 1974 regardless of any actual prejudice suffered by the debtor or surety or culpability by the creditor (eg, failure to give notice of cancellation rights or correctly state all the ‘prescribed terms’– see Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816.)