ARTICLE...
An Impending Judgement
The claims management industry may have swelled in the past 18 months but a slew of high profile cases in recent weeks are now set to shape the sector's future.
One that provided welcome – and therefore rare – news to creditors and debt collectors was McGuffick vs. the Royal Bank of Scotland, which fond in favour of the bank.
Phillip McGuffick sought to declare a £17,000 loan taken out with RBS in 2005 was irredeemably unenforceable under sections 61 and 127 of CCA 1974. This was despite the fact that arrears of £2,078 were outstanding in May 2007.
McGuffick's claim was made on the grounds that the bank's non-compliance with section 77 of the CCA, as the bank had not produced a statement of account within the required deadline, though this was later abandoned by the time of the trial. RBS later provided all the correct information
However, the Royal Courts of Justice found that McGuffick should not stop paying back the loan while the claim is deemed unenforceable because the loan may become enforceable in the future. In short, McGuffick's obligation had not been extinguished.
A spokesperson for RBS explained: "The outcome of this test case confirms the position we have consistently adopted with customers who seek to challenge the validity of their agreements."
The crucial context for the McGuffick case was the issue that redeemable or temporary unenforceability, rather than irredeemable unenforceability, was considered under section of the CCA.
MJP Justice, solicitors for McGuffick, also sought an injunction against RBS to stop it from referring information on his arrears to the credit reference agencies. MJP argued this breached data protection law – although the court did not agree. They ruled that sharing this information was lawful and that RBS should not be prevented from doing so.
Chris Busby, partner at law firm Eversheds, said banks are facing an avalanche of copycat claims on sharing default information. He added: "This ought to stem the tide of these complaints. There are likely to be significant ramifications in relation to legal costs, with lenders seeking to recover costs were claims are abandoned."
This, Busby explained, would likely mean solicitors acting for claimants would now consider discontinuing their claims in light of the ruling.
Consumers will also have to weigh up a high risk attempt to have their debt written off while incurring an adverse credit rating.
Russell Kelsall, associate at law firm Hammonds said: "For customers wishing to protect their position against an adverse credit rating, there seems little option in light of McGuffick but to maintain payments."
So far, all is well for the credit industry. But more would emerge to vindicate common practices by creditors, debt collection agencies and debt purchasers. The case helped to clarify what constitutes enforcement, neither did demanding payment, publishing or threatening to publish his details to third parties, threatening legal proceedings, instructing a third party to collect payment or bringing proceedings.
Busby added: "This judgement will be invaluable to all lenders who are currently dealing with challenge to the enforceability of agreements."
This clarification also had implications for the OFT's drat guidance on sections 77, 78 and 79 of the CCA 1974 – the meaning of enforcement. An OFT spokesperson explained that a consultation on draft guidance for sections 77-79 would occur in November.
However, there are more twists in this particular tale, with more claims cases set to test and stretch the legal precedents in the months and years ahead. Five more cases, set to be held as 'tests' for the industry, are due to come before the high court during the coming months and it is hoped they will clarify several legal points.
One such issues is whether a breach of section 77 of the CCA 1974 can give rise to an unfair relationship, while another deals with failure to produce a true copy of the consumer credit agreement under a request in relation to section 77/78 of the Act. In this instance the quality of the copy is also under consideration.
One of the cases will also consider if a true copy is not provided within 12 working days. Another case will also examine whether the prescribed terms of an agreement can be printed on a separate piece of paper.
Carl Wright, chief executive of Cartel Clent Review, explained: "These cases could lead to momentous decisions. The banks and credit card companies have tried desperately hard to void fighting test cases."
Estimates put the number of claims management firms operating in the UK at around 3,000. the conduct of each one in a rapidly growing industry is under the microscope.
Original article courtesy of Credit Today.
