Section 75 Claim - Consumer Credit Act 1974 (as amended)

[charitynjw]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

The irresistible/unstoppable force paradox, & the CC co atm seem to be the immovable object.

I agree with R0b; one step at a time.

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

Thank you charitynjw and R0b. I will sit on my hands for a bit about this.

I believe I have 6 months to raise any complaint with the FOS from the CC Co. Refusal response; even if this does not consistute a complaint.

And if the FOS really need a complaint; I will make a complaint to the CC Co. when required to enable this to go to the FOS.

About the existing FOS complaint - I am checking with the FOS as to whether I can make more submissions if the ombudsman decides that IT IS a regulated agreement with the AI (as I maintain that the FOS will usually try to do the opposite of what you want; and so I think we are hedged either way here - as the FOS upholding it is not a regulated agreement helps the s 75 claim; if it IS a regulated agreement then onto complaining to the FOS directly about the AI concerning the misrepresentation).

[charitynjw]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

FOS time limits
http://www.financial-ombudsman.org.u...volved_a7.html

The 6 month rule applies from the final response, which itself has to inform you of the FOS 6 month limit.
Otherwise, generally 6 years. (Other rules also apply).

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

FOS time limits
http://www.financial-ombudsman.org.u...volved_a7.html

The 6 month rule applies from the final response, which itself has to inform you of the FOS 6 month limit.
Otherwise, generally 6 years. (Other rules also apply).

Thanks for this.

R0b / Charitynjw: I have today received the Decision by the FOS Ombudsman, in writing by post, concluding the FOS process for the complaint against the AI concerning whether the T&Cs contract is a 'regulated credit agreement' or not.

In summary, the FOS Ombudsman decision is:

- The FOS cannot consider a complaint against the AI
- Ombudsman satisfied that the "agreement" is "not a regulated credit agreement"

Shall I post a redacted version of the decision here? The reasoning is detailed and extensive to follow. However, I am concerned that the reasoning, whilst extensive to justify why the "agreement" is not a "regulated credit agreement" and therefore why the FOS cannot consider a complaint against the AI, that THIS IS NOT THE SAME as an argument as to why one should treat each year of the Programme as a separate 'single item' for s. 75 CCA purposes.

I.e. I am concerned that the Ombudsman decision, whilst solid for the purposes of justifying why it is not a "regulated credit agreement", does not actually help the "single item" argument (re the s. 75 claim and the CC Co.).

[charitynjw]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

Does the FOS letter mention the 6-month limit? (ie is it a final response?)

[R0b]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

If you can post up a redacted copy I will take a look at it.

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

Thanks R0b and Charitynjw. First of all, here is the redacted response from the CC Co. last week, in written letter format, which is a rejection of the Section 75 Claim against the CC Co. I take it to be their "final response" in relation to the s. 75 claim against the CC Co.



[Credit Card Co.]
[Credit Card Co. Address]
[Credit Card Co. Contact Details]

[Date]

Dear Sir

Reference Number: XXXXX
Supplier: AI

We write in relation to your claim made pursuant to section 75 of the Consumer Credit Act 1974 (the “Act”) with [CC Co.], regarding a [Academic Programme] course with [AI] (the “Merchant”)

You entered into a contract on [DATE] with the Merchant for a twenty one month, full time, [Academic Programme].

The total cost of the course was £48,XXX (discounted from £58,XXX), invoiced in two amounts of £19,XXX and £29,XXX for the two academic years.

You state that the Merchant misrepresented the course syllabus through misleading sales material and that they did not comply with the [Regulatory Authority] by providing you with the following:

- Information about the composition of the course, how it would be delivered and the balance between the various elements.
- Information pertaining to the number and type of contact hours.
- Information about the expected workload.
- Details about the general level of experience or status of the staff involved.

As a result of this, you decided not to continue with the course and did not pay for the second academic year.

You have asked [Credit Card Co.] to refund the amount you paid for the first year of the course (£19,XXX) because had you known the true content of the course, you would not have entered into the contract with the Merchant.

As you are aware, in order to claim under the Act, the total purchase price of the goods or services has to be more than £100.00 but not more than £30,000.00. In this instance, the [Academic Programme] you signed up to has a total cost of £48,XXX and therefore falls outside the scope of the Act.

Whilst I understand your comments that you feel your claim should be considered eligible under the Act as you were invoiced for two separate amounts, it’s clear that the [Academic Programme] was sold as a 21 month course and cannot be completed by only paying for and attending one year’s tuition.
We appreciate that this is not the outcome you had hoped for and can only respectfully advise that you either deal directly with [Academic Institution] or seek other legal avenues for a resolution.

Should you require help in the future please do not hesitate to contact us again.

Yours sincerely

[Credit Card Co.]

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

Does the FOS letter mention the 6-month limit? (ie is it a final response?)

Thanks charitynjw. The FOS Decision:

- Is a final decision
- Does not ask me to accept or reject the decision
- I have clarified with the FOS that the reason there is nothing to accept or reject, is because the Decision is that the complaint cannot be dealt with by the FOS
- The FOS cannot deal with the complaint against the AI as it is not a regulated agreement, therefore it is "out of their jurisdiction"
- As such, there is no decision for me to accept or reject; merely the reason why they cannot consider a complaint against the AI
- There is no 6 month time limit or any further avenue concerning the FOS complaint against the AI

[charitynjw]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

Thanks charitynjw. The FOS Decision:

- Is a final decision
- Does not ask me to accept or reject the decision
- I have clarified with the FOS that the reason there is nothing to accept or reject, is because the Decision is that the complaint cannot be dealt with by the FOS
- The FOS cannot deal with the complaint against the AI as it is not a regulated agreement, therefore it is "out of their jurisdiction"
- As such, there is no decision for me to accept or reject; merely the reason why they cannot consider a complaint against the AI
- There is no 6 month time limit or any further avenue concerning the FOS complaint against the AI

Hi dossier

Imho, the point that needs clarification is why it is not a regulated agreement.

Did FOS give you a reason?

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

If you can post up a redacted copy I will take a look at it.

The rules about complaining to the ombudsman set out when we can and cannot look into complaints. In my decision, I have explained what this means for this complaint.

Summary of the complaint

Mrs [X] complains about an agreement she had with AI to pay tuition fees for a programme of study. She believes the agreement is covered by the Consumer Credit Act 1974 (as amended) (‘the Act’).

Background to the complaint

Mrs [X] entered into an agreement with AI to undertake two academic years of study towards an [Academic Programme]. The costs for each academic year were invoiced separately, and provided for payment to be made in instalments (three payments in the first year, and three in the second).

AI has said that Mrs [X] did not successfully complete the minimum programme requirements, and so she was not eligible for the award of degree. This is because AI withdrew Mrs [X] from the programme in the second year after fees had not been paid.

Mrs [X] believes that the AI has certain obligations under the Act, which it has not met. But the AI does not agree. The AI says the agreement it had with Mrs [X] is not regulated by the CCA.

Our investigator also concluded that this was not regulated. He explained that there were two separate agreements, each requiring four or fewer payments to be made within twelve months of the start of the agreement. That meant the agreements were ‘exempt agreements’, and so we could not look into Mrs [X]’s complaint.

Mrs [X] did not agree and so this has come to me to decide.

My findings

The FOS can look into a wide range of complaints about financial businesses, but there are some limits on where we can help. The rules under which we operate say, amongst other things, that we cannot deal with a complaint if the business or the activity complained about is not within our jurisdiction.

Based on everything that I have seen, I do not think that we can take Mrs [X]’s complaint forward. I will explain why. Although the AI is regulated as a business by the FCA, and falls without our compulsory jurisdiction, the arrangement AI had with Mrs [X] was a form of restricted credit. It could only be used to pay for the course Mrs [X] was undertaking. And while our scheme rules say we can look at complaints about lending, they do not include restricted credit that is not a ‘credit-related activity’ (DISP 2.3.1R(4)). The activity here is lending, so I have looked at whether that lending was regulated.

The definition of a ‘regulated credit agreement’ is set out in article 60B of FSMA 2000 (Regulated Activities Order 2001). This is the test of whether certain consumer credit regulated activities are being carried on. But a credit agreement is not a ‘regulated credit agreement’ if it is an ‘exempt agreement’.

Article 60F of the Regulated Activities Order, referred to above (‘RAO’), makes it clear that a credit agreement is an ‘exempt agreement’ if:

• The number of payments to be made by the borrower is not more than twelve;
• Those payments are required to be made within a period of twelve months or less (beginning on the date of the agreement), and
• The credit is provided without interest or other charges.

But for such agreements entered before 18 March 2015, the exemption applies where there are four or fewer payments.

The general T&Cs of the contract between Mrs X and AI make it clear:

“The School may agree separately that the fees that are due in relation to an Academic Year can be paid in instalments. If the School so agrees in relation to an Academic Year’s fees (or any part of them), then the School and the Student liable for those fees will agree separately, in writing, the amount of the fees that is to be deferred and the anticipated schedule of instalments by which the deferred amount is to be paid. As a condition of the School's agreement to such a deferred payment arrangement, the agreed amount for each Academic Year shall be paid in not more than four (4) instalments within a period that does not exceed twelve (12) months beginning with the date of the relevant invoice. The School shall issue a separate invoice and schedule of instalments relating to the fees due in respect of each Academic Year, which shall be evidence of the separate agreement for the payment of that Academic Year’s fees.”

I have seen copies of the sales involves for each academic year. These show the payments were to be made under two separate agreements. Each of the agreements was for a fixed sum (with no interest or charges), of not more than 4 instalments within a twelve month period.

The RAO exemption corresponds to the exemption which is set out in section 16(5)(a) of the CCA and article 3(1)(a) (i) of the Consumer Credit (Exempt Agreements) Order 1989.

So, whether or not the CCA applies to the agreement, I am satisfied that it is not a ‘regulated credit agreement’ under FSMA 2000, because it is an ‘exempt agreement’ under the relevant RAO. This means the FOS does not have the jurisdiction to consider the complaint, although there may be other avenues open to Mrs [X] to have this complaint considered.

My decision

My decision is that the FOS cannot consider Mrs [X]’s complaint against the AI.

Ombudsman

[R0b]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

So the gist of the letter essential says that the FOs believes because of the invoices being paid separately, despite the programme being over a period of 2 years they are two separate agreements and fall outside the remit of the CCA as they are exempt under the exemptions.

That seems clear enough to me. Two separate agreements = two single items = within s.75

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

So the gist of the letter essential says that the FOs believes because of the invoices being paid separately, despite the programme being over a period of 2 years they are two separate agreements and fall outside the remit of the CCA as they are exempt under the exemptions.

That seems clear enough to me. Two separate agreements = two single items = within s.75

Thanks. Let me post a more detailed new message....

- - - Updated - - -

Thank you R0b. It is much appreciated.

Summary of the current situation

(1) FOS: After 3 months from start to finish (April to July), the complaint against the AI has been through an Investigator and Ombudsman and a final decision issued, and is now closed at the FOS end.

(2) CC Co. s.75 team: After 1 month from start to finish (July to July), the s. 75 claim with the CC Co. has been through from start to finish, with a rejection of the s. 75 claim and is effectively a final response from the CC Co. I do not believe a complaint to the CC Co. is necessary for the purposes of taking the issue to the FOS.

(3) There is no interaction with the AI taking place on this matter; the AI consider it closed

I have considered all the options on the next steps, such as:

a) Do nothing at all (or leave it until a later date for now)
b) Give more material to the CC Co. and go through the complaints process
c) Pre-action conduct letter and then county court claim against the CC Co.
d) Pre-action conduct letter and then county court claim against the AI
e) New FOS complaint concerning the CC Co's refusal of the s. 75 claim
f) Try to get some negative press coverage against the CC Co re the s. 75 claim (often used in poorly fitted kitchen claims; usually into national newspapers)

On balance, given the work done, it seems best to move onto the new FOS complaint – i.e. option (e), but not straight away.

An FOS complaint will make this a case of me vs the CC Co. before the FOS; and all contact is with the FOS (I do not need to have any more contact with the CC Co. or AI), which is helpful to keep things simple and straightforward. I can also argue the case with the FOS rather than respond to the ‘tactical games’ of the CC Co.

To succeed at the FOS now requires a "YES" by the FOS to the two questions below:

1) Does the s. 75 "claim relate to any single item to which the supplier has attached a cash price not exceeding £100 or more than £30,000"?

If No, end of the claim. If yes, proceed to the next question:

2) Has the AI misrepresented or breached the contract?

If No, end of the claim. If yes, the claim succeeds and the CC Co. is ordered to pay [question mark what the potential award would be though for misrepresentation by the AI?: Fees paid + 8% penalty upon the CC Co.? Fees paid + 8% penalty + consequential cost of a new academic programme elsewhere?]

So, if YES to both questions -> SUCCESS WITH THE FOS!

The CC Co., to date, has not attempted to touch the issue of misrepresentation by the AI. They have no stated position on the misrepresentation by the AI. The CC Co is relying entirely upon the first question: arguing that the "total purchase price of the goods or services has to be more than £100 but not more than £30,000", even though s. 75 of the CCA 1974 says the "any single item" not "the total purchase price" (the CC Co. keeps referring to the total purchase price, which is not what s. 75 of the CCA 1974 says).

I think we have already done a lot of work on the "single item" issue as far as possible, to put the best possible case to the FOS.

Regardless of the "two separate agreements" decision by the FOS already, I could still see the FOS deciding YES or NO on Question 1 (i.e. the new FOS ombudsman does not feel bound by the previous FOS decision of the separate complaint):

YES - s. 75 CCA 1974 says "any single item to which the supplier has attached a cash price"; there are two academic years; two invoices; two different cash prices (both within £100 - £30k), therefore YES

NO - Mrs X purchased a "Programme" and that "Programme" is the single item purchased; and the cash price of the "Programme" is well in excess of £30k; therefore NO, end of the story

On the second question, If YES to the first question: then onto the FOS tests for misrepresentation, which is set out below from some past FOS cases:

"For a claim for misrepresentation to succeed I have to be satisfied that a false statement of
fact was made, inducing Miss B into making a decision she otherwise would not have made."

"For there to be misrepresentation:

• someone must make a false representation that must be false at the time of the transaction, and remain false;
• the misrepresentation is "material to the transaction," which means it must be about an important element of the transaction at hand;
• the other party must substantially rely on the misrepresentation, meaning if the other party knew the true position, they would not go through with the transaction. If the buyer, for instance, would have bought the item regardless of what was said about it, the misrepresentation may not count. They must substantially rely on the falsehood."

So in order for the outcome to Question 2 to the YES, we need YES to all of the below:

1. False statement of fact was made by the AI

2) This false statement induced Mrs X into making a decision she would not otherwise have made

3) Mrs X substantially relied upon this misrepresentation, and if Mrs X had known the true position, Mrs X would not have proceeded with the transaction (i.e. Mrs X would not have signed up to the AI programme)

Next steps

On balance, I think it would be best to let this rest for several months from now. We have all the material needed on the "single item" point, but the "misrepresentation" point has more scope to substantiated further. In particular, there may be more material coming out of an official investigation by the regulator against the AI, which would be helpful to cite before the FOS at a later date if this becomes public material, as this would provide a more "smoking gun" to point the FOS to on the misrepresentation point, and be from an official regulatory body (i.e. to help support my arguments with independent verification from a regulatory body).

R0b and charitynjw: I hope you will still be both around to pick this topic up next year?

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

So the gist of the letter essential says that the FOs believes because of the invoices being paid separately, despite the programme being over a period of 2 years they are two separate agreements and fall outside the remit of the CCA as they are exempt under the exemptions.

That seems clear enough to me. Two separate agreements = two single items = within s.75

R0b: Is there any merit in raising this as a complaint with the CC Co.? I did ask the CC Co. about their complaints process, and they jumped the gun and told me they would start a complaint, which I found odd, as I had not told them any of the "grounds" of the complaint!

Update: I have submitted a complaint to the CC Co and given them 8 weeks to finalise until mid October.

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

The CC Co. has finalised the complaints process, upheld their position, found no change, and offered nothing at all. This automatically and formally triggers a 6 month window to take this to the Financial Ombudsman Service between now and early next 2017.

[dossier]

Re: Section 75 Claim - Consumer Credit Act 1974 (as amended)

So the gist of the letter essential says that the FOs believes because of the invoices being paid separately, despite the programme being over a period of 2 years they are two separate agreements and fall outside the remit of the CCA as they are exempt under the exemptions.

That seems clear enough to me. Two separate agreements = two single items = within s.75

As the CC Co. has concluded the complaints process and triggered the window to take this to the FOS, the next step would be to take this to the FOS.