Court of Appeal delivers blow to banking industry with default ruling

[Legal Beagles]

Explicit guidance given on unenforceable credit agreements The Court of Appeal has ruled that banks cannot impose a default on a person’s credit file if the credit agreement in question has already been judged unenforceable. The appeal decision stems from an earlier ruling in Grace & Anor v Blackhorse, in which District Judge Newman ruled […]

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[Amethyst]

Re: Court of Appeal delivers blow to banking industry with default ruling

Paul Tilley, a litigation executive and specialist in consumer credit law at QualitySolicitors Howlett Clarke, commented: "It was our view that the recording of a default in circumstances where the underlying agreement was unenforceable was not accurate and therefore contrary to principle 4 of the Data Protection Act 1998."


He continued: "This judgment could easily be overlooked, as I'm sure the banking world will be hoping. However, this case has given explicit guidance to the banking industry on an important issue and sends out a clear message that where a credit agreement is found to be unenforceable or where the parties accept the agreement is unenforceable, the creditor should not seek to argue that the debtor is a defaulter and record a default on the debtors credit file.

"This ruling may also open the door to challenge defaults recorded under credit agreements which are subject to temporary unenforceability such as through a failure to comply with section 78 Consumer Credit Act 1974."

[Sparkie1723]

Re: Court of Appeal delivers blow to banking industry with default ruling

Paul Tilley, a litigation executive and specialist in consumer credit law at QualitySolicitors Howlett Clarke, commented: "It was our view that the recording of a default in circumstances where the underlying agreement was unenforceable was not accurate and therefore contrary to principle 4 of the Data Protection Act 1998."


He continued: "This judgment could easily be overlooked, as I'm sure the banking world will be hoping. However, this case has given explicit guidance to the banking industry on an important issue and sends out a clear message that where a credit agreement is found to be unenforceable or where the parties accept the agreement is unenforceable, the creditor should not seek to argue that the debtor is a defaulter and record a default on the debtors credit file.

"This ruling may also open the door to challenge defaults recorded under credit agreements which are subject to temporary unenforceability such as through a failure to comply with section 78 Consumer Credit Act 1974."

Just added this Amethyst hope ypu don't mind.
Sparkie

http://www.solicitorsjournal.com/new...default-ruling

[stevemLS]

Re: Court of Appeal delivers blow to banking industry with default ruling

As I read the judgment, it hinged on the inability of CRAs to record that the default was in relation to a credit agreement that had been found to be unenforceable (para 44) so if the CRA were to alter its systems to allow for that fact to be registered, such defaults again become registrable.

The court expressly refused to deal with the question of temporary unenforceability (para 43) so I don't understand why Paul Tilley has reached a conclusion on that element.

[PAWS]

Re: Court of Appeal delivers blow to banking industry with default ruling

Fantastic result.:rockon:

This bit really made my blood boil!

Unbeknown to Grace, Blackhorse not only recorded a defaulton his credit file, but also added their costs of the failed court action onto what had already been found to be an unenforceable debt.

The arrogance!

[Sparkie1723]

Re: Court of Appeal delivers blow to banking industry with default ruling

What has to be considered is that fact that if an agreement is temporay unenforceable it should not be entered on a persons credit file until it is declared by a Court that it is enforecable/it is simple to me .but then I have a simple mind not a legal one.

Sparkie

[Sparkie1723]

Re: Court of Appeal delivers blow to banking industry with default ruling

Fantastic result.:rockon:

This bit really made my blood boil!

The arrogance!

The other thing is PAWS is that they also added costs that had been awarded to me and still not paid...... to the original amount....it was only £50 ....but £50 plus contractual interest compounded from 2000 until now is over £1000
Sparkie

[PAWS]

Re: Court of Appeal delivers blow to banking industry with default ruling

The other thing is PAWS is that they also added costs that had been awarded to me and still not paid...... to the original amount....it was only £50 ....but £50 plus contractual interest compounded from 2000 until now is over £1000
Sparkie

Cheating B’s. You can see why I want the FCA to look into the fact that these bankers (feel free to use rhyming slang) can get a credit licence when they have a string of unsatisfied CCJs and refuse to pay what they owe!:rant:

[pt2537]

Re: Court of Appeal delivers blow to banking industry with default ruling

Its straight forward really, the Court of Appeal took the view that the issue relating to recording of defaults in circumstances where the agreement was unenforceable due to s78 for example was still open to challenge under principle 4 DPA 1998, no where in McGuffick was the question posed as to whether it was accurate as opposed to "enforcement, to call a debtor a defaulter under an unenforceable agreement.

So, the principle applies equally to both, so in my view the door is open to challenge, indeed the Court said as much.[

You wanted an answer why i took that view, well there it is

As I read the judgment, it hinged on the inability of CRAs to record that the default was in relation to a credit agreement that had been found to be unenforceable (para 44) so if the CRA were to alter its systems to allow for that fact to be registered, such defaults again become registrable.

The court expressly refused to deal with the question of temporary unenforceability (para 43) so I don't understand why Paul Tilley has reached a conclusion on that element.

[Sparkie1723]

Re: Court of Appeal delivers blow to banking industry with default ruling

I,ve had this on file for a few years now ....sort of backs up our Ruling and Richard Durkins

http://www.theguardian.com/money/200....jobsandmoney1


It was this little bit I'm referring to......the CRA data must be accurate and factual ( 4th Principle again)

"The judge's conclusion seemed to be based on the agencies doing no more than providing accurate, factual information which may be no more than a minimal interference with anybody's rights".

[Guest]

Re: Court of Appeal delivers blow to banking industry with default ruling

I think much will depend on how the argument is presented. In Mcguffic the matter of irredeemable unenforceablity under section 127 was not addressed, the mechanism of the unenforceablty on an improperly executed agreement is fundamentally different, so if the two kinds of unenforceablty are to be likened in this respect i think that the case must fail.

However if the argument turns on the question of, is it accurate to record a default when the debtor does not have to pay.

Is it more of a breach of data principles to allow a default to be recorded on a irredeemably enforceable agreement than it is on a an agreement which is only temporarily so, I think that is the question the court will have to answer it will be interesting.

[Sparkie1723]

Re: Court of Appeal delivers blow to banking industry with default ruling

The Court ruled that if information about an an " unenforecable" is to be recorded the Lender and the CRA's must record that the information is in relation to an Unenforceable agreement and must have the facility in place to do so .... .........ie record it accurately........if they can't or don't......they must remove the entry..........the ruling affects both lenders and the CRA's.

Just my dumb opinion of course

Sparkie

[Sparkie1723]

Re: Court of Appeal delivers blow to banking industry with default ruling

Another off shoot to all this could be ...assignments /sales of agreements by lenders to DCA's such as Cabot or Marlin come into question.........I believe that lenders are going to have to ensure that any agreement they sell is enforceable .............or they could be open to selling worthless loans to DCA's ...if any are unenforceable then that could be construed as fraud by misrepresentation ..............I KNOW I'm Ruddy rambling again
I just think ouir ruling has caused/will cause havoc in the credit industry when the dust has settled

Sparkie

[PAWS]

Re: Court of Appeal delivers blow to banking industry with default ruling

The Court ruled that if information about an an " unenforecable" is to be recorded the Lender and the CRA's must record that the information is in relation to an Unenforceable agreement and must have the facility in place to do so .... .........ie record it accurately........if they can't or don't......they must remove the entry..........the ruling affects both lenders and the CRA's.

If a credit record highlights or in any way indicates that aparticular agreement was deemed unenforceable and future creditors see that then I think that would be a ‘blacker’ mark than a default or even a CCJ. It should be removed but it is tricky because, as pointed out already, the bank/DCA could argue that the fact that an agreement is unenforceable doesn’t mean it did not exist.

Another off shoot to all this could be ...assignments /sales of agreements by lenders to DCA's such as Cabot or Marlin come into question.........I believe that lenders are going to have to ensure that any agreement they sell is enforceable .............or they could be open to selling worthless loans to DCA's ...if any are unenforceable then that could be construed as fraud by misrepresentation

I have no technical legal knowledge but to sell anything that is not fit for purpose (i.e. a debt that cannot be collected) has got to be an issue! Personally I believe that selling debt is an abominable practice and like most people I have no sympathy for a DCA that gets burned.

[Sparkie1723]

Re: Court of Appeal delivers blow to banking industry with default ruling

If an agreement is unenforceable .........that is not the fault of the debtor ......its the lenders fault...for not making sure the paperwork was correct...................the debtor should not be burdened with a mark on their credit file.
Like you PAWS I have no legal knowledge................just work on logic and post only as I see it which more often than not wrong in law.....but right in principle

Sparkie