Cabot/Mortimer Clarke letter of claim

[amugu]

Hi,
I have read a lot of previous post on this issue and would like some clarification. Received a letter of claim from Mortimer Clarke on behalf of Cabot for a loan taken out in 2006. BOS sold this account to Cabot in 2017. After several emails and denials, BOS has now finally admitted to Cabot that they did not send a default notice to me before terminating the account and selling it on to them. My understanding is that under s87 &88, this prevents them from taking legal action. SO my questions is whether Cabot have the authority to issue a default notice or can they return the account to BOS for them to issue a default? The default was reported to the CRA in 2008 so it is no longer on my file.
Thank you

[echat11]

Hi AMUGU

Welcome to LB

a) First thing to do is to write a complaint to BOS, explain that they added a Default to your Credit File, but failed to send you a Default Notice for the loan account (you have written evidence). Explain that it effected your ability to obtain credit, explain that you seek compensation from because of that. Explain that you are minded to lodge complaints with the ICO and FOS. Follow BOS complaints procedure, it will be on their website. When they send your their final response, if you aren't happy lodge a complaint with the ICO and FOS.

https://www.experian.co.uk/consumer/...20default%20notice,immediately%20to%20avoid%20a%20default.

b) As the account was taken out in 2006 request a copy of your CCA, make sure you get Proof of Postage.

https://legalbeagles.info/library/gu...etter-example/

c) Send them a SAR, make sure you get Proof of Postage.

https://legalbeagles.info/library/gu...ccess-request/

d) I believe they have to issue a Default Notices between within 3 / 6 moths, but it will be in their T's & C's.

[R0b]

SO my questions is whether Cabot have the authority to issue a default notice or can they return the account to BOS for them to issue a default?

Well they can, but legally I do not think it will have any force. If BOS have admitted they terminated without issuing a default notice, then there has been an unlawful termination of the contract by BOS and that is your defence. Once the contract has been terminated, it cannot be revived and thus any default notice would be legally ineffective.

You will need to keep those emails with BOS safeguarded as that will be your evidence to show their admission for failing to file a default notice before terminating. I suggest you prepare a response to Mortimer Clarke and say as much to that effect, putting them on notice and see how they respond. Of course, if they argue a default notice was issue then you know they are lying and they will be digging themselves a hole.

Why don't you post up a draft response and then we can take a look at it with comments.

[amugu]

Hi Rob, thanks for the response. I have done everything you have suggested and kept copies of the correspondence. Regarding the complaint, their final decision was that because it is more than 6 years from when the default was recorded, the time limit has passed. They did not admit to me that no DN was sent but they have told Cabot about that who have in turn written to me to confirm that BOS admits to not sending a DN.

[amugu]

I draft a response and post tomorrow. Thanks

[echat11]

Who said this? 'Regarding the complaint, their final decision was that because it is more than 6 years from when the default was recorded, the time limit has passed.'

[amugu]

This was from the lender - BOS.

[echat11]

This was from the lender - BOS.

I believe the clock starts when you find out, so when did you find out?

[amugu]

I believe the clock starts when you find out, so when did you find out?

Yes you are right, this is the exact quote from the letter they sent in 2019
'The FCA allows us to limit the time you have to make a complaint. In usual circumstances you must raise your concerns with six years from when you took out the loan or if later, three years from when you should have become aware you have reason to complain. As you have raised your complaints outside of these limits, no further review of your concerns will take place,
I am not sure when I first found out but I want to focus on s87 and 88 which now prevents them from bringing a case against me if a default notice was not served.

[amugu]

Well they can, but legally I do not think it will have any force. If BOS have admitted they terminated without issuing a default notice, then there has been an unlawful termination of the contract by BOS and that is your defence. Once the contract has been terminated, it cannot be revived and thus any default notice would be legally ineffective.

You will need to keep those emails with BOS safeguarded as that will be your evidence to show their admission for failing to file a default notice before terminating. I suggest you prepare a response to Mortimer Clarke and say as much to that effect, putting them on notice and see how they respond. Of course, if they argue a default notice was issue then you know they are lying and they will be digging themselves a hole.

Why don't you post up a draft response and then we can take a look at it with comments.

Hi Rob,
This is what I have drafted to be sent to them

This letter is in response to the letter of claims issued on your behalf by MC. In _____ (date), I informed you that BOS did not issue a default notice on this alleged debt. In your letter dated ______ you confirmed that BOS ‘upon further review have concluded that no letters were sent to me’. The issuance of a default notice is a pre-requisite to legal action, without it there would be no "cause for action". Since BOS have admitted to you that it did not serve a default notice on me before terminating the agreement, it could not possibly have met section s87 (need for a default notice) and s88 (contents and effect of a default notice).

In Doyle v PRA Group (UK) Ltd [2019] EWCA Civ 12, the Court of Appeal determined that the need for a default notice was more than a procedural requirement but qualified the creditor’s substantive legal rights. It decided that where a borrower defaults under a regulated credit agreement, the lender’s cause of action to recover a debt becoming due by reason of the default does not accrue until: the lender has served a statutory default notice under section 87(1) of the Consumer Credit Act 1974. The absence therefore of a valid default notice gives the debtor a complete defence.

Secondly, because the agreement has already been terminated without following the relevant procedure, BOS cannot now issue a default notice (not sure how to phrase this)

[R0b]

Yours looks ok and captures the majority but if I would prefer to remove the reference to the Doyle case and keep it tight according to what the Consumer Credit Act says. Also added something on repudiatory breach for wrongful termination but for a repudiatory breach to have occurred you need to have given notice that you accept the breach and treat the contract as terminated - if you fail to do that within a reasonable time of becoming aware of the breach, then you lose the right to terminate, the contract remains alive and you can only claim damages for the breach. If the contract remains alive, strictly speaking, Cabot could then serve a default notice to terminate the agreement.

It's not clear at what point you became aware of the fact BOS did not serve a notice before treating the contract as terminated but if it was recently, then the below point about accepting and treating the contract as terminated is valid because it has only recently been confirmed that BOS did not in fact serve a default notice. If you became aware of this last year, there's a very slim chance (when I mean slim, I really mean no chance) of you being able to rely on treating the contract as terminated by giving notice a year later.

So before you decide to reference any repudiatory breach, you need to be sure of your timelines about when you first became aware BOS did not serve a default notice.

This letter is in response to the letter of claims issued on your behalf by MC. In _____ (date), I informed you that BOS did not issue a default notice on this alleged debt. In your letter dated ______ you confirmed that BOS ‘upon further review have concluded that no letters were sent to me’ prior to the account being terminated and the alleged debt sold on. As you will no doubt be aware, s87(1) of the Consumer Credit Act 1974 requires a default notice to served before the creditor can be entitled to terminate the agreement.

BOS did not serve a default notice before it decided to terminate the agreement and as a result, the agreement was wrongfully terminated by BOS. Wrongful termination amounts to a repudiatory breach. I accept the repudiatory breach by BOS in failing to serve the default notice prior termination of the agreement and therefore treat the contract as terminated, whilst reserving my rights on damages stemming from the breach. Accordingly, your client has no cause of action in respect of the agreement and no right to pursue the alleged debt it is claiming to be owed.

I require you to confirm by return that no further action will be taken by your client in respect of this agreement. If, however, your client continues to pursue this matter, I will consider such action as form of harassment contrary to section 1 of the Protection from Harassment Act 1997 and will counterclaim for damages together with any damages arising from the repudiatory breach by BOS, which now falls to your client as the creditor having purchased the rights to the agreement.

Edit: Thinking about it, you could probably expand on the above with reference to the FCA Handbook and particularly the CONC Rules. Pretty sure in there it says the creditor must not continue to make demands if the debt is disputed without providing a clear justification why it does not believe the disputes raised by the customer are valid. I'll try to add something later and update the above.

[amugu]

Yours looks ok and captures the majority but if I would prefer to remove the reference to the Doyle case and keep it tight according to what the Consumer Credit Act says. Also added something on repudiatory breach for wrongful termination but for a repudiatory breach to have occurred you need to have given notice that you accept the breach and treat the contract as terminated - if you fail to do that within a reasonable time of becoming aware of the breach, then you lose the right to terminate, the contract remains alive and you can only claim damages for the breach. If the contract remains alive, strictly speaking, Cabot could then serve a default notice to terminate the agreement.

It's not clear at what point you became aware of the fact BOS did not serve a notice before treating the contract as terminated but if it was recently, then the below point about accepting and treating the contract as terminated is valid because it has only recently been confirmed that BOS did not in fact serve a default notice. If you became aware of this last year, there's a very slim chance (when I mean slim, I really mean no chance) of you being able to rely on treating the contract as terminated by giving notice a year later.

So before you decide to reference any repudiatory breach, you need to be sure of your timelines about when you first became aware BOS did not serve a default notice.



Edit: Thinking about it, you could probably expand on the above with reference to the FCA Handbook and particularly the CONC Rules. Pretty sure in there it says the creditor must not continue to make demands if the debt is disputed without providing a clear justification why it does not believe the disputes raised by the customer are valid. I'll try to add something later and update the above.

Thank you very much for this excellent contribution. Cabot informed me about the lack of a DN almost three years ago and therefore as you said, I have lost the right to terminate. I will also remove the repudiatory breach because of that too. On what legal basis will Cabot have to able to claim that the contract remains alive?
I will at including something from the FCA handbook
Thank you

[R0b]

On second thoughts, scrap what I said previously I think I may have rushed out my response and it may be that you could still reserve the repudiatory breach argument so it might still be valid. I'll have a think and get back to you later today

[amugu]

SO just a bit more information
Loan taken out in 2006 for for 4 years. Paid full amount for two years until 2008. Encountered financial difficulties so paid a reduced amount about 20% of original from 2008 to 2018(9 years). No payment made since 1/2/18 (5 years). Based on my calculations, original amount paid off plus part of the interest which was at 6.5%.
The FCA guidance states that a DN should be issued when one has missed or paid less than the full amount for 3-6 months. 1) Is there a maximum time limit because they have had about 15 years to do that? In fact they registered it as defaulted with CRA's in 2008.
2) Am I correct in thinking that in selling the account, they have technically terminated the agreement?

[R0b]

Well, now you've supplied some further information, that could change things as to your rights and any defence you may have.

First of all, selling the account does not automatically terminate the agreement. Transferring agreements from one party to another is common practice and perfectly legal and valid. There are two ways which an agreement can be transferred - called assignment whereby the third party takes on the rights but not the liabilities of the contract which remain with the incumbent or novation where both the rights and liabilities transfer to the third party. The agreement will only terminate if the terminating party indicates as much either through words or actions.

I think this is where you need to be careful and ensure you fully understand what has actually been said by Mortimer Clarke or Cabot. If the correspondence suggests that BOS did not send a DN, you cannot imply that the agreement was terminated, they simply didn't send one but that can be rectified by Cabot by issuing a DN. If there are clear words that BOS did not serve the DN before they terminated the agreement, then you could imply from those words they BOS treated the contract as terminated and then decided to sell the account on albeit the agreement was wrongfully terminated and you have a defence.

As to your point about the default date, unless the default is still registered with credit reference agencies, there is absolutely no point arguing about the date on which the default should have been registered because it only sits on your credit file for 6 years.

The current situation could be viewed in multiple ways. For example:

1. If BOS treated the agreement as terminated without serving the DN and you continued to make payments following termination on the honest belief that BOS were entitled to receive them but have only become aware after the fact that the DN was not actually served. You could argue there was a misrepresentation by BOS by suggesting they were entitled to the amounts when in fact they weren't because they wrongfully terminated the agreement and all those payments made after the termination date should be returned to you on a restitutionary basis. For that you would need to bring a claim against BOS and any claim brought by Cabot against you would be defended on the basis of wrongful termination and Cabot cannot benefit from a creditor's breach i.e. BOS' wrongful termination.

2. If there's no evidence of BOS claiming the agreement to be terminated and no DN served, Cabot could remedy this issue as I described above and then failure to pay the amounts owed would entitle them to full payment of the debt under the agreement. In your defence, you argue that Cabot, through their words and actions i.e. by sending the letter before claim and presumably seeking the full debt amount owed together with whatever interest amount has been calculated, are treating the agreement as terminated because creditors are only allowed to claim an accelerated amount e.g. the full debt that is owed only if the agreement is terminated. As such, under the principles of estoppel (suggest you look this up if you don't know what it is), they are prevented from claiming that the agreement was never terminated otherwise why else would they have brought a claim for the full debt amount? They would only be entitled to the outstanding debt that you have part-paid potentially with interest on top of that at the given contractual rate calculated up to the date of the wrongful termination. That would be at the earliest when BOS determined the date that contract was terminated or worst case, the date when Cabot purchased the debt.

It's possible other scenarios may come up that I've not specifically thought about but those are the two scenarios that immediately spring to mind. Whatever the case, if you plan on defending this then it would be sensible to go in with a well-worded robust response it may put you in good standing but how you respond depends on how you interpret what MC/Cabot have said to you about the DN. It may also be a sensible option to make a subject access request to BOS and see what information they hold about you including your account notes, payment history etc.

Also, just to be clear these are also not your only defences to the claim which we can look at should Cabot decide to issue a claim.