An Invalid Default Notice?

[whizzkid001]

I have a secured loan which was taken out in December last year. I have recently accrued several months of arrears and have recently been sent a default notice. Have now scrutinised the DN at some length and believe it is faulty on no less than 4 counts:

1. the Default Notice is dated 23 October, the envelope postmarked 26 October and was received on 28 October. It stipulated that we had to remedy the default by 9 November. With receipt on 28 October, this left us with only 12 days to remedy the breach - not the 14 clear days as strictly required be given by the Consumer Credit (Enforcement, Default and Termination Notices) Regulations, 1983;
2. the amount quoted to repay to remedy the breach is incorrectly shown as £939.60. This total arrears figure did not account for, and preclude, the £100.00 that was paid to them via debit card prior to the receipt of the Default Notice. Notice's under the Consumer Credit Act 1974 must follow a certain format. In particular, if the amount claimed by a credit provider is more than is necessary to remedy the breach, the default notice is defective and invalid;
3. (a) the lettering in the statement shall be afforded more prominence (whether by capital letters, underlining, large or bold print or otherwise) than any other lettering in the notice; and (b) where words are both shown in capital letters and underlined in any statement specified in a Schedule to these Regulations, they shall be afforded yet more prominence. Their Notice fails to give more prominence to the words underlined. This is the correct format below:

“IF THE ACTION REQUIRED BY THIS NOTICE IS TAKEN BEFORE THE DATE SHOWN NO FURTHER ENFORCEMENT ACTION WILL BE TAKEN IN RESPECT OF THE BREACH”

“IF YOU DO NOT TAKE THE ACTION REQUIRED BY THIS NOTICE BEFORE THE DATE SHOWN THEN THE FURTHER ACTION SET OUT BELOW MAY BE TAKEN AGAINST YOU"

This is what they have actually put:

“IF THE ACTION REQUIRED BY THIS NOTICE IS TAKEN BEFORE THE DATE SHOWN NO FURTHER ENFORCEMENT ACTION WILL BE TAKEN IN RESPECT OF THE BREACH”

“IF YOU DO NOT TAKE THE ACTION REQUIRED BY THIS NOTICE BEFORE THE DATE SHOWN THEN THE FURTHER ACTION SET OUT BELOW MAY BE TAKEN AGAINST YOU

4. the default notice completely omits the address of the creditor, as required under the prescribed terms;

What are my options in this situation? I would also add that they failed to send me an arrears information sheet each time they notified me of my arrears, which they were required to do.

[Guest]

Re: An Invalid Default Notice?

Your major concern should be the arrears and the fact that in order to enjoy the money forwarded under the loan, you allowed a charge to be placed against some security you hold, probably your house.

Instead of arguing over a few upside-down full stops and whether or not bold and underline should have been used instead of just underline, why not spend time ensuring that they do not move to repossess the security they hold against your performance of your obligations under the loan agreement?

As to your point 2, I presume you paid £100 after 23 October, or at least it was credited to your account following the creation of the default notice and in which case, I fail to see how you expect the lender to be able to amend documents after they have been printed and posted and I rather suspect a court would agree.

Whether or not this particular default notice is fully compliant with the prescribed terms, the lender holds security for the sum lent and they are not going to simply give up because you picked faults with their letter to you. You will still owe the money and they will still be able to exercise their rights in respect of that security.

Therefore, in practical terms, your options are limited to repaying the arrears and sticking to the contract and perhaps reclaiming any unlawful charges they may have levied. Certainly you will not be absolved of any responsibility toward any money owing under the contract.

[whizzkid001]

Re: An Invalid Default Notice?

Your major concern should be the arrears and the fact that in order to enjoy the money forwarded under the loan, you allowed a charge to be placed against some security you hold, probably your house.

Instead of arguing over a few upside-down full stops and whether or not bold and underline should have been used instead of just underline, why not spend time ensuring that they do not move to repossess the security they hold against your performance of your obligations under the loan agreement?

As to your point 2, I presume you paid £100 after 23 October, or at least it was credited to your account following the creation of the default notice and in which case, I fail to see how you expect the lender to be able to amend documents after they have been printed and posted and I rather suspect a court would agree.

Whether or not this particular default notice is fully compliant with the prescribed terms, the lender holds security for the sum lent and they are not going to simply give up because you picked faults with their letter to you. You will still owe the money and they will still be able to exercise their rights in respect of that security.

Therefore, in practical terms, your options are limited to repaying the arrears and sticking to the contract and perhaps reclaiming any unlawful charges they may have levied. Certainly you will not be absolved of any responsibility toward any money owing under the contract.

Not quite sure of your analogy that this is just a case of a few upside-down full stops - they were just a few extra minor faulty issues with the notice, the main one being that I was not given the 14 statutory days in which to pay the arrears off.

Default Notices are covered by the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983. They must take a precise form as laid down by these regulations. A DN which doesn't is invalid. Where a DN is invalid and then the account is then terminated, the creditor loses the legal right to the capital sum as they terminated the account without giving the debtor an opportunity to mend the breach that led to the default in the first place. All they can claim is any arrears that arose whilst the agreement was current. Where a DN is valid ie drawn up properly in accordance with the Regulations, then the creditor can claim the whole balance of the account if the breach that caused the default was not remedied by the given date on the DN.

The failure of a Default Notice to be accurate not only invalidates the Default Notice (Woodchester Lease Management Services Ltd v Swain and Co - [2001] GCCR 2255) but is an unlawful rescission of contract which would not only prevent the Court enforcing any alleged debt, but give me a counter claim for damages (Kpohraror v Woolwich Building Society [1996] 4 All ER 119).

Any other views on this?

[Curlyben]

Re: An Invalid Default Notice?

Feel free to contest these EXTREMELY minor technicalities in court, but you WILL be struck out faster than you could imagine.

What date was this agreement drawn up ?
------------------------------- merged -------------------------------
Additional.

1. the Default Notice is dated 23 October, the envelope postmarked 26 October and was received on 28 October. It stipulated that we had to remedy the default by 9 November. With receipt on 28 October, this left us with only 12 days to remedy the breach - not the 14 clear days as strictly required be given by the Consumer Credit (Enforcement, Default and Termination Notices) Regulations, 1983;the argument is 14 days from the DATE OF THE LETTER not from date of receipt.
   
2. the amount quoted to repay to remedy the breach is incorrectly shown as £939.60. This total arrears figure did not account for, and preclude, the £100.00 that was paid to them via debit card prior to the receipt of the Default Notice. Notice's under the Consumer Credit Act 1974 must follow a certain format. In particular, if the amount claimed by a credit provider is more than is necessary to remedy the breach, the default notice is defective and invalid;When was this paid ? Obviously, if it arrived on your account on or after the 23rd then it wouldn't be included in this amount at all, can take upto FIVE working days for payments to be credited to accounts.
   
3. (a) the lettering in the statement shall be afforded more prominence (whether by capital letters, underlining, large or bold print or otherwise) than any other lettering in the notice; and (b) where words are both shown in capital letters and underlined in any statement specified in a Schedule to these Regulations, they shall be afforded yet more prominence. Their Notice fails to give more prominence to the words underlined. This is the correct format below: *COUGH* What they have written complies with SI 1983/1561 in content. There is NO stipulation for further highlighting, either bold or underline.
4. the default notice completely omits the address of the creditor, as required under the prescribed term.s I assume that this is a business letter and as such this information would actually be on it, either in the address or the footer.
   

You are basically clutching at straws here.
Remember this is a SECURED loan and as such the creditor has the option of REPOSSESSION !!!

Time to contact the creditor and sort things out.

[whizzkid001]

Re: An Invalid Default Notice?

Feel free to contest these EXTREMELY minor technicalities in court, but you WILL be struck out faster than you could imagine.

What date was this agreement drawn up ?
------------------------------- merged -------------------------------
Additional.

You are basically clutching at straws here.
Remember this is a SECURED loan and as such the creditor has the option of REPOSSESSION !!!

Time to contact the creditor and sort things out.

December, 2008

[Curlyben]

Re: An Invalid Default Notice?

In which case you are governed by CCA 2006 and the changes that entails.
The main one concerns unenforceability with the repeal of s127(3).

CALL THEM NOW !!!

[whizzkid001]

Re: An Invalid Default Notice?

Feel free to contest these EXTREMELY minor technicalities in court, but you WILL be struck out faster than you could imagine.

What date was this agreement drawn up ?
------------------------------- merged -------------------------------
Additional.

You are basically clutching at straws here.
Remember this is a SECURED loan and as such the creditor has the option of REPOSSESSION !!!

Time to contact the creditor and sort things out

1. the Default Notice is dated 23 October, the envelope postmarked 26 October and was received on 28 October. It stipulated that we had to remedy the default by 9 November. With receipt on 28 October, this left us with only 12 days to remedy the breach - not the 14 clear days as strictly required be given by the Consumer Credit (Enforcement, Default and Termination Notices) Regulations, 1983;the argument is 14 days from the DATE OF THE LETTER not from date of receipt.
   
2. the amount quoted to repay to remedy the breach is incorrectly shown as £939.60. This total arrears figure did not account for, and preclude, the £100.00 that was paid to them via debit card prior to the receipt of the Default Notice. Notice's under the Consumer Credit Act 1974 must follow a certain format. In particular, if the amount claimed by a credit provider is more than is necessary to remedy the breach, the default notice is defective and invalid;When was this paid ? Obviously, if it arrived on your account on or after the 23rd then it wouldn't be included in this amount at all, can take upto FIVE working days for payments to be credited to accounts.
   
3. (a) the lettering in the statement shall be afforded more prominence (whether by capital letters, underlining, large or bold print or otherwise) than any other lettering in the notice; and (b) where words are both shown in capital letters and underlined in any statement specified in a Schedule to these Regulations, they shall be afforded yet more prominence. Their Notice fails to give more prominence to the words underlined. This is the correct format below: *COUGH* What they have written complies with SI 1983/1561 in content. There is NO stipulation for further highlighting, either bold or underline.
4. the default notice completely omits the address of the creditor, as required under the prescribed term.s I assume that this is a business letter and as such this information would actually be on it, either in the address or the footer.

1. I believe you are wrong on the service, it's 14 days from receipt, not the date on the notice. If that were not the case, a default notice might well have a date on it, but not be posted for let's say 7 days - if you are correct, then you would only have received 7 days notice, not the 14 as clearly prescribed. It is counted from the date received.
3. as I paid via debit card, they had confirmed that the payment went through and would have been credited immediately. Also, they have had sufficient time since to send an amended Default notice with the correct figure shown
4. There is NO company address anywhere on the notice - header or footer.

[Curlyben]

Re: An Invalid Default Notice?

1. Honestly, you are whining about TWO days.
3. Doesn't work like that at all. It takes 3-5 working days for payments to be processed unless it's in CASH over the counter. Who's to say there isn't an amended DN winging it's way to you as we speak..
4. Fair enough.

BIG QUESTION: What EXACTLY are you attempting to achieve with this attempt to challenge this DN ?!
Think very carefully before answering that one.

[Amy]

Re: An Invalid Default Notice?

If you’ve got the money, then pay off the arrears.

If you don’t have the money to pay the arrears then what difference does it make whether they gave you a month, 14 days or 5 days notice?

[whizzkid001]

Re: An Invalid Default Notice?

1. Honestly, you are whining about TWO days.
3. Doesn't work like that at all. It takes 3-5 working days for payments to be processed unless it's in CASH over the counter. Who's to say there isn't an amended DN winging it's way to you as we speak..
4. Fair enough.

BIG QUESTION: What EXACTLY are you attempting to achieve with this attempt to challenge this DN ?!
Think very carefully before answering that one.

The situation is this: a few weeks back, they wrote to me as I had been a few months in arrears. at this point, they said to contact them within 7 days with a proposal to repay, otherwise they will send me a default notice. I duly contact them just 3 days later to make a decent proposal to pay, but they totally ignore me and tell me 'it's too late, the default notice is already on it's way to you'!! Excuse me?? That was utterly outrageous behaviour to take, particularly not even allowing me the full 7 days I had been given and then, not even wanting to listen to my proposals to repay (sure a judge would like that one).

Ok, so they hurry out this default notice - faulty for all the reasons I specified, and hardly surprising given their seemingly rash desire to default me and totally ignore the repayment proposal I had.

So, having spoken on another forum about the issue of faulty default notices, I am advised as follows:

For a Creditor to be entitled to terminate a regulated Credit Agreement where there is a breach, demand repayment in full or take any legal action to recover any monies due under the Agreement, a creditor must serve a Default Notice under section 87(1) of the Consumer Credit Act 1974 which states:

Section 87. Need for Default Notice

(1) Service of a notice on the Debtor or hirer in accordance with section 88 (a "Default Notice ") is necessary before the creditor or owner can become entitled, by reason of any breach by the Debtor or hirer of a regulated Agreement -

(a) to terminate the Agreement, or

(b) to demand earlier payment of any sum, or

(c) to recover possession of any goods or land, or

(d) to treat any right conferred on the Debtor or hirer by the Agreement as terminated, restricted or deferred, or

(e) to enforce any security.

The Act also sets out via Section 88(1), that the Default Notice must be in the prescribed form, as below:

Section 88. Contents and effect of Default Notice

(1) The Default Notice must be in the prescribed form…

The wording must make it clear that no variation is acceptable. Therefore it cannot be dispensed with as a De Minimus issue.

I note that the regulations do not allow any variation in the form of these statements and therefore it is suggested that where the statements are not as laid down in the regulations the Default Notice is rendered invalid as a consequence.

In the case of Woodchester Lease Management Services Ltd v Swain & Co - [1998] All ER (D) 339 in the Court of Appeal, the Court addressed in some detail the issue of the contents of a Default Notice and should the notice fail to comply with the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 (SI 1983/1561) it would render the Default Notice invalid I quote the comment of KENNEDY LJ: "This statute was plainly enacted to protect consumers, most of whom are likely to be individuals" the judgment appears to confirm the consumer credit legislation made under the Consumer Credit Act 1974 as plainly enacted and set out to offer protection to the consumer. Therefore it is suggested that the failure of the Claimant to set out the Default Notice in accordance with the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 (SI 1983/1561) could unduly prejudice a debtor as it failed to allow the required time to remedy the alleged default.

The Claimant’s failure to issue a valid Default Notice must surely prevent a right of action and would make any termination of the Agreement unlawful, as statute provides the procedure that must be followed. Since the Creditor has failed to adhere to statutory procedure, the Creditor does not have a right of action, and can never now have a right of action having terminated the Agreement unlawfully

So, the above is not surprisingly behind my thinking now. This faulty DN has not only screwed up my credit file for 6 years, but they had no right to issue it with the underhand haste they did, and without even wanting to hear what proposal I had for repaying my arrears.

[Curlyben]

Re: An Invalid Default Notice?

Hmm I've seen that before

BIG QUESTION: What EXACTLY are you attempting to achieve with this attempt to challenge this DN ?!

So are they making any other demands ?!

[whizzkid001]

Re: An Invalid Default Notice?

Hmm I've seen that before


So are they making any other demands ?!

They've now given me 7 days to contact them (which probably means 4 lol) to discuss repayment of arrears (which they refused to hear pre-default), otherwise they will issue enforcement proceedings at court.

Seems to me I only have 2 options:

1) pay the full arrears, which I am able to now, but why should I then accept that defective and hastily sent default notice, which now unjustifiably impairs my credit file for 6 years, or

2) wait for them to terminate, and, as per advice previously given, claim a rescission of contract on the back of the faulty DN. At the same time, when it gets to court, ask the judge to order the default's removal

[Curlyben]

Re: An Invalid Default Notice?

Best course of action is to call them and arrange repayment. You may well be able to negotiate the default removal.

Bear in mind you are already in arrears and this would of been reported to the CRA's anyway.

I feel point 2 would be extremely foolhardy, especially given the age of the agreement and the fact you freely acknowledge the arrears. Forcing further action on their behalf, when you can make repayments, would NOT be seen in a favourable light with any Judge.

[whizzkid001]

Re: An Invalid Default Notice?

Best course of action is to call them and arrange repayment. You may well be able to negotiate the default removal.

Bear in mind you are already in arrears and this would of been reported to the CRA's anyway.

I feel point 2 would be extremely foolhardy, especially given the age of the agreement and the fact you freely acknowledge the arrears. Forcing further action on their behalf, when you can make repayments, would NOT be seen in a favourable light with any Judge.

Given that they were not the least bit interested in hearing my proposals prior to issuing the default, I cannot see that they will now willingly agree to remove the default. And if they don't? I guess I can always bring in a claim in court for it's removal, think I wouldn't have too much trouble persuading a judge that the DN was faulty in several respects. And at least that would be the only issue, not going for rescission of contract etc

[whizzkid001]

Re: An Invalid Default Notice?

Ok, rang them and they refused point blank to remove the default. Anyone's thoughts as to the best plan of action at this stage?