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Does s140 CCA apply to mortgages?

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  • Does s140 CCA apply to mortgages?

    Wonder if any of the CCA experts can help with this one...

    Does s140 CCA apply to mortgages, pre Oct 2004?

    I have had several discussions over this and the conclusion was that it does. However I have been quoted this:
    Section 16(2)(b) of the CCA 1974. Provides an exemption to all credit agreements that are secured by any land mortgage.
    which implies it doesn't.

    Page 5 of OFT Unfair Relationships says
    The unfair relationships provisions apply to credit agreements whether regulated or not, and regardless of the amount of credit extended. The sole exception is where an agreement is exempt under section 16(6C) of the 1974 Act because it is a regulated mortgage contract under the Financial Services and Markets Act 2000. In all other respects, the provisions apply to exempt agreements including those which will be exempt by virtue of section 16A (high net worth borrowers) or section 16B (business lending for more than 25,000) of the 1974 Act.6
    which seems to say it does...

    Anyone willing to give a definitive argument?
    I am not a solicitor. Please seek your own legal advice before relying on my comments in this forum!

  • #2
    Re: Does s140 CCA apply to mortgages?

    The Consumer Credit Act 2006 (Commencement No. 4 and Transitional Provisions) Order 2008 No. 831 (C. 40)
    Schedule 1 may help - as I do not know what your mortgage is. A standard mortgage on your own home does not fall under the CCA, otherwise it may doif it falls into the areas in that schedule. Things have been altered since the OFTs report but I'm not up to date so can't give a definitive answer.
    Last edited by Amethyst; 24th June 2010, 08:31:AM.
    #staysafestayhome

    Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

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    Comment


    • #3
      Re: Does s140 CCA apply to mortgages?

      The existence of a higher APR is not of itself indicative of an unfair relationship for the purposes of the Consumer Credit Act.
      Judge Burn in the Bromley County Court gave judgment that has decided that a high APR in connection with a “log book loan” was not, of itself, an unfair relationship. The case involved a loan for that amount of money but payable by 55 instalments. The APR was 384.4%. The loan was secured by a bill of sale over the customer’s car. The loan account fell into arrears and the vehicle was sold. The lender sued for the balance owing of nearly three times the original amount of the loan. The borrower claimed the agreement constituted an unfair relationship under section 140 of the Consumer Credit Act 1974. This section replaced the old provisions of section 138 of the CCA relating to extortionate credit bargains. The old section had a number of factors that the court could take into account in deciding what is extortionate, but no such factors are in the new unfair relationship provisions. The court, therefore, looks to the relationship between the parties to decide whether or not the relationship is in fact unfair. In this particular instance, the relationship was not unfair for four reasons:-
      1. the interest rate was high but the risk to the lender was also high;
      2. the loan was to be repaid over a short period and this was at a competitive interest rate;
      3. the entitlement to recover the vehicle without a court order was harsh but the borrower was advised and given opportunities to prevent the recovery of the vehicle;
      4. the lender’s procedures in setting up the loan were reasonable and they encouraged the borrower to come to an arrangement rather than lose the car. These indicated that there was not an unfair relationship. However, the court did go on to look at the way in which the agreement had been enforced and some concession was given back to the borrower for the fact that the vehicle had been sold without the keys and logbook.

      Comment


      • #4
        Re: Does s140 CCA apply to mortgages?

        Patrick, may I ask how/where you obtained the details of this county court case?

        Comment


        • #5
          Re: Does s140 CCA apply to mortgages?

          The OFT are still saying the above, in an email dated 14 July 2010... Confusion reigns... :-(

          In addition, if mortgages are already excluded by s16, then why introduce a new exclusion for regulated mortgages?

          Also found this:
          13 Debtor-creditor agreements
          A debtor-creditor agreement is a regulated consumer credit agreement being—
          the operative word being 'regulated'. A mortgage prior to Oct 2004 is not regulated by FSA or by CCA...
          The exemptions specifically state:
          16 2 (b) a debtor-creditor agreement secured by any land mortgage
          Am I reading this correctly, that 16 2 (b) exemption applies only to a CCA agreement secured on land? and not a mortgage?

          Also, if mortgages are excluded, how did Bentley make a case?
          Last edited by Animal; 16th July 2010, 11:31:AM.
          I am not a solicitor. Please seek your own legal advice before relying on my comments in this forum!

          Comment


          • #6
            Re: Does s140 CCA apply to mortgages?

            http://www.lexology.com/library/resu...=date&start=10
            ------------------------------- merged -------------------------------
            Am I reading this correctly, that 16 2 (b) exemption applies only to a CCA agreement secured on land? and not a mortgage?

            Also, if mortgages are excluded, how did Bentley make a case?

            from what i have read in the past the land and a mortgage is not excluded and comes under the umbrella of "the land "
            patrickq1
            Last edited by patrickq1; 19th July 2010, 20:57:PM. Reason: Automerged Doublepost

            Comment


            • #7
              Re: Does s140 CCA apply to mortgages?

              S16 7A was also added to the CCA and states

              Nothing in this section affects the application of sections 140A to 140C.
              Which exempts the exemptions :-) And there a further variation that re-includes one of the exempt exemptions :-)

              140A (5) An order under section 140B shall not be made in connection with a credit agreement which is an exempt agreement by virtue of section 16(6C).
              How's that for confusing...?

              I don't understand why this section is not being used more as it seems very powerful...
              I am not a solicitor. Please seek your own legal advice before relying on my comments in this forum!

              Comment


              • #8
                Re: Does s140 CCA apply to mortgages?

                First mortgages are unregulated by the CCA, therefore the provisions afforded via s140 will not apply.

                Secured loans/second mortgages will usually be CCA regulated.

                Hope this helps.

                Comment


                • #9
                  Re: Does s140 CCA apply to mortgages?

                  Originally posted by pfloyd View Post
                  First mortgages are unregulated by the CCA, therefore the provisions afforded via s140 will not apply.

                  Secured loans/second mortgages will usually be CCA regulated.

                  Hope this helps.
                  Nope. S16 previously exempted mortgages, but s16 7A now excludes all exemptions in the case of s140A.

                  S16 7A Nothing in this section affects the application of sections 140A to 140C.
                  I am not a solicitor. Please seek your own legal advice before relying on my comments in this forum!

                  Comment


                  • #10
                    Re: Does s140 CCA apply to mortgages?

                    I'm sorry Animal, you've lost me.

                    I'm pretty certain that first mortgages are not covered by the CCA, they are regulated by the FSA?

                    Or are you saying that the provisions within s140a can extend to agreements that may not be CCA regulated?

                    Please do correct me if I'm wrong. Mortgages are really not my area of expertise!
                    Last edited by pfloyd; 20th July 2010, 14:35:PM.

                    Comment


                    • #11
                      Re: Does s140 CCA apply to mortgages?

                      Under the CCA 1974, s16 defined the exempt agreements, including mortgages. However CCA 2006 introduced an amendment 7A which I posted above. Now the only significant exemption is FSA regulated mortgages, i.e. those after Oct 2004. Almost everything else comes under s140A.

                      Existing agreements as at april 2007 can only be challenged if the unfairness mainfests after Apr 2007, so you cannot complain about unfairness that occurred pre April 2007.
                      I am not a solicitor. Please seek your own legal advice before relying on my comments in this forum!

                      Comment


                      • #12
                        Re: Does s140 CCA apply to mortgages?

                        Originally posted by Animal View Post
                        Under the CCA 1974, s16 defined the exempt agreements, including mortgages. However CCA 2006 introduced an amendment 7A which I posted above. Now the only significant exemption is FSA regulated mortgages, i.e. those after Oct 2004. Almost everything else comes under s140A.

                        Existing agreements as at april 2007 can only be challenged if the unfairness mainfests after Apr 2007, so you cannot complain about unfairness that occurred pre April 2007.
                        i have a legal charge over my property that is for 20,000 it is cca as it states on the charge,due to this i was in litigation with the bank in 1991/2 they dropped their prosecution and have relied on the legal charge unfortunitly for them it is now statue barred hehe ...

                        Comment


                        • #13
                          Re: Does s140 CCA apply to mortgages?

                          Animal:

                          Surely most mortgages taken out prior to the changes in FSA regulation wouldn't be CCA regulated by virtue of the fact that they would be over the financial limit for regulation?

                          Patrick:

                          Be careful, they may try and recover their monies from the proceeds of the house sale.
                          Last edited by pfloyd; 22nd July 2010, 14:34:PM.

                          Comment


                          • #14
                            Re: Does s140 CCA apply to mortgages?

                            The financial limit was removed in 2006.
                            I am not a solicitor. Please seek your own legal advice before relying on my comments in this forum!

                            Comment


                            • #15
                              Re: Does s140 CCA apply to mortgages?

                              Originally posted by Animal View Post
                              The financial limit was removed in 2006.
                              It's not retrospective though, is it? So by then first mortgages would have been regulated by the FSA and would have to adhere to the rules set within MCOB rules ??

                              Comment

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