s.89 - what does it mean?

[Lord_Alcohol]

Hello everyone

I'm trying to understand the actual meaning of s.89, which states;

If before the date specified for that purpose in the default notice the debtor or hirer takes the action specified under section 88(1)(b) or (c) the breach shall be treated as not having occurred

I've never been able to work this out. Peterbard, in this post (http://www.legalbeagles.info/forums/...175#post182175) said;

The misconnection [misconception] about this is that it means they [the] agreement should be put into the same position as before any breach was committed.
Lets examine what that would mean.
The creditor would be compelled to ignore maybe years of missed payments and re start the account, the CRA would have to remove any defaults or missed payments off their records as if they never happened .
Firstly common sense does anyone really believe this could happen?
The act of course says no such thing. The reference to the breach having not occurred refers to section 87 where it says,” by reason of a breach”, its function is to remove the entitlement of section 87 to enforce the agreement.
The statement mealy [merely] closes the loop in the same way that a none [non-]compliant DN under section 88 does.
This is why a DCA can issue a default it does not have to return the account to its functioning state just to its condition before the default was issued.

[apologies to Peter who I know is dyslexic but the bracketed corrections make it easier, for me at least, to read his posts]

"it's function is to remove the entitlement of section 87 to enforce the agreement" - to my simple mind this makes not the slightest sense whatsoever, because what then is the status of the agreement following payment of the sum demanded in the DN? It can't be terminated because the debtor has avoided that step by payment. So it must remain live.

Does the Act at s.89 compel a creditor to restore the agreement to it's pre-breach state when a DN is satisfied?

If it does, but the creditor leaves things as they are and does nothing, what options are open to the debtor?

If it doesn't, what the heck does it mean?!?!?

TIA
LA

[teaboy2]

Re: s.89 - what does it mean?

LA

Section 89 is regarding debtors remedy of the breach, if the debtor pays before the date give in the DN then the breach (which for all intent and purposes is a Default) is deemed to have not occurred, the breach was therefore remedied by the debtor and both parties must be returned to the same position they were in prior to the breach.

It doesn't mean default payments recorded on a credit file must be removed or anything like that, though a default status placed on file must be removed. Though most creditors do not record a default status on your credit file until after the before date on a DN anyway.

So it means exactly what it says!

[Lord_Alcohol]

Re: s.89 - what does it mean?

LA

Section 89 is regarding debtors remedy of the breach, if the debtor pays before the date give in the DN then the breach (which for all intent and purposes is a Default) is deemed to have not occurred, the breach was therefore remedied by the debtor and both parties must be returned to the same position they were in prior to the breach.

It doesn't mean default payments recorded on a credit file must be removed or anything like that, though a default status placed on file must be removed. Though most creditors do not record a default status on your credit file until after the before date on a DN anyway.

So it means exactly what it says!

Many thanks Teaboy - that is my understanding too and good to have it confirmed.

So, if the position prior to the breach is all credit facilities enabled and intact, the creditor must (in order to observe s.89) put things back to how they were?

But, if the creditor doesn't observe s.89, and in fact does nothing, what options are open to the debtor?

An example might be where an agreement is terminated following a bad DN, a year passes, the DN is corrected and satisfied, but the agreement remains terminated.

I have a nasty feeling that the debtor can do precisely nothing due to s.170 but would be helpful to confirm this.

LA

[miliitant]

Re: s.89 - what does it mean?

YOU CANNOT TERMINATE AN AGREEMENT ON A BAD DEFAULT NOTICE AS SUCH

The account can be sold as a live account but thats quite rare, but not terminated

I had this in court where a creditor put in a money claim. I myself discovered that the default notice was defective. The only option to the creditor was to withdraw the claim, issue a fresah default notice under 87(1), wait 14 days, then issue a new claim through the courts

You cannot bring a claim on a defective default notice to enforce or to demand sums not yet due, that would be the full balance outstanding and not the contractual payments you may have missed

[Lord_Alcohol]

Re: s.89 - what does it mean?

I had this in court where a creditor put in a money claim. I myself discovered that the default notice was defective. The only option to the creditor was to withdraw the claim, issue a fresah default notice under 87(1), wait 14 days, then issue a new claim through the courts

Thanks Miliitant, but what would have happened had you satisfied the fresh DN?

LA

[teaboy2]

Re: s.89 - what does it mean?

If the creditor has sold the account of the back of a faulty DN then as they no longer own the account they agreement no longer exists entitling them to issue a new DN, they would have to take the account back and request your permission to reinstate the agreement. Its the agreement that was terminated when they sold the account not the account itself. So all though the account remains live, the agreement doesn't hence why they, or a DCA, can not reissue a new DN when the account has been sold.

I had an argument where someone said the DCA can issue a new DN, this is not the case as if it is remedied the breach must be treated as not having occurred, and only way a DCA can do that is by either selling the account back to the OC or by providing a fully functioning credit card / Bank Facility or by honoring the original terms of the loan. For bank or credit cards, well i doubt they have the facilities or the desire to lend money for purchases on credit cards or to provide you a bank account. So their only option would be to sell it back to the OC, but then the OC will likely not want it back, so then what? Well they will have repudiated the agreement by failing to comply with section 89 and therefore would not be entitled to reclaim remaining balance only the arrears, which they will have already got when the newly issued DN was issued and remedied by the Debtor. But then as the agreement ceased to exist when it was sold to the DCA then they are not entitled to issue a DN nor could they be in repudiation of the agreement. Therefore only the OC can be in repudiation, if a new DN is issued after reinstatement of agreement, if they fail to comply with section 89 when DN is remedied. But then hasn't the OC all ready repudiated the agreement by selling of the back of a defective DN or prior to the full 14 days the debtor is entitled to remedy the Default? Yes they have, after all their is no excuse with all their money, technology legal know how, for them to be selling debts of the back of defective DN's or prior to the full 14 days passing that the debtor is entitled to.

Had the same argument with MBNA for a credit card, where the DN was invalid, only allowed 10 days from date of service, asked for full amount not the arrears, and account was actually sold (confirmed in writing by MBNA) the date before the DN was served - I threatened to counter claim for unlawful rescission/repudation and neither MBNA, Experto Credite, Varde Investment (Ireland) Limited or Aktiva Kapital wanted to progress it to court after i threatened that. Yet i constantly saw them taking others in similar situations for lesser amounts especially when Aktiva Kapital bought a load of them from Varde. So all i can say is that they were obviously reluctant to allow me the chance to counter claim for Unlawful rescission/repudiation through fear i would win.

There's no other reason why they would have taken others to court, but refused to take me to court and instead chose to remove the Default from my file along with all history of the account from my credit file. So they are clearly either aware that the Unlawful rescission/repudiation theory has a good chance of winning or are simply as confused and uncertain as the rest of us as to if it would be successful in court. Either way its clearly something they did not want to risk.

[basa48]

Re: s.89 - what does it mean?

There's no other reason why they would have taken others to court, but refused to take me to court and instead chose to remove the Default from my file along with all history of the account from my credit file. So they are clearly either aware that the Unlawful rescission/repudiation theory has a good chance of winning or are simply as confused and uncertain as the rest of us as to if it would be successful in court. Either way its clearly something they did not want to risk.

Indeed - they cannot risk taking yours (and my) situation to court for fear of losing and perhaps setting a precedent. Much easier (and profitable) to take the less savvy (LB 'educated') to court and write the savvy ones off.

Having said that, if they have taken similar cases to court, and won, then why wouldn't they be shaking those successes in our faces? More likely just the threat of court has convinced many debtors to enter arrangements.

[Lord_Alcohol]

Re: s.89 - what does it mean?

What a mess Teaboy. It defies belief.

Presumably then, anyone serving a DN under s.87 would have to hold a credit licence?

I have to say that I've been in two minds over the repudiation argument, but if an agreement is sold to an unlicensed DCA when it is still live (ie, the DN was defective and there is no contractual termination) then that is exactly what it is - repudiation. I just cannot see any other label that can be applied.

I suppose one stick to beat them with is the fact that they sold a live credit agreement to an unlicensed body, which is probably completely illegal. I guess that might be a reason why they have steered away from court.

But if a good DN is served post "termination" by a licenced body (even the OC) and is then satisfied by the debtor in full, but the creditor fails to observe s.89 in some way, what can the debtor do? It's this point I'm scratching my head over and getting precisely nowhere...is it a breach of contract? Is it "repudiation"? I don't have a clue!

LA

[miliitant]

Re: s.89 - what does it mean?

how can you serve a fresh default notice post termination, an account can only be defaulted once

you cannot sell an account regulated by the cca 1974 to an institution that does not hold a consumer credit licence

the assignment would be unlawful

[teaboy2]

Re: s.89 - what does it mean?

how can you serve a fresh default notice post termination, an account can only be defaulted once

you cannot sell an account regulated by the cca 1974 to an institution that does not hold a consumer credit licence

the assignment would be unlawful

Exactly - Hence unlawful repudiation when selling of the back of a defective DN as they are not entitled to sell/terminate - whether it be to a license or non licensed DCA. At least that's how i understand.

[teaboy2]

Re: s.89 - what does it mean?

What a mess Teaboy. It defies belief.

Presumably then, anyone serving a DN under s.87 would have to hold a credit licence?

I have to say that I've been in two minds over the repudiation argument, but if an agreement is sold to an unlicensed DCA when it is still live (ie, the DN was defective and there is no contractual termination) then that is exactly what it is - repudiation. I just cannot see any other label that can be applied.

I suppose one stick to beat them with is the fact that they sold a live credit agreement to an unlicensed body, which is probably completely illegal. I guess that might be a reason why they have steered away from court.

But if a good DN is served post "termination" by a licenced body (even the OC) and is then satisfied by the debtor in full, but the creditor fails to observe s.89 in some way, what can the debtor do? It's this point I'm scratching my head over and getting precisely nowhere...is it a breach of contract? Is it "repudiation"? I don't have a clue!

LA

It most certainly was a mess lol.

They can't serve DN post termination as the agreement would have ceased to have existed, therefore they would not be entitled to serve a DN under said agreement since the agreement no longer exist. All that exist post termination is the account e.g. the outstanding balance.

Varde are licensed i believe though its been that long since i dealt with varde themselves i can't remember if they had a license of not now, or whether its was a UK or Irish one.

Only time you need a license to serve a DN is under a regulated agreement, other companies like phone companies can also issue DN's but they are merely notices of default so not really the same thing.

[basa48]

Re: s.89 - what does it mean?

It most certainly was a mess lol.

They can't serve DN post termination as the agreement would have ceased to have existed, therefore they would not be entitled to serve a DN under said agreement since the agreement no longer exist. All that exist post termination is the account e.g. the outstanding balance.

Varde are licensed i believe though its been that long since i dealt with varde themselves i can't remember if they had a license of not now, or whether its was a UK or Irish one.

Only time you need a license to serve a DN is under a regulated agreement, other companies like phone companies can also issue DN's but they are merely notices of default so not really the same thing.

I thought the argument was that any termination following an invalid DN was itself invalid, thus the agreement endures.

It is quite possible to sell a 'live' agreement to a DCA which if the above argument is correct would be the case following invalid DNs and terminations. Quite how such a DCA would react to having to offer credit under a valid agreement (assuming he issued a valid DN which was subsequently remedied) I don't know. I suppose he would immediately restrict credit.

The point about whether Varde have a license is now moot since they've sold out to Aktiv Zug branch (whose offices are in Switzerland). I don't know if there is a reciprocal agreement with the UK that allows them to sue here.

[teaboy2]

Re: s.89 - what does it mean?

I thought the argument was that any termination following an invalid DN was itself invalid, thus the agreement endures.

It is quite possible to sell a 'live' agreement to a DCA which if the above argument is correct would be the case following invalid DNs and terminations. Quite how such a DCA would react to having to offer credit under a valid agreement (assuming he issued a valid DN which was subsequently remedied) I don't know. I suppose he would immediately restrict credit.

The point about whether Varde have a license is now moot since they've sold out to Aktiv Zug branch (whose offices are in Switzerland). I don't know if there is a reciprocal agreement with the UK that allows them to sue here.

I think the main point, regardless of which argument is used, is that in both cases it still amounts to unlawful repudiation as the DCA simply would not have the facilities to continue to honor the agreement when it comes to Credit cards, bank accounts etc, they could still facilitate fixed term loans by accepting the original agreed monthly repayments for the loan, but that's all really. So if they refuse to carry on supplying you a credit card facility or bank account facilities, then they have repudiated the agreement. So in a way a DCA reissuing a new DN would be more beneficial for debtors, as then all they have to do is pay the arrears, and that's it - Its because of the above that i believe the agreement can not possibly be live and has to have been terminated as DCA's have no means to treat the agreement as being live and have only the means to enforce outstanding balance and the balance itself still exists even if the agreement no longer exists, just like when you default on a phone contract and the contract is terminated, but the balance is still due.

Any restriction of credit would would likely not be possible as they simply have not got the assets and facilities in place to run a running credit card agreement, allowing you to continue to use your card as though the breach had not occurred. So it would be a complete block on credit and therefore repudiation.

We could even make a template letter for when accounts are sold of the back of defective DN, informing the DCA that as they now own the account they and not the original creditor must issue a DN pointing out that once they do and if paid with in the statutory time limit, that they most then comply with section 89 and treat the breach as not having occurred and therefore have a legally binding duty to provide the same service as the original creditor when it comes to the continued running of your credit card account - as failure to do so puts them in repudiation of the agreement and therefore means they would no longer be entitled to the full balance but only the arrears, which would have been paid once the default is remedied within 14 days. That is off course only IF the agreement is still deemed as legally live when sold.

So yes theirs two theories/arguments, but both still have the same end result if played out correctly and if either 1 are proved to be legally correct arguments then i think the DCA's will be worried as they simply will have no way to counter. As even if it agreement was live after being sold, they can not simply terminate under sections 98, 98A or 99 etc as they will already have repudiated the contract for not complying with section 89, and simply can not use those sections to cover for their refusal to comply with section 89.

I don't think they have a reciprocal agreement either, but then that's why the assign it to their UK based branch i suppose, who take the claim to court from them.

[miliitant]

Re: s.89 - what does it mean?

a creditor can terminate his relationship with the debtor at any time and sell an agreement .
an overdraft is an example as parts of it are covered by the cca.
it is normally written into the small print

terminating prior to sale is a whole new ball game

it is demanding sums not yet due thats the problem and which a dca fails to grasp

the new creditor would have to follow the original t&c of the original contract as it would still be a live account

the above sinario is that the original account has not been defaulted under
87(1), .terminated and sold

thats how i see it

[basa48]

Re: s.89 - what does it mean?

I don't think they have a reciprocal agreement either, but then that's why the assign it to their UK based branch i suppose, who take the claim to court from them.

My letter from AK suggests the Zug branch are the debt purchasers. AK UK are acting on behalf of.

Only the debt owner can bring a claim.