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I've been going through some of my files and stumbled upon some interesting stuff I would like to share with you all.
Some of you may have already read this, but I think it would be good to see how the DCA's think about debt.
All debt buyers and collection agencies have to deal with rogue customers who seek to raise spurious defences to avoid or delay payment of legitimate debts. Unfortunately, the growth in the use of websites for disgruntled or mischievous debtors to exchange often inaccurate, but plausible, information has created a number of misconceptions which have been picked up by well-meaning debt customers and advisors without access to proper legal advice.
Debtors are being encouraged by such websites, and ill-informed advisors, to use their rights to information under the Data Protection Act 1998 and the Consumer Credit Act 1974 as weapons against banks, other lenders and debt administration companies with a view to avoiding payment, having adverse entries removed from credit reference agency files and obtaining compensation in respect of those entries.
Of course, debtors may exercise their rights to obtain information for whatever reason they choose. However, it is not in anyone’s interest for debtors to be encouraged to use those rights in the false hope that they will thereby improve their credit ratings or obtain compensation.
Various websites assert that a creditor’s failure to provide information to a debtor in accordance with a request made under section 77, 78 or 97 of the Consumer Credit Act gives the debtor the right to have his credit reference agency files amended to delete records of his or her defaults under the agreement. In fact, where a creditor fails to provide information requested in accordance with any of those sections, what the Act does is to prevent the creditor from enforcing the agreement until the creditor provides the information:
“The creditor is not entitled, while the default continues, to enforce the agreement”: section 77(4)(a), 78(6)(a) and 97(3)(a).
That does not mean that the debtor ceases to be liable to repay the indebtedness in accordance with the terms of the agreement; nor does it mean that the debtor’s failure to meet his or her obligations under the agreement should no longer be recorded by credit reference agencies. What it means is that, until the creditor provides the information, the creditor cannot enforce the debt by issuing legal proceedings or by repossessing or realising any security.
It has also been asserted that any failure by a data controller to comply with its obligations under the Data Protection Act in relation to a debtor’s personal data will entitle the debtor to have adverse credit entries removed from credit reference agency files and to receive compensation. However, the Act only provides for personal data to be erased from records where the data is inaccurate, or where the data subject has suffered damage by reason of a data controller’s breach of the Act in respect of the data and there is a substantial risk of further contravention in respect of those data (see section 14). If a debt administration company had contravened a requirement of the Act in respect of a debtor’s personal data, the debt administration company’s contravention would not enable a court to order the removal of accurate information from a credit reference agency’s files.
In order for a debtor to receive compensation under the Data Protection Act, or to have accurate data erased, any financial damage suffered must have been caused by the data controller's contravention of the Act (see sections 13 and 14 and Johnson v The Medical Defence Union, Times 4th April 2006). Where, due to an accurate adverse credit history, a debtor is refused further credit or is offered a loan at a higher rate of interest than a person with a less adverse credit history, then it is the adverse credit history which causes any such loss as the debtor may suffer.
Creditors and debt administration companies disclose information to credit reference agencies about debtors’ conduct of their accounts because that disclosure is necessary for the purposes of legitimate interests pursued by the creditors, the debt administration companies and the credit reference agencies. Credit reference agencies hold such data and disclose it to prospective lenders because that is, similarly, necessary for the purposes of the same legitimate interests. Such disclosure and the maintenance of credit reference agency files play an important role in enabling lenders to assess the risks involved in proposed lending and to avoid irresponsible lending. Accordingly, the Data Protection Act permits disclosure of such information to and by those agencies without the debtor’s consent (see section 4, Schedule 1 and Schedule 2 of the Act, in particular paragraph 6 of Schedule 2).
Failure by a data controller to provide information to a debtor about the processing of his personal data might make the processing unfair, but, where that processing consists of disclosure of accurate data to a credit reference agency, the unfairness of failing to inform the debtor would not be the cause of any loss suffered by reason of the adverse nature of the data disclosed to the agency. Provided that the data was accurate, a fully informed debtor would not have been entitled to prevent its disclosure.
There are also popular misconceptions about the rights and obligations of debt purchase companies under the Consumer Credit Act. We do not believe that debt purchasers fall within the definition of “creditor” in section 189(1) of the Consumer Credit Act, because they take assignments of the rights, but not the duties, of creditors under consumer credit agreements: they collect the debts, but they do not themselves lend money. We believe that the Government’s decision to create a new category of business for which a licence is to be required, namely debt administration, when the Act is amended in April 2008, reflects the fact that debt administration companies are not creditors for the purposes of the Act. (When explaining the new category of licence during parliamentary debate, the Under-Secretary of State for Trade and Industry said that the category was intended to cover those who “purchase portfolios of existing loans and administer them”.) However, the fact that in our view debt purchase companies are not creditors does not mean that they are not entitled to enforce the debts that have been assigned to them, or which, in laymen’s terms, they have bought. As a legal assignee, under section 136 of the Law of Property Act 1925, a company which has bought a creditor’s rights under a credit agreement is entitled to sue the debtor for any repayment that remains due under the agreement.
It is worth pointing out that the Citizen’s Advice Bureau is currently pursuing a series of court cases which challenge the right of the debt purchasers to enforce regulated debts through the courts. The CAB’s argument appears to be that according to the definition of “creditor” under section 189 of the CCA, a purchaser must prove he has acquired the duties as well as the rights to a consumer credit agreement. This is an interesting assertion, but misses the point entirely on the basis that a debt purchaser needs only to be a legal assignee to enforce the credit agreement, which it is as soon as written notice of the assignment is given to the debtor. In my view, the actions of the CAB in these cases are ill conceived and in many ways the outcome of the cases themselves is entirely irrelevant.
Whatever the correct interpretation of the word “creditor” for the purposes of any relevant provisions of the Consumer Credit Act 1974, it is clearly important that debtors should have access to information relating to their debts and that all lenders, debt buyers and administrators should use all reasonable endeavours to assist in the provision of that information.
It is just a shame that there appear to be so many debtors, and apparently advice agencies, keen to frustrate attempts by legitimate businesses to seek payment of bona fide, and usually undisputed debts.
Would any one like to guess who penned this wonderful missive ?
Some of you may have already read this, but I think it would be good to see how the DCA's think about debt.
Originally posted by Legal Misconceptions in Debt Sale and Administration
All debt buyers and collection agencies have to deal with rogue customers who seek to raise spurious defences to avoid or delay payment of legitimate debts. Unfortunately, the growth in the use of websites for disgruntled or mischievous debtors to exchange often inaccurate, but plausible, information has created a number of misconceptions which have been picked up by well-meaning debt customers and advisors without access to proper legal advice.
Debtors are being encouraged by such websites, and ill-informed advisors, to use their rights to information under the Data Protection Act 1998 and the Consumer Credit Act 1974 as weapons against banks, other lenders and debt administration companies with a view to avoiding payment, having adverse entries removed from credit reference agency files and obtaining compensation in respect of those entries.
Of course, debtors may exercise their rights to obtain information for whatever reason they choose. However, it is not in anyone’s interest for debtors to be encouraged to use those rights in the false hope that they will thereby improve their credit ratings or obtain compensation.
Various websites assert that a creditor’s failure to provide information to a debtor in accordance with a request made under section 77, 78 or 97 of the Consumer Credit Act gives the debtor the right to have his credit reference agency files amended to delete records of his or her defaults under the agreement. In fact, where a creditor fails to provide information requested in accordance with any of those sections, what the Act does is to prevent the creditor from enforcing the agreement until the creditor provides the information:
“The creditor is not entitled, while the default continues, to enforce the agreement”: section 77(4)(a), 78(6)(a) and 97(3)(a).
That does not mean that the debtor ceases to be liable to repay the indebtedness in accordance with the terms of the agreement; nor does it mean that the debtor’s failure to meet his or her obligations under the agreement should no longer be recorded by credit reference agencies. What it means is that, until the creditor provides the information, the creditor cannot enforce the debt by issuing legal proceedings or by repossessing or realising any security.
It has also been asserted that any failure by a data controller to comply with its obligations under the Data Protection Act in relation to a debtor’s personal data will entitle the debtor to have adverse credit entries removed from credit reference agency files and to receive compensation. However, the Act only provides for personal data to be erased from records where the data is inaccurate, or where the data subject has suffered damage by reason of a data controller’s breach of the Act in respect of the data and there is a substantial risk of further contravention in respect of those data (see section 14). If a debt administration company had contravened a requirement of the Act in respect of a debtor’s personal data, the debt administration company’s contravention would not enable a court to order the removal of accurate information from a credit reference agency’s files.
In order for a debtor to receive compensation under the Data Protection Act, or to have accurate data erased, any financial damage suffered must have been caused by the data controller's contravention of the Act (see sections 13 and 14 and Johnson v The Medical Defence Union, Times 4th April 2006). Where, due to an accurate adverse credit history, a debtor is refused further credit or is offered a loan at a higher rate of interest than a person with a less adverse credit history, then it is the adverse credit history which causes any such loss as the debtor may suffer.
Creditors and debt administration companies disclose information to credit reference agencies about debtors’ conduct of their accounts because that disclosure is necessary for the purposes of legitimate interests pursued by the creditors, the debt administration companies and the credit reference agencies. Credit reference agencies hold such data and disclose it to prospective lenders because that is, similarly, necessary for the purposes of the same legitimate interests. Such disclosure and the maintenance of credit reference agency files play an important role in enabling lenders to assess the risks involved in proposed lending and to avoid irresponsible lending. Accordingly, the Data Protection Act permits disclosure of such information to and by those agencies without the debtor’s consent (see section 4, Schedule 1 and Schedule 2 of the Act, in particular paragraph 6 of Schedule 2).
Failure by a data controller to provide information to a debtor about the processing of his personal data might make the processing unfair, but, where that processing consists of disclosure of accurate data to a credit reference agency, the unfairness of failing to inform the debtor would not be the cause of any loss suffered by reason of the adverse nature of the data disclosed to the agency. Provided that the data was accurate, a fully informed debtor would not have been entitled to prevent its disclosure.
There are also popular misconceptions about the rights and obligations of debt purchase companies under the Consumer Credit Act. We do not believe that debt purchasers fall within the definition of “creditor” in section 189(1) of the Consumer Credit Act, because they take assignments of the rights, but not the duties, of creditors under consumer credit agreements: they collect the debts, but they do not themselves lend money. We believe that the Government’s decision to create a new category of business for which a licence is to be required, namely debt administration, when the Act is amended in April 2008, reflects the fact that debt administration companies are not creditors for the purposes of the Act. (When explaining the new category of licence during parliamentary debate, the Under-Secretary of State for Trade and Industry said that the category was intended to cover those who “purchase portfolios of existing loans and administer them”.) However, the fact that in our view debt purchase companies are not creditors does not mean that they are not entitled to enforce the debts that have been assigned to them, or which, in laymen’s terms, they have bought. As a legal assignee, under section 136 of the Law of Property Act 1925, a company which has bought a creditor’s rights under a credit agreement is entitled to sue the debtor for any repayment that remains due under the agreement.
It is worth pointing out that the Citizen’s Advice Bureau is currently pursuing a series of court cases which challenge the right of the debt purchasers to enforce regulated debts through the courts. The CAB’s argument appears to be that according to the definition of “creditor” under section 189 of the CCA, a purchaser must prove he has acquired the duties as well as the rights to a consumer credit agreement. This is an interesting assertion, but misses the point entirely on the basis that a debt purchaser needs only to be a legal assignee to enforce the credit agreement, which it is as soon as written notice of the assignment is given to the debtor. In my view, the actions of the CAB in these cases are ill conceived and in many ways the outcome of the cases themselves is entirely irrelevant.
Whatever the correct interpretation of the word “creditor” for the purposes of any relevant provisions of the Consumer Credit Act 1974, it is clearly important that debtors should have access to information relating to their debts and that all lenders, debt buyers and administrators should use all reasonable endeavours to assist in the provision of that information.
It is just a shame that there appear to be so many debtors, and apparently advice agencies, keen to frustrate attempts by legitimate businesses to seek payment of bona fide, and usually undisputed debts.
Would any one like to guess who penned this wonderful missive ?
BUT didn't it make you think!
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