What are the Prescribed Terms for an Unenforceable Credit Agreement?
For a credit agreement to be enforceable in a court of law it must contain a number of prescribed terms. If any contract is missing any of these prescribed terms then it can be deemed ‘unenforceable’ and the debt cannot legally be collected by the lender.
In section 127(3) of the Consumer Credit Act 1974 it clearly states;
(3) The court shall not make an enforcement order under section 65(1) if section 61(1) (a)(signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner).
Here is an overview of the requirements of section 127(3) of the Consumer Credit Act 1974. For a credit agreement to be enforceable it must contain the following prescribed terms;
1) Amount of credit
There must be a term on the agreement which states the amount of credit which has been issued
2) Credit Limit
The agreement must include regarding a credit limit or if a credit limit is not required (i.e. in the case of a loan)
The agreement must contain information on how the debtor is to make repayments. This could be in the form of any of the following points;
a. Amount of repayments to be made
b. Date the repayments are to be made
c. Timing of payments
d. Frequency of payments
e. Total number of repayments (For instance, when a loan is required)
f. The power of the creditor to vary any of the above mentioned
f. The manner in which any of the above is to be determined.
4) Rate of interest
There must be a term referring to the rate of interest to be applied to the credit agreement
If you have a credit card then sections 2, 3, and 4 apply to you.
If you have a loan sections 1 and 2 apply.
What if my credit agreement doesn’t contain any or one of these points?
You credit agreement does not comply with the Consumer Credit Act 1974 and is invalid. If you credit agreement was to be taken to a court the judge would not be able to make an enforcement order to enable to debt to be collected by the lender.
When this happens the debt effectively sits in ‘limbo’ as it cannot be legally collected and you are not obliged to repay it. Most lenders don’t want loose ends or debts sat in ‘limbo’ as it takes up more of their resources maintaining dormant accounts so in the majority of cases the lender will write the debt off.
Section127(3) also provides that the court may not make an enforcement order unless a document containing all the prescribed terms of the agreement was signed by the debtor. This basically means a lender needs to be able to supply a ‘true copy’ signed copy of a credit agreement, along with signed terms and conditions in order for it to be enforceable in a court of law. If a lender cannot supply this then the debt can also be rendered unenforceable.
Can I do this myself?
Anyone can take their case to a court and challenge your credit agreements for enforceability but you must make sure you know what you are doing. If you get to court and fail you could end up with a hefty legal bill to pay, just like what happened in the Rankine’s case in back in 2002, where the couple successfully wrote off over £100,000 but ended up with a legal bill which roughly equated to the same amount!
The best option is to let a qualified solicitor handle the case for you. See if your debts qualify here and we will recommend the most suitable company to help you.