Nearly 100,000 people who are awaiting a ruling on the cancellation of their consumer debt, like outstanding credit card balances, will have to wait a bit longer as English and Welsh courts consider the implications of their debt cancellation claims. These claims are based on the recent swell in the number of firms that advertise quick-fix debt cancellation in newspapers and on daytime television. Their boasts of having your debt written off hinge on a loophole within the central clause that any lender must keep proper, up to date records of their client’s debts and repayment schedule.
At this point, the courts are intent on selecting a few of these claims at random and compiling a test case to be put to the High Court. This is in an effort to identify the fundamental points involved with this kind of debt cancellation scheme. An essential benefit of this test case will be to determine the points which are common to the vast majority of claim cases and develop some legislation that will help the courts to deal with the extremely high volume of claims that they are currently facing.
The most common grounds for a declaration of the invalidity of a credit agreement, the term which is used to signify an upheld debt cancellation claim, is non-compliance with the Consumer Credit Act (CCA). The most common example of such non-compliance would be the failure to keep adequate records. Upon referral of selected claims to the Commercial Court in London, all other cases will be placed on hold until the court has established some essential principles. It’s important to note that no time limit has been placed on this process so the bulk of cases are now in a kind of judiciary limbo, awaiting the findings.
This kind of debt cancellation claim is a relatively new phenomenon. It appears to have been triggered by a heavily publicised case of 2008 in which a couple from Staffordshire were able to write off over £65,000 of debt. The cases hinged on a variety of arguments but primarily focused on the fact that the lenders could not produce the necessary paperwork in relation to the loan. The maintenance of adequate records is a key requirement of the Consumer Credit Act. However, they failed in an attempt to clear further debt at the High Court, in a case that had the potential to set a controversial legal precedent.
This scope for some borrowers to renege on their debt is based upon the phrasing of certain passages in the Consumer Credit Act of 1974. This Act only impacts on credit agreements that were drawn up before the new Act can into force in 2006. The main thrust of the 1974 Act was to safeguard borrowers against exploitation from unscrupulous lenders. In the most straightforward terms, if you write to your lender and request a “true copy” of your loan agreement and they are unable to furnish you with one within a certain time limit, the agreement could be found to be unenforceable. So, the debt could be written off.
It has been estimated that there are tens of thousands of these unenforceable credit agreement claims just waiting to swamp the British legal system. This is chiefly due to the increased publicity that claims-handling firms have achieved through day-time television advertising. These firms are regulated by the Ministry of Justice and Office of Fair Trading and are being monitored for making deliberately misleading statements about their ability to write off debt.
The message is clear though; only borrow if you can afford to pay it back. These cases are by no means the norm and it would be extremely reckless to assume that there will be any kind of quick-fix debt solution. For anyone struggling with debt, their first action should be to take professional advice about how to deal with their finances.