OFT publishes section 77-79 guidance - 27/01/2010

[PGH7447]

Credit Today online

 

The Office of Fair Trading (OFT) today said lenders and collectors must not threaten legal action if they have failed to fulfill debtor requests for information.

 

The OFT took the controversial step of disagreeing with the courts on the issue in its draft guidance for the industry on sections 77-79 of the Consumer Credit Act 1974 (CCA), published today. They also said creditors and debt buyers must notify debtors that they are not allowed to enforce.

 

Sections 77-79, which allow consumers to request information about their credit agreements, have been reviewed by the OFT because of concerns that some debtors are being misled into thinking that these sections can be used as a loophole to get their debts written off and some creditors do not seem to understand their obligations.

 

The OFT said the sections do allow a consumer to request a 'true copy' of their agreement but it agrees with the High Court that this does not have to be a photocopy or an exact copy of the original. A copy of the debtor’s signature is also not required to fulfill the obligation. If the creditor fails to provide the information the debt is unenforceable, but the OFT emphasised that this does not mean it is written off.

 

As such, lenders can pass the account to third parties to collect and can notify credit reference agencies of the arrears. However, the OFT disagreed with elements of the Royal Bank of Scotland versus McGuffick court case, which said threatening legal action does not constitute enforcement. While acknowledging the case, it said: "A creditor should in no way mislead a debtor as to the enforceability of the agreement. To do so would be an unfair of improper business practice and would be highly relevant to the creditor’s or owner’s fitness to hold a licence."

 

It added: "No communications or requests for payment should in any way threaten court action or other enforcement of the debt where the creditor or owner is aware that it cannot or will not be entitled to enforce."

 

The OFT then went further, insisting that communications with the debtor should in fact make it clear that the debt is unenforceable.

 

The regulator also said creditors should supply information to third parties who are authorised to seek the details by the debtor. In response to revelations that some creditors have refused to deal with claims management companies which do not hold a licence under the Act – the OFT has said that where a request is received from a debtor or hirer through such an unlicensed business it should still be responded to. It suggested the owner of the debt writes to the debtor directly and informs them why the information is being sent to them instead of the unlicensed business. The creditor is then expected to notify the OFT and Ministry of Justice about the business.

 

Ray Watson, OFT director of consumer credit, said: "There has been a great deal of confusion over the meaning of these sections with many borrowers being misled into thinking that they can get their debt written off. This guidance is to clarify the legal position and the OFT view on standards expected of the industry, and to make consumers aware that they may be at risk if they seek to use these sections to avoid paying legitimately owed debts."

 

The deadline for responses to the consultation is 21 April 2010. To view the document visit http://www.oft.gov.uk/shared_oft/consultations/OFT1175con.pdf

[dizzyblonde1966]

So the creditors/dca"s are going to have to inform debtors if the agreement is unenforcable.

 

The proof will be in the pudding,lets see how many admission letters pop up on here

 

Actually looks very consumer/debtor friendly from my interpretation

but i could be barking up the wrong tree:p

 

DB

Edited January 27, 2010 by dizzyblonde1966

[the_shadow]

Some of these sections if they remain in will require a lot of archive searching for lenders, I suspect the final document will be watered down...

 

Too many big lenders with too much to lose, esp for old debt accounts say 8 years+

 

S.

[the_shadow]

So the creditors/dca"s are going to have to inform debtors if the agreement is unenforcable.

 

The proof will be in the pudding,lets see how many admission letters pop up on here

 

Actually looks very consumer/debtor friendly from my interpretation

but i could be barlking up the wrong tree:p

 

DB

 

It obviously contains the warning about credit record marking and being chased but if you cant pay then the least of your worry is some nomark DCA phoning you or marking your credit file for 6 years, normally court action is the only thing you are really worried about at the end of the day.

 

S.

[dizzyblonde1966]

It obviously contains the warning about credit record marking and being chased but if you cant pay then the least of your worry is some nomark DCA phoning you or marking your credit file for 6 years, normally court action is the only thing you are really worried about at the end of the day.

 

S.

 

Agree,the old boys school are going to want to change a few of those guidelines

 

im happy to let the clock tick down, only 4 and a half years left;)

 

When will the final draft be released,?

[spartathisis]

Site Team, can I ask if CAG will be making representations to the OFT? I ask as would it not carry more weight if it came from here, but say with a petition signed by all caggers? Just feel that is the way to go rather than all of us individually. we could maybe have a thread solely for suggestions (realistic not ridiculous)?

[Revenant]

Some of these sections if they remain in will require a lot of archive searching for lenders, I suspect the final document will be watered down...

 

Too many big lenders with too much to lose, esp for old debt accounts say 8 years+

 

S.

 

Unless of course the OFT for once shows it has the balls to stick up for us but at least a nibble at the cake is better than nothing

R

[247orbital]

A more sturdy reply would have been the DCA must make it clear if the debt is unenforceable and that the debt can only be sold once, there seems no grounds to me now if a debt is unenforceable that it should be re-sold repeatedly......

 

However we all know when it comes to it the OFT are toothless/spineless.

[Jameson78]

lets see how many admission letters pop up on here

 

 

Subbing

[BARFLY]

This guidance seems to be specifically for section 77/78/79 requests. This will still allow the creditor to threaten legal action. They can fill in a template in response to your request and state that they have met the criteria and continue to threaten legal action. Even if they do not have the original agreement. Unless you take them to court who will ever know?

[BARFLY]

Do they still require the orginal agreement to enforce through the courts? With all the prescribed terms etc. What legislation would you quote to force them to provide a copy of the original agreement. Or to admit that they do not have a copy? Section 77/78/79 is now flawed in doing this after recent court cases.

[the_shadow]

This guidance seems to be specifically for section 77/78/79 requests. This will still allow the creditor to threaten legal action. They can fill in a template in response to your request and state that they have met the criteria and continue to threaten legal action. Even if they do not have the original agreement. Unless you take them to court who will ever know?

 

The guidelines state they would take a dim view of any lender who did not indicate that the original does not exist still.

 

So yes, they can re-construct but they must tell you according to these current guidelines that they have done so.

 

S.

[BARFLY]

Thanks Shadow. Were they to reconstruct an agreement this is not necessarily an admittance that they do not have the original agreement. They could state that they are at present unable to locate the agreement but this is what it would have looked like. Therefore they are entitled to continue with their threats of legal action. What would have been more helpful wold be an obligation to respond in the negative or affirmative as to whether or not they had your original agreement. These guidelines seem to allow the creditors to continue their avoidance of the question. Taking a dim view means little. Financial penalties for the creditors would be of more use.

 

Does the creditor still need the original agreement to enforce in court?

[247orbital]

Yes original is requried in a court case.

[FANTASY CHARGES]

subbing

[Nagasis]

So they can provide a reconstitued agreement providing it is a true reflection of the original but they also have to provide all other documents refered to in the agreement which also were applicable at the time such as T&c's.

 

As many (loan or HP) agreements have PPI as part of the agreement (with separate terms and conditions) wouldnt they also need to provide all docs (t&c) relating to that which were also applicable at the time, as the agreement is not just for the loan but also for PPI. They cant differenciate between one and the other (ie they cant send just t&c's for the loan as it is only half the agreement), they both form the agreement.

 

Would they need to provide all this even if reconstituted? plus any variations to the loan or PPI

[the_shadow]

So they can provide a reconstitued agreement providing it is a true reflection of the original but they also have to provide all other documents refered to in the agreement which also were applicable at the time such as T&c's.

 

As many (loan or HP) agreements have PPI as part of the agreement (with separate terms and conditions) wouldnt they also need to provide all docs (t&c) relating to that which were also applicable at the time, as the agreement is not just for the loan but also for PPI. They cant differenciate between one and the other (ie they cant send just t&c's for the loan as it is only half the agreement), they both form the agreement.

 

Would they need to provide all this even if reconstituted? plus any variations to the loan or PPI

 

 

The guidelines do state that if the original referred to any other document that must be sent too... so if the ppi referred to a booklet or such like then they should be sent too IMHO

 

S.

[jimbo45]

Hi there

This is BOUND to be watered down to probably a meaningless mush since this document as it stands effectively means to ALL DCA's -- R.I.P -- Hooray.

 

However I'm sure this won't happen.

 

Can you imagine your friendly DCA writing to you -- You owe me xxxxx GBP but this debt is unenforceable so you don't have to pay it.

 

 

I think not somehow -- although wouldn't it be great if this DID pass into law.

 

Remember GUIDELINES are just that GUIDELINES -- they are NOT LAWS.

 

Cheers

jimbo

[Huff&Puff]

Remember GUIDELINES are just that GUIDELINES -- they are NOT LAWS.

 

Nevertheless, the more of these guidelines that the OFT produce that then ridden roughshod over by DCAs, then the more chance there is of some or all of those DCAs losing their credit licences. Or of us being able to bring pressure to bear on the politicians to regulate this "despicable industry" to use their own words.

[angry cat]

The guidelines do state that if the original referred to any other document that must be sent too... so if the ppi referred to a booklet or such like then they should be sent too IMHO

 

S.

 

Yes Shadow, this has always been the case!

[Stephan56]

I remain unclear as to what is required to be produced if a "reconstituted" agreement is permitted to satisfy these requests - and permit further "chasing activity".

 

I they do not have to produce the origianl agreement, do not need to produce anything with my signature on it, do not have to produce anything that looks like an "agreement" - then what actually do they have to produce? Just some terms and conditions in force when/if there ever was an agreement.

 

Maybe one tactic, when making a Section 77-79 request is to ALSO ASK for a copy of any "legally enforceable agreement". At least you are then on reconrd as to having requested it - and questions rasied why the DCA/OC did not provide it.

 

I think the OFT material is weak as it it is - and if further weakened by industry lobbying, then will be next to worthless.

[BARFLY]

They'll ignore these guidelines. In response to my section 78 request they sent an application form without prescribed terms. When I pointed out this was unenforceable they responded that in their opinion it was enforceable - that it stated on the application form "Consumer Credit Agreement.." etc. They know this not to be true. They know that I know it not to be true. So what's changed? If I send them a letter stating the OFT guidelines do you think they'll write back saying that the agreement is unenforceable? No chance. By the way, i've been reminding them of OFT guideliens on debt collection for the past two years and they've blatantly ignored each and every one of them. What a surprise. A dim view! Your having a laugh!

[make them aktiv runners]

It added: "No communications or requests for payment should in any way threaten court action or other enforcement of the debt where the creditor or owner is aware that it cannot or will not be entitled to enforce."

 

Keywords highlighted.

 

This is a delight for the industry. Only in section 5 after failing to send a reconstruction do they actually have to check there is an original. The guide basically says they can reconstruct agreements to mirror what would have been completed by reference to anything on their systems, that in itself says they do not have to look at the original at all.

 

The only time it is wrong to reconstruct an agreement is if there never was one completed in the first place. Again it clarifies that by never being one means that type of contract would never have required an agreement.

 

For enforcability threats, this can be done if the creditor is unaware of it being unenforceable. Think about it, DCAs have been named as creditors by OFT yet they will never see the actual document held by OC as a reconstruction can be done, so the spirit of the guide gives them an immediate get out.

 

The only aid to consumers is a weak comment that an original copy can be added to reconstructions to save disputes, it goes on then to say it is not compulsory to do so.

[BARFLY]

That's the gist of it. This does nothing for the consumer. It's groundhog day. You tell them about the guidelines and the reasons for any agreement being unenforceable. They completely ignore your letter and threaten legal action. Unless they take you to court and produce an agreement how will anyone ever show them that their agreement is unenforceable? You can't.

[lexis200]

I agree with pretty much all of the above.

 

If they were actually intending on helping the consumer they would a) make damn sure they chased up complaints and actually did something about them, and b) have included somewhere, anywhere, in this new guidance that if a direct copy of the original was not available, or that it doesn't exist then they (the creditors/dca's) are stuffed.

 

For crying out loud, the only reason the true-copy-but-with-omissions was there in the first place was because it was before it was easy/possible to make a complete copy including a signature. We have scanners and copiers now, so why on earth are they still being given a get out if they can not provide the original agreement??

 

It should simply be that they have to give us a direct copy with a signature, full stop. As it's quite possible that this would have to be sourced from OC's or large archives, I think it would be reasonable to extend their compliance time to, say, 21 days (pulling a number out of thin air) as the 12 days was way back when there were not the sheer volume of agreements knocking about that there are today.

 

Apart from anything this would save a hell of a lot of time for both the consumer and the government bodies who have to deal with our complaints when the banks use loopholes to get out of their requirements.

 

Bah humbug to the lot of them.