Finance Focus
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The recent case of Keith Harrison has highlighted an critical issue for borrowers and lenders.

Some courts are siding with end users in debt, if their loan companies, such as credit card companies, have failed to abide by the strict demands of the consumer credit laws.

Normally these debtors haven’t denied running up debts on their cards.

But they have challenged their loan companies to prove they’ve jumped through all the hoops required to get their cash back again.

Part 78 from the Consumer Credit Act demands a credit card lender delivers what is identified as a “actual duplicate” of its original loan agreement when the borrower asks for one.

This really should exhibit all the original terms and conditions (T&Cs), including information including the rate of interest.

Plenty of current cases have shown providing a satisfactory copy can be tricky if a lender has misplaced, thrown aside or poorly archived some of its original documentation.

And that can mean the lender fails to get its money.

“Prior to now a number of the really well known banks haven’t kept copies of standard form agreements,” says Ray Cox QC, a foremost barrister specialising in banking legislation.

“Prior to now it has not mattered too much – now the agreed terms are an Exocet [missile],” he states.

Fundamental breach

Mr Harrison had gone to court to avoid a debt collection company, Link Financial, forcing him to pay back greater than £20,000 outstanding on his credit card.

He was in a position to convince the High Court that MBNA, the original credit card issuer, had probably not supplied him with the needed T&Cs when it had initially issued him the card in 1998.

That is certainly a elementary breach of the regulations and can mean the debt is totally unenforceable.

The judge’s decision hinged partly on the fact MBNA couldn’t provide a entirely accurate copy of the standard loan agreement that applied to Mr Harrison, despite the fact that his was one of five million sent out in a marketing mailshot.

The card business revealed to the court it didn’t have a library of those standard form docs issued prior to 2004.

The MBNA witness, a senior in-house lawyer, said to find the forms, which had not been kept in an archive, she had needed to search filing cabinets, the desks of MBNA employees and also the lofts in bank buildings.

Even then, the reconstructed backup was not entirely precise as it mis-stated, slightly, the rate of interest that had been applied to Mr Harrison’s account.

His solicitors, Watsons of Llandudno, say this highlights a wider concern for financial institutions.

“We have had a number of cases where the bank has not been in a position to comply with area 78,” says Paul Tilley, a litigator at Watsons.

“We are in a position to show that the banks haven’t got it right all the time – we are not able to rely on what they say,” Mr Tilley adds.