By Elliot Wright, 14th January 2010
Some borrowers could see their debt written off as the Office of
Fair Trading (OFT) prepares to clear up the confusion surrounding
unenforceable credit agreements.
The OFT is set to clarify the recent court rulings which set
down the information lenders need to supply in order to be able to
chase customers for debt.
The watchdog will issue guidance which states that lenders do
not need to produce the original credit agreement documents to a
borrower on request, but only a "true copy" or reconstituted
agreement containing the original terms and conditions.
If the lender cannot supply any of these then the borrower may
be able to declare the agreement as "unenforceable" and see their
debt wiped out.
However, it is expected that the majority of lenders should be
able to comply with the rules and force borrowers to repay their
debts.
Over the past few years, a number of borrowers have used claims
management companies, charging up to £500 up front a time, to
pursue lenders for the original credit agreement and get their
debts written off.
However, with the new rules only a small amount of these claims
will likely to be successful.
The new guidelines come as a result of a test case in Manchester
last month where it was stated that a lender must provide a "true
copy" of a loan agreement under Section 77-79 of the Consumer
Credit Act within 12 days of a borrower requesting it.
If the lender fails to do so then the debt is deemed
unenforceable and the debt cannot be chased until a "true copy" is
produced.
Claims Financial
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