Challenging loans/credit card debts themselves. Opinions?

MSE_Martin · 5 April 2007 at 5:39PM

New Consumer Credit act regulatoins come into force tomorrow, making it easier to challenge the consumer credit act. Plus a website's been set up promising to allow people to check whether their loan/credit card debt is enforceable. I've been mulling over the issues and haven't yet made up my mind, so I thought I'd lay it out here and canvas views

The consumer credit act is not something I've studied in any detail yet; so it's quite a difficult one to think about.

Challenging a credit agreement may make it unenforceable

If a credit agreement, which could be for a loan, credit card, or any other borrowing under £25,000 is challenged in Court it can be declared unenforceable, which literally means it needn't be repaid.

This is a tool, that to my knowledge the CAB has utilised a few times for unsigned agreements, to get people out of loans with bad terms.

What's the 'challenge it' website

It's a commercial not a consumer site, which promises a tool to easily allow people to check credit agreements. Yet if you want to challenge them either you need go on a 'no win, no fee' basis' or pay it £30 for a report and then challenge it yourself.

If you'd like to look it's http://www.financialagreementsolutions.co.uk/index.html (not a recommendation - just for information)

Is it worth doing?

The possibility is you could wipe out your debt based on a technicality. That certainly is, in monetary terms, if it works, worth it, and FAS says there are many loans in this position.

I must admit it raises some ethical questions for me, that I've not resolved yet.

Reclaiming bank charges is about taking on an unfair, overly penal system, that snowballs peoples financial problems. Yet if someone borrows £5,000 at 6% with reasonable terms and can afford it - is it right to encourage them to challenge it on a technicality? Would this not, if the claims of the company that a substantial number of credit documents are in error, fundamentally lead to a problem of legitimacy in the Consumer Credit market which could cause problems to the wider economy.

Remember the email from this site reaches 1.1 million people and the site is read by nearly 3 million a month - that number of people alone could have a massive impact - never mind other media appearances I could do on it.

Your thoughts

Above are my very basic, unresearched mullings. I've not really checked out the technicalities, the veracity of the site, or legitimacy of the claims yet, but the theory is interesting. I would love MoneySavers views.... what would you do if you were me?

Martin

Updated Info 10 April 2007

Having done a wee bit more digging on this, a few more details for you on challenging enforceability. The new change to the consumer credit act has an interesting impact on this - it makes it easier for people to challenge based upon unreasonable terms, but more difficult for people to challenge solely based upon technical defficiencies in drafting.

It's therefore likely that if a loan agreement is "just and equitable" even if it has a "technical defficiency", a judge would uphold its legitimacy.

Discuss this blog

tru · 5 April 2007 at 5:46PM

Not sure about that, I wouldn't have a problem with anyone that does it but I won't be doing it. I spent the money and I'm paying it back no matter what.

LondonDiva · 5 April 2007 at 5:54PM

I'd be concerned that people would purposely take on debt that they had no intention of paying and think it was ok because it's a big, bad bank.

Money saving - yes. Essentially encouraging people to knowingly commit fraud and theft - no

Beanietdc · 5 April 2007 at 5:54PM

Not sure here either. Some people may see it as a way of avoiding their responsibilities. Like Tru.. I spent the money - I have to pay it back. I know not everyone is in the same situation but for me it's quite simple.

ZTD · 5 April 2007 at 6:01PM

How would such an event be represented on your credit record?

I don't think it is going to be a problem to virtually all lenders, as it would seize up the banking system in very short order if it was. That would be "bad news" (TM) for everybody.

System · 5 April 2007 at 6:02PM

That would open some serious floodgates and I fear it would unfairly have greater ramifications in different areas.

Odd_Fellow · 5 April 2007 at 6:06PM

It's an interesting point.

I agree with the comments made already. If you can't afford the repayments, don't take out the credit.

However, let's look at it from a different position. These credit companies have the resources to get it right - first time, every time. They write the credit agreements - they are responsible for working within the law.

Like the banks, if they screw up, it's their fault, not ours. In situations like this, I believe that they have got it coming.

BritBrat · 5 April 2007 at 6:08PM

Bank over charging is one thing, trying to get out of a loan just because you can when you had freely agreed to it is another issue.

I can see people taking out loans just to get them canceled.

No No No, we will all end up paying for it later as we will with the bank issue in the end.

Swishter · 5 April 2007 at 6:10PM

From my standpoint if you take out a debt you have a moral obligation to repay, not to look for ways out. But at the same time if companies demand that we follow their rules they should follow their own obligations.

However if certain companies set up agreements purely to take advantage of people in dire straits then I think that they should take everything thats coming to them.

I think that its a difficult and murky issue, most likely some companies are out there to take advantage but at the same time some individuals are trying to take advantage also.

Interested to hear what others have to say!

mountainofdebt · 5 April 2007 at 6:17PM

I must admit I rarely get annoyed with other MSErs, even when they complain about having no money but refuse to accept that there are areas of their spending that they could do without. However my blood pressure does go up slightly when I see it said to people that catalogue debts are not inforceable if th e companies can not provide copies of the credit agreement.

It may be legally right but it seems morally wrong in my view to accept goods and then not pay for them.

System · 5 April 2007 at 6:21PM

It's one thing reclaiming unlawfully imposed bank charges but it's another thing altogther trying to wriggle out of an entirely legal agreement on a technicality.

I tend to agree with others who have posted, if you've spent the money you should be prepared to pay it all back at the agreed rate.

Interesting subject none the less, and I would be very interested to see how it would impact credit reference files as I have some negative information I would like removed from 3 years ago (I'm good now!) and it was off the back of an unsigned credit agreement.

I'll keep a watch with interest.

Regards
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Challenging loans/credit card debts themselves. Opinions?

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