This chapter:
applies to a firm with respect to consumer credit lending and a firm with respect to consumer hiring;
does not apply to the obligation in or under section 78(4), (4A) or (5) of the CCA on a lender to give regular statements where running-account credit is provided under a regulated credit agreement.
The FCA takes the view that sections 77, 78 and 79 of the CCA should be read in a way that allows the borrower or hirer to obtain the information needed in order to be properly informed without imposing unnecessary burden on firms.
The statement referred to in the relevant section must be prepared according to the information to which it is 'practicable' for the firm to refer. In the FCA's view, this means practicable at the time of the request and includes information which can reasonably be obtained from third parties.
Firms should take steps to ensure that information is preserved and kept available to be used to give information to a borrower or hirer.
A request must be from or on behalf of the borrower under sections 77 and 78 or from or on behalf of a hirer under section 79. This would include a friend or relative, a solicitor, a claims management company or other third party. Under data protection legislation, the lender or owner is not allowed to reveal such information to a third party without the authority of the borrower or hirer. It should therefore satisfy itself that the person making the request has proper authority to obtain the information. If a copy of such authority is not enclosed with the request, the lender or owner is entitled to reply by asking to see the authority.
Where there are two or more borrowers or hirers and the request comes from one only, it must be nevertheless complied with, and the response must be given to both (or all) borrowers or hirers.
If the recipient considers that another person is the lender or owner, the recipient should either inform the applicant of who it considers is the correct recipient or pass the request on to that person.
In accordance with the sections referred to in (1) the firm must 'give' a copy of the executed agreement and any other document referred to in it and the required statement. In the FCA's view, sending a copy of them by ordinary second class post will suffice. Guidance on what constitutes a copy is given below and found in the case of result matched startCarey v HSBC Bank plcresult matched end [2009] EWHC 3417 (QB).
The duty under the relevant section does not apply if no sum is, or will or may become, payable by the borrower or hirer under the agreement. This is irrespective of whether the agreement may have been terminated.
The copy of the executed agreement should be a 'true copy' of the original. However, as confirmed in the case of result matched startCarey v HSBC Bank plcresult matched end [2009] EWHC 3417 (QB), in this context the term 'true copy' does not necessarily mean a carbon, photocopy, microfiche copy or other exact copy of the signed agreement. There is no obligation to provide a copy which includes a copy of the signature.
The firm can reconstitute a copy. It can do this by re-populating a template of the relevant agreement form with the details of the specific agreement taken from its records. If the firm does provide a reconstituted copy, it should explain that that is what it has done, to avoid misleading the customer that this is a contemporaneous copy.
The terms and conditions should be those applicable at the time the agreement was executed. The name and address at the time of execution must be included.
The reconstituted agreement should contain a heading prescribed by the CCA and any relevant cancellation notice.
If the reason why no copy is given in response to a request under these sections is that there never was an executed agreement, the firm should acknowledge this in its response.
If the agreement has been varied, the duty is to provide not only a copy of the agreement as originally executed but also either:
a copy of the latest variation given in accordance with section 82(1) of the CCA relating to each discrete term of the agreement which has been varied; or,
a clear statement of the terms of the agreement as varied.
Further, section 180(1)(b) of the CCA and regulation 3(2) of the Consumer Credit (Cancellation Notices and Copies of Documents) Regulations 1983 expressly allow certain matters to be omitted from the copy. There may be excluded from the copy of the executed agreement to be provided under these sections:
any information relating to the borrower, hirer or surety, or information included for the use of the lender or owner only, which is not required to be included by the CCA or by any regulations made under the CCA as to the form and content of the agreement;
any signature box, signature or date of signature;
in the case of pawn agreements, any description of the article taken in pawn.
If the firm possesses insufficient information to enable it to ascertain the amount and date of any sum which is to become payable, it is sufficient to indicate the basis on which they would fall to be ascertained.
Failure to comply with the provisions means that the agreement becomes unenforceable while the failure to comply persists, and the courts have no discretion to allow enforcement.
In such cases, a firm should in no way, either by act or omission, mislead a customer as to the enforceability of the agreement.
In particular, a firm should not in such cases either threaten court action or other enforcement of the debt or imply that the debt is enforceable when it is not.
The firm should, in any request for payment or communication relating to a payment (other than a statement issued in accordance with the CCA or regulations made under it which does not constitute or contain a request for payment) in such cases, make clear to the customer that although the debt remains outstanding it is unenforceable.
In the judgment of result matched startMcGuffick -v- The Royal Bank of Scotland plcresult matched end [2009] EWHC 2386 (Comm) Flaux J held in a case under section 77 of the CCA that passing details of a debt to a credit reference agency and related activities do not constitute enforcement under the CCA. He also held that steps taken with a view to enforcement, including demanding payment from a claimant, issuing a default notice, threatening legal action and the actual bringing of proceedings, are not themselves 'enforcement' under the CCA. On the other hand he confirmed that the actions listed under sections 76(1) and 87(1) of the CCA did amount to enforcement notwithstanding that some of the actions 'less obviously' amounted to enforcement. These actions are demanding earlier payment, recovering possession of goods or land, treating any right conferred on the debtor by the agreement as terminated, restricted or deferred, enforcing any security and terminating the agreement.
While Flaux J agreed with the decision of HHJ Simon Brown QC (sitting as a Deputy High Court Judge) in result matched startTesco Personal Finance v Rankineresult matched end [2009] C.C.L.R. 3 that commencing proceedings was not enforcement, but a step taken with a view to enforcement, both he and HHJ Simon Brown appear to have been drawing a distinction between commencing proceedings and entering judgment in those proceedings.
This guidance deals only with the question of whether an agreement is unenforceable in relation to sections 77, 78 and 79 of the CCA. A lender's rights to enforce an agreement may be restricted for a variety of reasons, by the Act, by or under the CCA and by virtue of the general law.
However, where a firm is aware that an agreement is unenforceable because of non-compliance with an information request under section 77, 78 or 79 of the CCA, a firm should make it clear when communicating to a customer about a debt that the debt is in fact unenforceable. Failure to do so, in that case, would in the FCA's view unfairly mislead the customer by omission. Any communication that implies expressly or otherwise that a debt is enforceable when it is known that it is not, would be misleading. One way to avoid this would be for the firm to explain to the customer the full meaning of 'unenforceable'.
