In a landmark claims management case at the High Court, Judge David Waksman clarified a number of points over the enforceability of consumer credit agreements.

He upheld that banks can enforce debts even if the original agreement of the loan or credit card has been destroyed and that a creditor can fulfil its duty, by providing a "reconstituted version of the executed agreement which may be from sources other than the actual signed agreement itself."

Judge Waksman decided that these other sources could include other data held by the bank about their customers, and it could be recreated by drawing on the standard terms and conditions that the bank applied at the time.

He added, therefore, that if the creditor does not have the original executed agreement, this is not itself a "bar to compliance" with the Consumer Credit Act, because of the other sources that can be used to provide a reconstituted version.

But he also stated that if a creditor could not supply a copy of the loan agreement at all, then this automatically prevents them from using the courts to chase a debt until they provide one. A copy also must contain the name and address of the borrower as it was at the time it was signed.

The case in front of Judge Waksman was one of six test cases from which it is hoped that clarity would be provided on how creditors can ensure they are compliant with the CCA, when they face claims from consumers that their debts are unenforceable.

Under section 77 to 79 of the Act, lenders must supply a copy of the credit card or loan agreement to the borrower when one is requested, but there were ambiguities over what constituted a true copy of the agreement and in what form it should be provided.

Some claims management companies had argued in the courts that debts were not legally enforceable if an acceptable copy was not provided, because failure to provide one did not comply with the Act.

But Judge Waksman upheld that the purpose of obliging lenders to provide a copy of the agreement as not to prove that the agreement was fully compliant in the first place, moreover that it should provide the consumer with information about the state of the account.

But he also said that creditors could not invent the loan agreement retrospectively to comply with the Act.

He added that the copy of an agreement must be honest and accurate and must be based upon records held on the debtor and the agreement originally struck with the debtor.

Source: Credit today