Readers are likely to have seen an increase in requests for
information under sections 77(1), 78(1) and 79(1) of the Consumer
Credit Act 1974 (the Act). These requests are often driven by
claims management companies on fishing expeditions. The Office of
Fair Trading (OFT) has published a draft guidance note to help
businesses comply with their duties to give debtors and hirers copy
documents and statements of account under the Act.
The requirement under the sections is for the creditor or owner
to provide, within the prescribed period after receiving the
request in writing and payment of the £1 fee, a copy of the
executed agreement (if any) and any documents referred to in it,
together with a signed statement of account.
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The guidance note should be read for its full effect and
suggestions as to best practice but the headlines are set out
below.
The creditor or owner includes the party entering into the
agreement or anyone to whom the rights and duties under the
agreement have passed, for example if the agreement is assigned to
another lender. If the wrong recipient receives it, the request
should be passed on to the correct creditor, or the debtor advised
accordingly. The creditor must satisfy itself that a third party
making a request on behalf of a debtor has proper authority to
obtain the information. If the third party is a solicitor,
authority can be assumed. The response must be given to all debtors
even if the request comes from one only.
Although the £1 fee may be inadequate to cover the cost of
compliance, the creditor cannot ask for more in order to
comply.
The information should be sent by second-class post (unless the
agreement provides otherwise) to the address given in the request
within 12 working days after the request is received.
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By GlobalDataA true, legible copy of the executed agreement (and of any
variations to it) should be provided. That does not necessarily
mean a photocopy of the original signed credit agreement. If
necessary, a copy can be reconstituted containing the terms and
conditions applicable at the time of the original contract together
with all the prescribed information and statements of protection
and remedies required by the Consumer Credit (Agreements)
Regulations 1983 that were set out in the executed agreement.
The statement of account is to be prepared according to the
information to which it is practicable for the creditor or owner to
refer at the time of the request, which can include information
obtained from third parties. The statement must be signed by or on
behalf of the creditor or owner and is then binding on the creditor
or owner. The statement must show certain specified information
depending upon whether the agreement is a fixed-sum,
running-account or hire agreement.
The sanction for non-compliance with an information request is
unenforceability of the agreement for so long as the creditor or
owner fails to comply with the duty. The Act makes it clear that
enforcement means more than just obtaining a court order. It
includes demanding earlier payment of any sum, recovering
possession of any goods or land, treating any right conferred on
the debtor or hirer by the agreement as terminated, restricted or
deferred.
Comment
I have seen a number of lenders who have failed to comply with a
request resulting in proceedings being issued to compel them to
comply. In fact, compliance should not be too onerous for the
lender – it is simply a matter of implementing a procedure to deal
with a request on a timely basis. If in doubt, lenders should take
legal advice on their duties.
Greg Standing is a partner in Wragge & Co LLP’s Finance,
Insolvency, Recoveries and Sales team
