When the financial crisis happened in 2008, there were many borrowers/credit card holders who faced being in default and the lenders took action to terminate the agreements and recover the sums due. When faced with thousands of pounds of debt, it is understandable that the debtor will consider whether there are any legal issues which will enable them to escape liability and probably bankruptcy. Some may say that as they took out the loan and had the money then they should pay it back and not try and find some obscure provision to avoid paying their debts. Such behaviour in their opinion is morally reprehensible. On the other hand, the organisations who lend the money and provide the credit cards should know the legal requirements or have the resources to check the rules and so there is no excuse if they do not comply with law. Those who lend money are required to have a consumer credit licence and to obtain such a licence they have to display that they are aware of the legal requirements. If they follow the correct procedures, then very few borrowers would be able to avoid payment.
A typical example of a process which can lead to borrowers being able to exploit the legal process is where, for example, a credit card company sells off many accounts to a credit purchaser a number of years after the accounts have gone into default. The debt purchaser will probably pay a few pence in the pound for each debt and therefore anything it manages to recover from the debtor is a reasonable return. The original creditor also believes that is it is better to sell the accounts for a much reduced price than to spend the time and effort in recovering the monies due. But herein lies the problem and hence the ability of the tenacious borrower to escape payment of the loan. It may seem unjust but if Consumer Credit legislation was introduced to protect consumers from unfair practices, is it unfair for the consumer to utilise the legislation if the borrower has made a mistake? It might be said that the law is weighted too heavily in favour of the consumer in that if the consumer makes a mistake then they are not faced with the same dire consequences, e.g. not being able to enforce payment of a loan, as faced by the creditor.
The issues and questions about an assignment often arise where debt purchase companies buy debts. The debts are bought for a few pence from Credit Card and Loan companies in the hope that they can recover some thing for little effort, apart from some chasing by debt collectors or the threat (and possibly issue) of court proceedings. Companies that sell the debt do not want to get involved in any disputes after the sale and this creates a problem for the debt purchaser. They probably have limited documentation and if a matter does progress to a court hearing they struggle to prove their case.
Summerfield Browne Solicitors have offices in London, Birmingham, Cambridge, Oxford, Leicester and Market Harborough
