Simon Read: Wriggling out of debt is not proper justice
Saturday 09 January 2010
It looks like common sense will prevail in the attempt by some borrowers to have credit card debts written off. A judge ruled at the end of last month that credit agreements can't be deemed unenforceable. His ruling was the opposite of advice peddled by claims companies that have been telling borrowers for months that they could effectively get away without paying back the money they borrowed from credit card companies.
The claims companies have been signing up thousands of struggling families with heavy debts on the promise that they could wriggle out of the money they owe through a legal loophole.
The firms suggested that credit card companies could not force people to pay back their debts if the lender could not provide an exact copy of the original credit card agreement under the terms of the previously little-heard-of Section 78 of the Consumer Credit Act. Borrowers could also walk away from loans if the agreement had a minor error in it, the claims companies said, although the focus of their activities was on loan agreements made before 2007. After this date, apparently, the legal loophole was slammed shut by savvy lenders.
But the judgment on a trial brought against lenders at Manchester District Registry Mercantile Court on December 30, has blown the claims companies' argument to bits.
Judge David Waksman ruled that banks and credit card companies are entitled to chase debts even if they have lost the original credit agreement. Effectively he ruled that a copy of the original credit agreement rather than the original would be enough. Lenders simply have to provide "a reconstituted version... which may be from sources other than the signed agreement".
The judge said that lenders can demand payment of the debts and can register non-payment with a credit reference agency. That black mark would hit people's credit score making it difficult for them to borrow again.
I applaud the ruling because the whole scheme seems to have simply been a way for people to wriggle out of debt when they had no moral right too. If you borrow money, then you should pay it back, simple as that. I sympathise with those that have subsequently struggled because of a change in their circumstances, such as losing a job, but rather than trying to get out of their responsibilities, people should deal with them. If you are struggling with money there is plenty of free advice out there to help get you back on your financial feet. Citizens Advice, for one, has money experts at most branches that offer a helping hand.
But beyond the moral principle, there's something else at stake – justice. Banks do make mistakes and should be brought to book for them. But while these thousands of somewhat spurious claims have been going through the courts, real cases may have been lost in the mass of actions. How many people have suffered extra hardship because of the actions of these claims companies?
I'd hope the firms would turn their attention to finding real victims to help, but they won't as there are no fat fees in it for them.
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