Reconstituted agreement suffices

24.02.10

 

This article was written by Greg Standing, partner in Wragge & Co LLP's finance, insolvency, recoveries and sales team and published in the February issue of Motor Finance.

In the latest in a line of decisions in favour of finance companies engaged in writing Consumer Credit Act 1974 (CCA) regulated business, the High Court has provided further guidance arising out of s78 CCA request for information.

In Carey & Others v HSBC Bank PLC & Others, His Honour Judge Waksman QC held:

• Lenders can satisfy a s78 (and s77) request by providing a reconstituted version of the executed agreement, which may be reconstituted from sources other than the actual signed agreement. A copy of the original signed agreement itself does not have to be provided.
• The copy provided must contain, amongst other things, the name and address of the debtor as at the date of the agreement.
• The document need not comply (if signed) with the requirements of the Consumer Credit (Agreements) Regulations 1983 (CCAR) as to form, as at the date the agreement was made.
• If an agreement has been varied, a (reconstituted) copy of the original agreement must be provided along with a (reconstituted) copy of the amended agreement.
• A breach of s78 does not of itself give rise to an unfair relationship within the meaning of s140A CCA.
• The court can exercise its discretion and make a declaration that there has been a breach of s78, depending upon the facts of the particular case. If the lender has admitted the breach in the proceedings, the court will not make such a declaration.
• In determining whether the debtor has signed a document stated to contain the "prescribed terms", the court held that, for the purposes of s61 and of s127(3) CCA, the document need not be a single piece of paper. A physical connection between several pieces of paper is not necessary. Where the debtor's signature and the prescribed terms are on separate pieces of paper, the question of whether together they constitute one document is a question of substance, not form. Mere cross-reference to prescribed terms without a copy being supplied to the debtor at the time of signature would not suffice.
• If the lender cannot establish, following a trial, that there was a document signed by the debtor containing the prescribed terms, that would not of itself entail an unfair relationship.

Comment

This decision will hopefully put an end to many cases currently being dealt with which were instigated by claims management companies.

It is clear now that a reconstituted copy of the original document will suffice. The judge held that, as a matter of good practice, lenders should consider telling debtors that a reconstituted document is just that. Even if an agreement cannot be reconstituted and therefore there is a breach of s78, although the agreement may be unenforceable pending compliance, that does not mean there is an unfair relationship.

Procedures should be put in place to ensure that the information required to reconstitute documents is retained.

For further information about this published aticle, contact Kathryn Hobbs on +44 (0)121 213 2397, Amie Ryalls on +44 (0)121 213 2360 or Rebecca Davies on +44 (0)121 213 2396

This published article may contain information of general interest about current legal issues, but does not give legal advice.