At long last good news for creditors on Default Notices.
As the credit industry will know Default Notices continue to come under close scrutiny by individuals/organisations wishing to challenge liabilities arising under CCA regulated agreements. An allegation that a Default Notice is defective has been a mainstay in template defences for some years.
A creditor’s task is not made easy by the complexity of the governing secondary legislation – the Consumer Credit (Enforcement Default and Termination Notices) Regulations 1983. Matters were made worse by the 1998 Court of Appeal decision in Woodchester v Swain which ruled that overstatement of arrears rendered a Default Notice defective preventing a creditor obtaining Judgment for the full balance in recovery proceedings. Whilst the court tentatively left open a “de minimus” exception reference was made to a lender’s “ability and the resources to give …… information with precision”.
Further bad news was brought by the Court of Appeal ruling in American Express v Brandon that (in the case before it) the creditor should not have Summary Judgment where the Default Notice clearly did not allow the statutory 14 days to repay the arrears. Whether or not the error could be “excused” as “de-minimus” was something which had to be considered at full trial.
For a variety of reasons many Default Notices issued by creditors actually understate the arrears and we have noticed a tendency for debt challengers to argue that such understatement renders the Default Notice defective.
This particular point arose in HFC Bank Limited v Moody (Central London County Court, 7th February 2013, Mr Recorder Male QC, unreported) where we successfully represented the Bank in opposing an application by a debtor for permission to appeal against a previous award of summary judgment. In allowing the judgment to stand the Recorder clearly rejected the argument that understatement of arrears rendered the Default Notice non CCA compliant. Not only would we argue that is legally correct (after all the Act specifically provides that if the debtor pays the arrears the facility continues) but it also accords with common sense. No prejudice was caused to the debtor by the understatement and the difference would have worked in his favour had he been able to pay.
An important decision we believe because accuracy requires complete alignment of potentially separate systems dealing with statements of account and the issue of a Default Notice. That in turn would have left creditors worrying whether the difference/discrepancy was caused as a result of isolated issues or a systemic error.
Hopefully the credit industry can breathe a sigh of relief on this particular point.
Jeremy Bouchier – Senior Solicitor