2009 - The Banks' Annus Mirabilis: Through the Consumer Credit Looking-Glass

Away from the courts, 2009 may have been an atrocious year for the banks, yet in front of the senior judiciary they notched up a number of notable successes. Most widely-reported was Office of Fair Trading v Abbey National plc [2009] 3 WLR 1215, in which the Supreme Court effectively called time on the "bank charges reclaim" litigation clogging the county courts. Less well-publicised was a series of cases handed down, one every month, in October, November and December 2009 in which the courts cast a critical eye over many of the arguments raised by debtors against creditors in the current slew of litigation under the Consumer Credit Act 1974 ("the CCA"). In all three cases, the debtors' principal contentions were roundly dismissed. This article will summarise the key elements of each case in turn.

McGuffick v Royal Bank of Scotland plc [2009] EWHC 2386 (Comm), 6 October 2009

McGuffick concerned a loan entered into in October 2005. In February 2009, Mr McGuffick's solicitors made a request for a copy of his agreement, as well a statutory statement of account, under s.77 of the CCA. S.77 provides that the bank should provide a copy of the agreement and the statement of account within 12 working days, and that during any period of default it is not entitled to "enforce" the agreement: s.77(4)(a).

The bank failed to respond by the deadline. It had received hundreds of such requests from solicitors and claims management companies ("CMCs"). Eventually in May it found and served a copy of the agreement. It forgot to provide a signed statement of account. However, it continued to threaten that Mr McGuffick's details would be passed to credit reference agencies ("CRAs"). Mr McGuffick then issued proceedings for among other things a declaration that, because the bank had not complied with s.77, his obligations under the agreement were suspended, and for injunctive relief, restraining the bank from notifying CRAs of default during the period of non-compliance.

Cleverly, as it turned out, the bank chose not to rectify its omission in failing to serve a statement of account under s.77, so that the case could come on as a test case before Flaux J. The key issue that fell to be decided was the meaning of "enforce" in s.77(4)(a) of the CCA.

To lay the groundwork, Flaux J held that the effect of s.77 is not to extinguish the debtor's obligations during a period of non-compliance. He remains liable, say, to make instalment payments and if he fails to do so a debt will accrue due. The bank's mirror-image rights remain in existence during a period of non-compliance but are statutorily "unenforceable".

What, then, is "enforcement"? Mr McGuffick argued that any coercive action by the bank to compel or secure performance of his prima facie obligations under the loan was "enforcement", including reporting to CRAs. However, he conceded...

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