McGuffick v Royal Bank of Scotland plc
QBD Commercial Court 06/10/09 [2009] EWHC 2386
This case arose from the activities of a claims management company, Cartel
Client Review, in Manchester.
The consumer took a £17,034 loan out with the bank in 2005. It was taken as fact
that the agreement was properly executed, so ss 61, 65 and 127 of the Consumer
Credit Act 1974 were not in issue. In 2006 and 2007 his payments ceased,
although some help was provided by a payment protection insurance policy which
he had taken out.
By May 2007, he was over £2000 in arrears and the bank issued a default letter,
which was accompanied by a form letter headed "Formal notice of intention to
file a default and to take action to recover debt".
In February 2009 MJP solicitors, acting for the consumer, made a s.77 request
for a true copy of the agreement. In their letter they stated that they regarded
the agreement as in dispute, and that no credit reference agency was to be sent
information until the matter was resolved. The bank could not comply with the
request within the statutory 12 working days, and wrote to the consumer stating
that they knew they could not enforce repayment, but that the consumer should
continue to meet his obligations under the agreement, bearing in mind that it
was not void but valid, and that any continuing default would be reported to a
credit reference agency. The bank's normal strategy was not to pursue legal
action and to put a stop to all collection activity
Correspondence ensued, and MJP threatened proceedings for a declaration of
unenforceability and for an injunction if the consumer's credit rating was
affected.
On 11 May 2009, the bank sent a copy of the agreement, which it had now located,
and stated that enforcement action would re-start. Inadvertently, the bank
failed to include a statement of account.
The bank found out about the launch of these proceedings and suspended
enforcement action. Although it could easily have made the loan enforceable by
serving the statement, it agreed with MJP that it would not do so, enabling the
court to examine the issues raised.
The court differentiated between absolute unenforceability under s.127(3) and
"redeemable" unenforceability under ss.77-79, which can be resolved by the
creditor's compliance.
It then stated that taking enforcement action did not include precursors to
enforcement action, such as credit reference agency referrals or the bringing of
enforcement proceedings. It accepted the bank's argument that otherwise it
would be unable to request a court order under s.127(3) because this would be
barred by s.65.