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Forward
Trust plc v Whymark Where a creditor seeks to recover sums outstanding under
a regulated consumer credit agreement in which a rebate is payable on early
settlement, judgement should be entered for the full outstanding amount owed by
the debtor. Mr Whymark was in arrears on a 10 year personal loan
agreement with the bank, who served him with a default notice under s.87(1) of
the Consumer Credit Act 1974. They required, if the default continued, payment
of the outstanding balance "less the rebate allowable". The bank
subsequently issued a summons claiming the outstanding balance, and the
Birmingham County Court, although originally granting judgement, subsequently
set it aside on the grounds that the amount awarded should have been the net
amount owing, after rebate. The bank appealed and Lord Donaldson, Master of the
Rolls, gave judgement in their favour. Forward Trust had not sought to make a windfall profit as
a result of suing to recover total indebtedness under the agreement, but they
objected to being placed at a significant disadvantage if they could only obtain
judgement for the rebated amount. The rebate represented future interest under
the agreement which, if they could have sued in the High Court, would have been
replaced by interest on the judgement debt. However, they were required (s.141
of the Act) to sue in the County Court whose judgements did not at present bear
interest. It was clear, from ss.94 and 95 of the Act, that Parliament intended
that a debtor should be entitled to a rebate if he discharged his indebtedness
before the time fixed by the agreement, whether through voluntary early
settlement or on a breach. The apparent conflict could be answered by the
Consumer Credit (Rebate on Early Settlement) Regulations 1983, in which the
formula for calculating the rebate required the "settlement date",
Regulation 6 defining this by reference to the date of payment by the debtor. On this basis, the debtor's position at the date when
judgement was entered was that he owed the full outstanding amount, and that
there was no reason why judgement should not have been entered in that amount.
Only when the debtor made a final payment of the agreement could a rebate (if
any) be calculated. The following effects of this judgement were noted by the
Court: (1)
Where a
county court permits payment by instalments, it will need to ensure that, if
discharge of the debt is going to be completed ahead of the original term of the
agreement, the creditor does not gain the advantage of not having to pay a
rebate which would otherwise be due. (2)
A
judgement for the full outstanding amount should never be ordered to be enforced
by the High Court (since this could create problems of interest being charged on
interest). (3)
If in
the future County Court judgements are allowed to bear interest, an exception
must be made for judgements in respect of consumer credit agreements to which
the rebate provisions apply. However there should be no bar to judgements
attracting interest after the date of expiry of the original agreement. (4)
Means
had to be found for informing the judgement debtor that, in some circumstances,
he might be able to discharge the judgement by paying a rebated amount, and for
informing bailiffs that their right to execute against goods would not extend to
taking more than was sufficient to satisfy the judgement debt less the
appropriate rebate. Lord Donaldson considered that forms of judgement should
be endorsed or specially printed to include the following wording:
"The judgement debtor can satisfy his obligations under this
judgement by paying the full amount adjudged due from him less any rebate
for early settlement to which he may be entitled under the Consumer Credit
Act 1974 and regulations made thereunder.
"The judgement debtor can find out whether any rebate
is applicable, and if so the amount of the rebate
by inquiry from the judgement creditor. In the event of dispute, the judgement
debtor should apply to the court for a determination of whether he is entitled
to any rebate and if so its
amount." This
form of judgement would also alert bailiffs asked to levy execution to the need
to take into account of the amount of any rebate likely to be applicable. |