Unenforceable Credit Agreements

You have probably hread already the problems around the legality of credit and loan agreements made before April 2007. The law changed in April 2007, but prior to that, all UK credit agreements (Loans & Credit cards) were bound to conform to the Consumer Credit Act 1974.

The 2007 act states that credit agreements need to be set out in a certain way and to contain specific information, for instance the APR must be included in credit agreements and pre-contract information and also notification to the borrower of any variation that may happen to an agreement.

It has become apparent and challenged, that some of the agreements did not conform to the act and are therefore legally unenforceable. There is now a widely used term of Unenforceable Credit Agreements that refer to these potential unlawful agreements. What this means for you, is that if you default on a loan repayment or credit card, then the lender can take you to court to reclaim the outstanding balances, but if the agreement between the lender and you is unenforceable then the court cannot rule in favor of the lender and force you to repay the balance.

The lender is actually aware of this and usually after they have reviewed the agreement will not take you to court as they already know they would not win so to save costs, they cancel the debt and write it off.

Information can be found at Unenforceable Credit Agreements