'Unenforceable debts' claims set to be thrown out

Posted in 'Dealing with Debt' by Richard Catlin

15 May 2009

The latest fad amongst claims-management companies, promising to wipe out existing debts based on legal loopholes in the original contracts, could be stopped dead following a ruling by a County Court Judge.

Based on a largely unfounded notion that consumer credit agreements are legally unenforceable, a number of claims firms have jumped on the bandwagon and have launched advertising campaigns promoting their services.

The Citizens Advice Bureau (CAB) has issued a warning about these ads, with just a few of the overblown claims they highlight including:

• Eighty percent of credit agreements are unenforceable.
• 100 percent guaranteed success rate.
• Fast results guaranteed!

The majority of these promises require consumers who are already in financial difficulty to part with an up-front fee of around £500 – with no real guarantee of success. The CAB has reported one case where an indebted couple were on the verge of handing over £1275 to a firm with almost no chance of their debts qualifying for write- off.

The law can of course be a bit of a lottery, and despite a small number of ‘unenforceable debt’ claims being upheld, a County Court Judge in Chester has now announced that all outstanding claims should be put on hold until “a few carefully selected” test cases have been examined and determined.

Because of the number of cases now queued in the courts system, Judge Derek Halbert has effectively put a block on all existing claims. Aware that a repeat of the bank charges court case – which threatens to go on indefinitely in the wake of lender appeals – would suit no-one, the proposed test cases are likely to set a precedent for future claims.

The Solicitors Regulation Authority (SRA) has also warned its members not to get involved in cases where such overblown cases are made, and are even investigating 10 firms who may have breached their code of conduct.

Pending the outcome of the test cases, any consumers challenging lender agreements must continue to repay their borrowings, or face debt collection and serious damage to their credit files.

Anyone struggling with existing debts can get free, impartial advice in our Debt Advice Centre, whether it’s a long-term concern, simply a shortage of monthly cash, or anything in-between.