OFT Warns Consumers Against Credit Loophole Claims

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The Office of Fair Trading has warned UK consumers not to be taken in by claims of writing off debt by some debt companies. These companies claim to use sections 77/78/79 of the Consumer Credit Act 1974 to exploit a loophole that allows in certain circumstances for all debt to be cleared.

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The Office of Fair Trading has warned UK consumers not to be taken in by claims of writing off debt by some debt companies. These companies claim to use sections 77/78/79 of the Consumer Credit Act 1974 to exploit a loophole that allows in certain circumstances for all debt to be cleared.

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The OFT have recent published a guide explaining to consumers their rights to access this information. Breifly the guide outlines that for a fee of £1 consumers can request a copy of their credit or hire agreement, to enable them to find out more information on the account. This includes the details of the original agreement, if the agreement has been amended or changed and how much is left to pay to the creditors.

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Adebt may be deemed ‘unenforceable’ if the lender cannot provide the requested information, as they will be unable to file a County Court Judgement (CCJ) against the borrower for the remainder of the debt or any asset secured against the original agreement. However, although the debt might be unenforceable, the OFT warned consumers about the consequences of exploiting the loopholes.  Legally the moneyis still owed, irrespective of whether the debt is legally enforceable, which means interest and default charges can still be added to the outstanding balance and the borrower’s credit score could still be effected.

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Ray Watson, Director of OFT’s Consumer Credit Group, declares that “'Consumers have a right to information on debts they owe, but it is important that they realise that these sections of the Act cannot be used to write off legitimately owed debts”. While reinforcing the OFT’s encouragement for consumers to seek good quality debt advice “'Although the debt can be classified as unenforceable until the right paperwork is provided, people are encouraged to seek advice and help on how they can continue to repay the money they owe.”

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