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Credit, the law and you

By Chris Ball

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Published: 18Apr2009
Word count: 879
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Whenever you make use of Bank credit, you are creating a liability and by doing this you lose our financial freedom until it is gone. There is nothing called good credit - all credit is bad. We realise this fact only when we are faced with a change in our circumstances and we can keep up with the payments. It is then that lenders turn less than congenial and adopt unfair and coercive means to extract money from us. Sometimes we realise a bit late that some lenders create unreasonable and legally unenforceable clauses in the contract when extending loans. Most of the time debtors don't even know that they have legal recourse when confronted with such highly distressing demands. This is where debt write-off specialists come into the picture. With the assistance of these firms you can successfully get out of debt. But before jumping to that topic, it is relevant to understand the legal position of debtors in case of default. According to some estimates most credit agreements taken out before April 6th 2007 are illegal and therefore unenforceable under the law. The Consumer Credit Act 1974 lays down strict rules for banks, credit card and loan companies and ways to protect yourself in case of situations where these rules have been broken. In other words the law was enacted to provide legal protection to both consumers as well as lenders.

What are the salient features of Consumer Credit Act 1974? The act covers many of the issues which a debtor is likely to encounter while procuring a loan. The most important point to remember is to take loans from lenders who are licensed. This means they must obtain a consumer credit licence from the Office of Fair Trading. This does not mean that the licensees follow fair practices at all times but at least they are bound by the rules as per the Consumer Credit Act 1974. Obviously unlicensed lenders (commonly known as "loan sharks") rarely care about any rules as they are generally outside of the legal framework of the Consumer Credit Acts. But we are now talking about getting out of debt so it is time therefore to have a closer look at the agreement including interest rates. Due to the complexity of the Consumer Credit Act it was not uncommon for lenders fudge the details and include terms which are outside those permitted within the Act. Under such circumstances, debtors have a legal recourse. Of course it is advisable to consult professionals and obtain guidance. Legal representation is important if one desires proper relief and freedom from debt, but there have been a number of individuals that have taken the time to study the law and successfully write off their debts.

Consumer Credit Act 2006 Consumer Credit Act 2006 is the most significant change in the law since Consumer Credit Act 1974. It was felt that over a period of time the provisions under the original act had either been diluted or become irrelevant. For example the financial limit of £25,000 was felt to be insufficient keeping in mind the current value of money (the result of rising debt without the backing of tangible assets). The key implementation dates were 6th April 2007 and 6th April 2008. The changes to the original act have been made to empower the individual borrower against the all powerful Banks, whilst at the same time making the requirements on the bank easier for them to follow. The provisions under the law can be evoked to become totally debt free.

Debt Write-off Writing off debts through litigation or negotiation has become big business, with many, many legal firms and claims handling agencies getting in on the act. It has therefore become really difficult for many ordinary people to define which company to use. In general these firms fall into three categories:

1. Firms that work exclusively on a purely conditional fee basis, seeking to extract there profits from the bank.

2. Firms that work on a partially conditional fee basis, whereby the initial costs are covered by the customer, but the main area of profit comes from extracting money from the bank.

3. Firms that charge sufficient from the customer that they can negotiate with the bank to avoid litigation, thereby offering the bank a means to avoid excessive court costs.

Generally speaking the banks are more likely to accept a settlement that means they have no additional costs to pay rather than fight, when there is a high likelihood of increasing their losses. Unfortunately, most customers seek the lowest cost option, which also generally means the lowest likelihood of success. This is because there are limited funds available for the firm to use to investigate a case and get it insured against loss. This in turn has resulted in many individuals being advised to pay when the case could have actually been won. Negotiating the debt write-off industry is a bit of a minefield and for many the intricacies of the Consumer Credit Acts to complex to decipher alone. Not knowing which companies have the specialist knowledge to trust is a big problem for many. The best advice is to do your research, find out what the success rate of the firm is and make sure you are not underselling yourself. It's your credit that you are clearing, not theirs.

After the loss of his business of 21 years in the Banking Crisis, Chris Ball was left with debts that were beyond his ability to pay. He had to find a unique solution to this difficult situation. In the process he learned a massive amount about how debt works in society and why it is eventually bad for everyone. http://www.IDeserveDebtFreedom.com

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