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Can a borrower be a defaulter if a credit agreement is unenforceable?
Can a lender properly register a default with a credit reference agency where a borrower has not made payment under a so-called ‘irremediably unenforceable’ credit agreement? William Hibbert, a barrister at Henderson Chambers, considers the Court of Appeal’s decision in Grace and another v Black Horse Ltd.
Grace and another v Black Horse Limited  EWCA Civ 1413,  All ER (D) 05 (Nov)
The proceedings raised a question as to the legitimacy of registration as a default with credit reference agencies of a non-payment by a debtor (or hirer) of money contracted to be paid under a regulated, but irremediably unenforceable, credit agreement. The Court of Appeal, in allowing the claimants’ appeal against the judge’s finding that they had not established causation, held, among other things, that it had not been accurate to describe the first claimant as a defaulter under his hire purchase agreement once a competent court had decided that it had been irremediably unenforceable against him.
What is the significance of the Court of Appeal’s decision?
This was a case about whether a lender can properly register with a credit reference agency a default where a borrower has not made payment under a so-called ‘irremediably unenforceable’ credit agreement. ‘Irremediably unenforceable’ credit agreements (a phrase coined by Lord Hoffman in Dimond v Lovell  2 All ER 897) are agreements where, because of particular failures to comply with the requirements for the proper execution of regulated credit agreements, the court is prohibited from making an enforcement order by the Consumer Credit Act 1974, s 127(3) and 127(4) (CCA 1974). Even though these subsections have been repealed in relation to agreements made on or after 6 April 2007, there are plenty of credit agreements still in place to which they apply and Mr Grace’s hire-purchase agreement for a laptop computer was one such.
The case was a claim for damages brought by Mr Grace for
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