Consumer protection--statutory wording and contractual effect

Consumer protection--statutory wording and contractual effect

What rights do consumers get when a lender uses documentation compliant with the Consumer Credit Act 1974 (CCA 1974) for loans outside the scope of the Act? David Bowden comments on the submissions made to the Court of Appeal in the expedited Northern Rock appeal.

Northern Rock Asset Management Plc (NRAM) v Jeffrey McAdam & Ann Hartley A3/2015/0150

What is the background to this case?

NRAM, previously known as Northern Rock Plc, is the successor company to which Northern Rock Building Society transferred its business in 1997. This lender got into financial difficulties from August 2007 onwards. On 17 February 2008 it was taken into public ownership and is now indirectly wholly owned by HM Treasury. Since nationalisation it has not undertaken any new lending, but holds a substantial book of historic residential mortgages dating back before nationalisation. NRAM has to administer this secured lending book.

Under CCA 1974, s 77A there is the requirement to send periodic statements to borrowers. These s 77A statements have to contain certain prescribed information. If they do not, then interest is not chargeable during a period of default. The s 77A statements NRAM had historically sent were not compliant. NRAM had compensated borrowers whose lending was clearly within the scope of CCA 1974 because the loan was for less than £25,000. NRAM had another large group of 41,000 borrowers who had used its 'Together' mortgage to borrow sums above this limit, typically £30,000. NRAM disputed any compensation obligation to this group because it said CCA 1974 did not apply to them.

The only deficiency with the s 77A statements are they did not state the original amount of credit provided (as required), but the borrowers would have known how much they had borrowed so nothing was being concealed from them. The borrowers have not suffered any loss as a result of this minor omission.

There had been three schools of thought in relation to using documentation compliant with CCA 1974 for lending which was

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