OFT Issues New Guidelines On ‘Unenforceable Debts’

The Office of Fair Trading (OFT) has published a guide on the rights that consumers have to request information about their debts with lenders.

The guide explains that for a payment of a £1 fee, consumers can request a copy of their credit or hire agreement from their lender and any information held on their loan account.

Information about what was covered under the terms of the original agreement, if any changes have been made to the agreement and how much is still owed, can be requested by the borrower under the terms of the Consumer Credit Act and explained in these new guidelines.

The lender is obligated to provide this information, and if it fails to do so, the loan agreement becomes ‘unenforceable’ which means that the lender cannot get a court judgement against the borrower, take back hired items or items bought on credit, or take anything used as security (such as your house if you have taken out a secured loan) when the agreement was made.

Having your loan declared as ‘unenforceable’ does not stop or reduce your obligations to repay the loan, the OFT is warning.

Interest could be added to the loan or hire agreement, default charges could be made, and any failure to pay could impact on your credit record. The guide also explains that the debt is enforceable again as soon as the lender provides this information.

Ray Watson, Director of the OFT’s Consumer Credit Group offers this advice:

“Consumers have a right to information on debts they owe, but it is important that they realise that these sections of the [Consumer Credit] Act cannot be used to write off legitimately owed debts.

“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. Consumers can get free advice on debt by contacting Citizens Advice or the Consumer Credit Counselling Service.”