The lender used part of the loan to repay a small amount of arrears of the claimant on another loan. The part so used was not part of the objective of the loan, but one of the costs of obtaining it.
Held: The deduction was properly part of the true cost of the credit, and so was not part of the credit. As a consequence, the consumer loan, and the charge securing it, were void and unenforceable. The purpose of section 127(3), which may work harshly against a creditor, is to ensure that the amount of credit is correctly stated.
Judges:
Lord Justice Kennedy, Lord Justice Clarke and Lady Justice Hale
Citations:
Times 30-May-2002, [2002] EWCA Civ 522, [2003] CCLR 11
Links:
Statutes:
Consumer Credit (Total Charge for Credit) Regulations 1980 (SI 1980 No 51) 4(2), Consumer Credit Act 1974 9(4) 127(3)
Jurisdiction:
England and Wales
Citing:
Cited – Watchtower Investments Ltd v Payne and Another CA 20-Jul-2001
The mortgagor borrowed funds against the charge, and part of the condition of the loan was that any arrears on the first charge must be discharged. The total amount of the loan was calculated to include sufficient to discharge the arrears on the . .
Cited by:
Cited – Wilson and Another v Hurstanger Ltd CA 4-Apr-2007
The company sought to enforce its loan agreement and charge over the defendants’ property. The defendants appealed saying that the agreement was unenforceable under the Act, since a commission had been paid to the introducing broker, and his fee had . .
Cited – Southern Pacific Mortgage Ltd v Heath CA 5-Nov-2009
The court considered the effect of an agreement within the 1974 Act falling into more than one category of agreement. Part was used to be used for the repayment of an existing mortgage (restricted use credit), and part was unrestricted. The question . .
Cited – Carey v HSBC Bank plc, Yunis v Barclays Bank plc and similar QBD 23-Dec-2009
(Manchester Mercantile Court) The court considered the effects in detail where a bank was unable to comply with a request under section 78 of the 1974 Act to provide a copy of the agreement signed by the client.
Held: The court set out to give . .
Lists of cited by and citing cases may be incomplete.
Banking, Consumer
Updated: 29 August 2022; Ref: scu.171344