Appeal court confirms debt unenforceable
28 Jul 05
£384,000 debt cancelled because initial credit wrongly stated
A husband and wife yesterday saw the Court of Appeal affirm a judge's decision that a £384,000 debt that began as a loan of £5,750 was unenforceable.
Tony and Michelle Meadows from Merseyside took out a home improvement loan in 1989 at an annual interest rate of 34.9%. The debt mushroomed and when the lenders, London North Securities, attempted to emforce a security against their home, the couple claimed that the agreement was extortionate and unenforceable under the Consumer Credit Act.
A county court judge accepted the "extortionate" claim and ruled in favour of the borrowers. The appeal court in London refused an appeal by London North but without giving an opinion on this point, said to be of general concern to lenders.
The appeal judges based their decision on the ground that a £750 insurance premium should have been stated as part of the charge for credit and not as part of the original loan. As the amount of credit was incorrectly stated, there was a breach of the Act which was fatal to enforcing the debt.