Civil Way: 14 March 2008

CONSUMER CREDIT REVOLUTION

When they brought the Consumer Credit Act 1974 (CCA 1974) into force it was £5,000. From 6 April 2008 it will be nothing. That’s the limit for regulation of a credit or hire agreement. The limit is removed for agreements made on or after that date and, generally, all agreements then made with an individual will be caught by CCA 1974 as the penultimate tranch of provisions of the Consumer Credit Act 2006 (CCA 2006) are brought into force by the third commencement order SI 2007/3300 and a fourth order to be made at the end of this month. Everything not already in force will be brought in on 6 April 2008—except provisions on post-contract transparency including time order changes for which you will have to wait until 1 October 2008.

What a business!

The definition of an individual has already been changed (see 157 NLJ 7268 p 515). It will still include a partnership so long as it comprises no more than three partners and they are not all bodies corporate. Exempt from regulation will be an agreement for over the current £25,000 limit for regulation, if entered into wholly or predominantly for the purposes of a business (CCA 1974, s 16B as amended). Among other exemptions will be agreements with high net worth customers (see 157 NLJ 7279 p 934).

Second mortgagors—good news at last

The consequence of the removal of any limit for regulation is that second residential mortgages will be covered whatever the amount borrowed and the CCA 1974, s 16 time order regime will apply. However, first residential mortgages (as to regulation and administration) are dealt with by the Financial Services Authority (FSA) under the Financial Services and Markets Act 2000. The fourth commencement order can be expected to include transitional provisions which will ensure that CCA 1974 does not extend to the situation where a FSA regulated mortgage is modified by a later agreement without new credit, for eg a fixed rate borrower agrees a new fixed rate instead of switching to a base rate tracker. The industry is apoplectic that present statutory drafting would lead to dual regulation.

Transitional provisions are also expected to be introduced and brought into force on 6 April 2008 to create a new exemption from CCA 1974 for buy to let mortgages and also prevent them from coming within CCA 1974, s 82. The provisions will be made permanent on 1 October 2008 by a legislative reform order.

Unfair and older relationships

The regime for reopening a credit agreement which was extortionate has been replaced by a broader unfair relationship regime under CCA 1974, s 140B as amended (see 157 NLJ 17268 p 515). As from 6 April 2008 the regime will apply to agreements which where extant when s 140B came into force and are still running.

Another tribunal

The Consumer Credit Appeals Tribunal is established on 6 April 2008 and replaces the existing system for appeals to the secretary of state. It will hear consumer credit licensing appeals from decisions of the Office of Fair Trading to suspend or revoke a licence. Tribunal rules of procedure will be brought into force on that date and provide for a public hearing in general but with a determination on the papers with consent. Representation at a hearing by a lay person will be allowed and an appeal will be to the Court of Appeal with permission.

SERVICE CHARGE OFF

Tenant succeeds in proceedings over service charges. Can the landlord be prevented from recovering any of its costs from that tenant by way of a future service charge demand? An order may be sought under the Landlord and Tenant Act 1985 as amended s 20C, that such costs are not to be regarded as relevant costs. But in Volosinovici v Corvan (Properties) Ltd [2007] EWLands LRX/67/2006 (Oct) Judge Huskinson held in the Lands Tribunal that such an order made in favour of a particular tenant would not disable the landlord as regards other tenants in the same building. In that case, the landlord’s costs of a successful appeal to the Lands Tribunal by the applicant tenant were excluded. It follows that the landlord will have to bear that share of its costs which, but for the s 20C order, would have been borne by the applicant tenant.

In the case of court proceedings, a s 20C application must be made to the court before which the proceedings are taking place or, if post-proceedings, to a county court.

THE BOUNCING CHARGE

The lender obtained a county court judgment against its borrower for around £38,500. It then obtained a final charging order from the county court. So far so good in National Westminster Bank plc v King [2008] EWHC 280 (Ch), [2008] All ER (D) 292 (Feb). Thereafter, it applied to the High Court for an order for sale. Why the High Court? Because a county court’s original jurisdiction to enforce a charging order is limited to a debt not exceeding £30,000 (County Courts Act 1984 (CCA 1984), s 23(c) as confirmed by CPR 73.10(2)), in the absence of written consent of both parties to the assumption of jurisdiction (CCA 1984, s 24).

A chancery master thereupon transferred the application down to the county court. The county court district judge, before whom it came at Portsmouth, concluded that his court had no jurisdiction and transferred—apparently wearing a district registry’s cap but no robe or bands etc—back to the High Court where Mr Justice David Richards got stuck with it. Having heard submissions from the lender but not the borrower, he retransferred down to the county court. The issue of practical importance decided by David Richards J was that the High Court did have power—under CCA 1974, s 40(2)—to transfer proceedings to a county court although that they would otherwise fall outside the county court’s jurisdiction and could not originally have been brought there.

As a matter of legislative policy, there was every good reason to consider that the High Court should have unlimited power of transfer. It was in keeping with the modern policy of assigning cases to the appropriate tier in the court system that it should be able to transfer down a suitable case irrespective of the county court limit.