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Your legal rights: Legal Protection for UK Residents with Debts

If you have debt problems, rest assured that the law in the UK is on your side. Numerous regulations exist that ensure that any credit deals you sign up for are completely fair. What is more, any organizations to whom you owe money must treat you in a reasonable manner.

Unfair credit agreements
If the court believes that an agreement is an extortionate credit bargain, then the Consumer Credit Act may allow the court to re-write that credit agreement. This is valid for mortgages, as well. This means that the agreement must have payments that are “grossly exorbitant” or “grossly contravenes the ordinary principles of fair dealing.”

The courts have utilized this law to reduce extremely high interest loans – particularly in those cases where the person who signed the agreement was pressured to do so. As this is not easy to prove, you should get expert advice from either an adviser or the trading standards department at your local council.

Unfair contract terms
Whenever you buy anything or sign a contract for credit, all of the terms and conditions should be spelled out. A law exists that says a company cannot enforce any part of a contract that is not written in plain English, or if it is otherwise deemed unfair. Such regulations prevent lenders from charging higher interest rates to those customers who have missed payments, as well as taking customers by surprise with tiny small print fees or unclear wording in their contracts.

In the event that you have fallen victim to unfair contract terms as defined above, you should contact an adviser or the trading standards department at your local council.

Credit licence
Anyone offering credit has to have a license to do so from the Office of Fair Trading. In the event that they do not have a license, then they cannot legally enforce the terms of the credit agreement.

The vast majority of credit agreements are “regulated agreements” under the Consumer Credit Act. What this means is that they must be in writing and explain the following:

• The amount of money you are borrowing;
• The interest rate; and
• How long you will be paying the debt back.

A creditor who is able to arrange credit via the use of regulated agreements should not be in a position to use court action against if you never signed such an agreement. The creditor is not able to start court action if they have not given you an agreement to sign.
You can get advice on other details of the Consumer Credit Act from:

• An adviser or solicitor,
• The Office of Fair Trading; or
• The trading standards department at your local council
• Your local Citizens Advice Bureau

Undue influence
If you have been put under a tremendous amount of pressure by someone you know to sign up for a loan, then a creditor might not be able to make you pay back that loan.
The most common scenario is if your husband, wife, or partner pressured you in to signing a secured loan agreement which was actually intended for their business. You must show that the lender did not explain to you fully how the loan worked, and that you received independent advice before signing for the loan.
As this part of the law is rather complicated, you should get legal advice before proceeding.
Limitation period
Under the 1980 Limitations Act, creditors are given a maximum period of time to launch legal proceedings after the last payment or written contact with the debtor. For the vast majority of debts, this period is six years – or twelve, in the case of mortgages. If you have not paid anything towards a debt for a period that exceeds five years, you should get legal advice before speaking to a creditor about an arrangement to pay off the remaining balance.
Harassment to repay
It is considered a criminal offense for a creditor to needlessly hassle you in order to get you to repay. The law defines harassment as any of the following:

• Threatening you with a criminal prosecution when you can't be prosecuted;
• Pretending to be a court official;
• Sending letters which look like court forms; and
• Telling other people, such as neighbors and your employer, about your debt to force you to pay.

If you feel you are being harassed, try to keep an exact record of what happened and when. You should then report the case to your local trading standards department at your local council. If found guilty of harassment, a creditor can have their license taken away. In the event that you are taken to court by a creditor, you can tell the court about the harassment at that point.