Chapter 13CreditThe court can take into account all matters which it thinks
relevant, including matters relevant to the debtor and
creditor in deciding whether the relationship is unfair.
The orders which may be made by the court where it
finds an unfair relationship are set out in the new s 140B.
They include:
(i) requiring the creditor to repay in whole or part any
sums paid by the debtor;
(ii) reducing or discharging any sum payable by the
debtor;
(iii) altering the terms of the agreement;
(iv) requiring the creditor to do or not to do anything
specified in the court order;
(v) setting aside in whole or part any duty imposed on
the debtor by virtue of the agreement;
(vi) directing the return to a surety of any property
provided as security;
(vii) directing accounts to be taken between parties.
The new ‘unfair relationship’ rules apply to new agree-
ments with effect from 6 April 2007 and to pre-existing
agreements from 6 April 2008. The old extortionate
credit provisions will continue to apply to agreements
completed before the new provisions came into force.
‘Completed’ means that there are no sums which are or
may become payable.
Termination and default
Both debtor and creditor may have reasons why they
want their relationship to end. The debtor may have
come into some money and wish to pay off his debt.
Alternatively, he may have lost his job and no longer be
able to afford the repayments. The creditor will want to
take action against people who have not lived up to the
agreements they have made.
Early settlement (ss 94–97)
The debtor under a regulated consumer credit agree-
ment is entitled to pay off what he owes at any time on
giving notice to the creditor of his intention to do this.
This may entitle him to a rebate of interest.
The 2003 Consumer Credit White Paper noted that
the formula contained in the Act, known as the ‘Rule of
78’, can result in substantial benefits to the lender, and
may not reflect the real cost to the lender of repaying
early. Some lenders do not apply the rule and charge
lower amounts or nothing at all. The government stated
its intention to abolish the Rule of 78 and to introduce
a new method to calculate maximum early settlement
charges. Credit agreements would be required to state
clearly the right to early settlement and to give three
examples of repayment charges calculated at different
points in the lifetime of the agreement. The Consumer
Credit (Early Settlement) Regulations 2004 (SI 2004/1483)
gave effect to these proposals. They also limit the defer-
ral of any settlement by the debtor to one month for
agreements of more than a year.Termination (ss 98–101)
1 By the debtor.The debtor under a regulated HP or
conditional sale agreement may give notice to terminate
the agreement at any time before the final instalment is
due. The debtor must return the goods and pay off any
arrears. In addition, he or she must pay the smaller of
the following:
■a minimum amount specified in the agreement;
■half of the total purchase price;
■an amount ordered by the court to compensate the
creditor for his loss.
If the debtor has failed to take reasonable care of the
goods, he or she must pay damages to the creditor.
2 By the creditor.Usually the creditor will wish to
terminate the agreement because the debtor has broken
the agreement in some way (this is dealt with below).
However, it should be noted that some agreements allow
the creditor to terminate where there has been no default
by the debtor. The agreement may specify that it can be
terminated at any time or if, for example, the creditor
becomes unemployed or is convicted of a crime of dis-
honesty. If it is an agreement for a specified period,
which has time to run, the creditor must give seven days’
notice of his intention. The debtor may apply to the
court for a ‘time order’.Default (ss 87–89)
If the debtor has committed a breach of the agreement,
the creditor must serve a ‘default notice’ before taking
any of the following actions:
■to terminate the agreement;
■to demand earlier payment;397