Greg Standing
Other
Head of Enterprise Risk Management
Article
4
In February, we reported on the decision in NRAM PLC v McAdam and others, in which the High Court held in excess of 40,000 unregulated consumer credit agreements to be regulated - at a cost of some £258 million to the lender - due to the way they had been administered by NRAM.
Briefly, for administrative convenience NRAM had used the same form of pre-contractual and contractual documentation for both its regulated and unregulated agreements. As a result, NRAM had repeatedly referred to, and indeed treated, the unregulated loans as being regulated by the Consumer Credit Act 1974 (CCA).
NRAM had, however, failed to comply with the prescribed requirements of s77A CCA when sending periodic statements to its borrowers. NRAM argued that in relation to the unregulated agreements it did not have to comply with those requirements.
The High Court held that on a proper construction of the unregulated loan agreements NRAM had held out that the agreements would be treated as regulated agreements and the borrowers would have the protection and rights conferred by the CCA. This finding would cost NRAM £258 million in repayment of interest and default charges. NRAM successfully appealed.
The Court of Appeal held as follows:
This is a helpful decision for any motor finance company whose documentation may have been drafted or administered in a similar way to NRAM.
Although the Court of Appeal held that there were misrepresentations and breaches of warranty, which could still form the basis of a claim against a lender, limitation defences may be available for NRAM as those breaches and misrepresentations arose when the loan agreements were entered into more than six years ago.
This article was originally published in the September edition of Motor Finance.
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