Unenforceable Loan Agreements

A loan agreement is a contract between a borrower and a lender that sets out the terms of credit. Loan agreements are issued with personal loans and secured loans, as well as credit cards, hire purchase and many other forms of credit. However, in reality, many of these loan agreements are unenforceable. Many loans are therefore not subject to repayment by law and may be written off.

Why might a loan agreement be unenforceable?

If you have been sold a loan for under £25,000 before April 2007, current figures indicate a 60 per cent chance that it isn't enforceable. In order to be legally above board, regulated loan agreements have to strictly comply with the terms of the Consumer Credit Act of 1974. Many do not.

What types of credit agreement are affected?

A variety of discrepancies in the following agreements could see the debt being written off:

  • Hire purchase
  • Personal loans
  • Secured loans
  • Illegal mortgage agreements
  • Store cards
  • Car finance
  • Credit cards

What about debts exceeding £25,000 and mortgage loans?

Unlawful mortgages and secured loans may also be subject to compensation, but the process for claiming money back is different. A lot of these loans are not fair or lawful either.

When might a credit agreement be not enforceable?

There are a variety of cases in which a credit agreement might not be able to be enforced:

  • If the lender doesn't hold a copy of the agreement
  • If the credit or credit limit isn't stated on the agreement
  • If the interest is incorrect
  • Increased credit has been added without being requested
  • Credit card charges are deemed as unfair
  • Sub-prime products sold to people in good credit
  • No recognition of a deposit
  • No mention of a 'cooling off' period
  • The agreement has not been signed
  • A person has been mis-sold payment protection insurance as a prerequisite of taking out the loan

How to get a copy of your credit agreements

If you have lost or misplaced your credit agreement, contact the lender with a SAR request. If you enclose a cheque for £10, the lender is legally obliged to pass on all information it holds within a 40 day period.