NORFOLK PENSIONER TOOK ON A CREDIT COMPANY AND
WON
A leading judge called yesterday for a change in the law after a Norfolk pensioner took on a credit company and won.
She had been faced with repaying a total of £90,000 on an original loan of just over £7000 because of the small print in her agreement the Court of Appeal heard Appeal judge Lord Justice Clarke called for a simplification of the Consumer Credit Act to make it comprehensible to the borrowers it was meant to protect He made his comments after effectively wiping out the £7000 loan secured on the home of divorced pensioner Valerie McGinn who had been threatened with repossession Lawyers acting for Mrs McGinn said the ruling could apply to thousands of other loans where charges are made by the lender against the stated amount of credit in the agreement. The judge said the number of cases coming before the courts involving credit showed the law was unsatisfactory". Simplification of a part of the law which is intended to protect consumers is surely long overdue so as to make it comprehensible to layman and lawyer alike," he said At present it is certainly not comprehensible to the former and is scarcely comprehensible to the latter."
Mrs McGinn bought her home in Cadge Road Norwich from the city council in 1987 and had a £32,000 mortgage with a building society. She wanted to build a dining room extension and contacted a broker after reading a newspaper advert for what she thought was a low cost loan. The broker arranged a loan with Grangewood Securities which agreed to advance her £7348 plus a broker's fee to be repaid over 20 years at £201.79 a month. When she was eventually sent a cheque solicitors Brand Montague acting for the lenders said they had paid a monthly repayment to her mortgage company of £359.29 settled the broker's fee of £1002 and had sent her the balance of £6988. The loan agreement also included a figure of £250 for legal costs which it said Mrs McGinn could defer until the end of the loan period. But the true cost of deferring the legal costs payment until the end of the loan about £90,000 was not spelled out to Mrs McGinn said the judge It appears to me to be little short of scandalous that a lender should set up a scheme which it intended should permit it to make substantial interest charges payable by the debtor without being required to make the position absolutely clear," he said. The judge said Mrs McGinn had won her appeal on the mortgage arrears point alone. He said the loan was not enforceable because the credit agreement should have stated that the total credit payable was £6988.71 not £7348 The loan was taken out in 1990 when Mrs McGinn was a self employed insurance and investment sales consultant earning £19,000 a year. Grangewood won a suspended possession order a year later after Mrs McGinn fell into arrears with the repayments. The order has never been enforced. First as a litigant in person and later with legal aid Mrs McGinn challenged the loan firm in the courts seeking orders that the credit agreement was not enforceable under a section of the Consumer Credit Act dealing with extortionate loans. A county court judge ruled in 2000 that the loan was properly drawn up but allowed Mrs McGinn to take her case to the appeal court. Allowing her appeal Lord Justice Clarke said the sole purpose of the loan was to extend her house and not pay off any mortgage arrears. He said Mrs McGinn did not know Grangewood was going to deduct the mortgage payment until after the loan had been completed. Because no document was signed by the borrower which showed the exact terms of the loan under the Consumer Credit Act the courts had no power to enforce it. A statement issued by Fosters Mrs McGinn's solicitors said she would have lost her home and all its equity if she had not succeeded in the appeal. The lender has already received £28,000 in repayments in relation to a loan of £8350 of which Mrs McGinn actually received under £7000." Grangewood was refused permission to appeal to the House of Lords and ordered to pay the entire costs of the case.
Reproduced courtesy of the Eastern Daily Press
24 April 2002
