Motor finance companies sometimes assign agreements in default to third party debt purchasers. Clearly, whether an assignee of such a debt under the Consumer Credit Act 1974 (CCA) can enforce its debt as a creditor is of crucial importance to both buyers and sellers of the debt.
The High Court recently confirmed the position in favour of the assignee in Jones v Link Financial Ltd. Jones had entered into a fixed-sum consumer credit agreement with GE Money Consumer Lending Ltd. Following default, GE issued a default notice and subsequently a demand for payment, which the court found complied with its obligations under the CCA. Payment was not made and the agreement was terminated.
GE subsequently assigned "all rights, title, interest and benefit" in the debt to Link Financial Ltd, as provided for under the credit agreement. Notice of the assignment was given to Jones by Link. Link then issued proceedings against Jones for the sums that were due.
Jones defended the proceedings on the basis of two issues:
- Only a creditor, as defined by section 189 of the CCA can enforce a regulated credit agreement.
- An assignee was not a creditor under the CCA, as only rights and not duties passed by assignment.
The High Court held (on appeal) that s189 of the CCA clearly contemplated that an assignee may become a creditor. The assignment of a regulated agreement puts the assignee into precisely the same position as the original creditor. There were no limitations on the obligations transferred with the agreement once the assignment was completed by notice being given to the debtor. The assignor was therefore the creditor and so entitled to enforce an assigned debt.
The ‘duties’ referred to in s189 of the CCA were those that the assignee had to perform in order to enforce its assigned rights. Those duties had to pass by assignment, as it was only through this process that the assignee would become obliged to fulfil them. The assignee could not assert its rights under the regulated credit agreement without accepting the statutory obligation to perform duties under the CCA relating to enforcement.
That would not be the case where an equitable assignment took place, of which no notice had been given to the debtor. In this situation, the debtor would remain liable to the assignorand the assignor would continue to be responsible for theperformance of the statutory duties relating to enforcement – for example, the provision of notices.
As Link was the creditor in this particular case, it was unnecessary to consider the first issued raised.
This is a sensible judgment. It is common for claims of this kind under consumer credit agreements to be brought by the assignee company. Had the judge come to any other decision, the legal right to the debt would have fallen into a black hole. Neither the assignor (which had sold the debt) nor the assignee (if not deemed to be the ‘creditor’) would be able to enforce the debt. Clearly, that could not have been the intention of the CCA.
Greg Standing is a partner in Wragge & Co’s motor finance litigation team