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Debt Advice Handbook 14th edition

1. Introduction

• Inaccurate calculations

This chapter looks at the two main ways of minimising debts – using contract law and/or the Consumer Credit Act 1974 to challenge or reduce liability – eg, by checking whether or not the creditor is legally able to enforce the debt.

It is essential to accurately identify each debt before attempting to deal with it. Chapter 5 covers the most common types of credit or debt that advisers are likely to encounter. Debts fall into two groups – those covered by the Consumer Credit Act 1974 (known as regulated credit debts) and those that do not.

You should first check that the client is legally liable to pay the debts claimed by her/his creditors. In general, a debt is only owed if:

•there is a valid contract between the client and creditor. This does not necessarily have to be a written agreement (see here); or
•money is owed because of particular legislation – eg, council tax or water charges; or
•the client has been ordered by a court to make payments to someone, or to the court itself, and there are no grounds to challenge the court order.

In addition, if the contract is a regulated credit agreement and therefore regulated by the Consumer Credit Act 1974, the creditor must comply with the Act’s provisions where relevant (see Chapter 4).

Inaccurate calculations

You should check that the amount of any debt is correct and should not assume that the amount owed by a client has been accurately calculated by the creditor.

Check the client’s own records of payments and make sure that all payments have been credited to the account, and, if in doubt, request a full statement to confirm this.

Request that any recovery action be suspended while the matter is being investigated.1See also FCA Handbook, CONC 7.14.1R It may be necessary to contact a creditor’s regional or head office if negotiations with the local branch are unsuccessful. If the creditor is not being co-operative in supplying information and the debt is a credit agreement regulated by the Consumer Credit Act 1974 (see here), you should write to the creditor asking for a full statement of account under sections 77 and 78 of the Consumer Credit Act 1974 and enclose a payment of £1. If the creditor fails to comply with the request within 12 working days, the debt is unenforceable unless and until the information is supplied.2ss77-79 CCA 1974 See here for more information.

 

1     See also FCA Handbook, CONC 7.14.1R »

2     ss77-79 CCA 1974 »