Lloyd's Maritime and Commercial Law Quarterly
PROTECTING BORROWERS
Neil R. L. Cawley*
Gordon Goldberg†
The Consumer Credit Act 1974 is obviously intended and indeed ought, inter alia, to protect borrowers. Trying to discover whether or not (and, if so, how and to what extent) it does so involves an exercise in statutory interpretation, which is not altogether simple, the noting of a possible conflict in attitude between the Court of Appeal and the county courts and a consideration of the common count of money had and received in connection with contracts rendered unenforceable by statute.
Courts often have scant sympathy for borrowers and can see them as greedy, silly and careless. Perversely, protection for the vulnerable borrower is probably more important in times of easy credit than at present, when money is harder to come by and lenders are more restrained. In a previous era, when security over property appeared to be the key to ever greater borrowing, lenders were not so careful. As people found their obligations difficult to maintain, there was an increased volume of cases in the courts, now almost abated, often involving consideration of the borrower protection provisions of the Consumer Credit Act 1974. Despite that abatement, the Act continues to be socially, commercially and, perhaps, increasingly important. Home ownership has dramatically increased; and, notwithstanding some mortgagees’ problems of negative equity, most people hold, or can expect to hold, in their homes equities of redemption (or even unencumbered interests) of considerable value. These may be the targets of unscrupulous lenders. This was recognized as an important area for consumer protection as early as 1990 in a study by the National Consumer Council.1
It is, therefore, surprising that the meaning and effect of the Act have not by now been tested thoroughly in the appeal courts. Borrowers’ defaults will result ultimately in repossession and in the borrowers and their families becoming homeless and a burden on the revenues of central and local government. That the enforcement of its security ultimately allows a lending finance company to seize equity in homes at the expense of the tax payer is a powerful reason to desire effective protection for borrowers, who tender such equity as security. However, there are parts of the Act which, in our submission, are unclear and yet vital to its operation. The Act’s provisions are here considered from the often sad perspective of the borrower in difficulty.
The provisions of the Act, with which we are concerned, provide protection for the borrower in several ways. One is by insisting that specified periods of time elapse between
* Barrister.
† Senior Lecturer, University of Buckingham.
1. Credit and Debt: the Consumer Interest (1990), para. 3.3.2.
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