After Meadows - Can the Courts Stop Extortionate Lending?
2nd November 2004
The recent decision of Liverpool County Court to rule that a secured loan from London North Securities fell foul of the existing extortionate credit provisions of the Consumer Credit Act is welcome simply for injecting some common sense into what is currently a confused and irrational credit market. For Tony and Michelle Meadows, the couple whose home was at the centre of the case, and who had seen their debts explode from the original loan of £5,570 to over £380,000, the judgment will be an obvious relief.
However, if anything the case also highlights the weaknesses in the current court based approach to addressing extortionate lending. Over two years ago, Gordon Marsden M.P laid down a parliamentary motion that focused attention on the practices of London North Securities. It cited the case of Frank and Jeanette Sharratt, who borrowed £2,240 in 1987 and were being pursued for over £50,000 at that time and called on the Office of Fair Trading to 'take robust action' to deal with an 'inequitable and unethical' company. The motion was signed by just 34 M.P's. Right though the motion was, unfortunately the Office of Fair Trading simply lacked the power to intervene effectively, and countless other inidividuals have fallen prey to such practices since. As a witness for London North Securities commented last week - 'The lender in this case has done nothing unusual, it is standard practice'.
It also appears that there are limits on achieving justice for those borrowers who, until this week, would not have been aware that their loans could be challenged in the courts. In 1998, London North Securities were on the winning side of a court decision that ruled the extortionate credit provisions of the consumer credit act could not be invoked more than six years after the date on which the loan was taken out. The judge in that case was powerless as a result to bring the practices complained of to the attention of a regulator and for action to be taken.
If anything, the plight of Mr & Mrs Meadows, Mr & Mrs Sharratt and countless others, should highlight that what we now need to tackle extortionate lending is not individual court cases, but a regulator with real teeth to intervene on behalf of borrowers and put an end to the worst practices of ballooning interest payments, and equity stripping. If only we had had that two years ago when this company first came to the attention of policy makers.
