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London North Securities Limited v Meadows
In a significant decision by HHJ Howarth at Liverpool County Court on 28th October 2004, it was held, in relation to a regulated consumer credit loan agreement, that the amount of credit supplied by a lender to a borrower had been misstated, rendering the agreement unenforceable.

The Meadows had requested some 1000 for home improvements, but were required by the lender to pay an additional 10 for an insurance premium and approximately 1000 to discharge pre-existing mortgage arrears.

It was held that in the circumstances of the case that the sums spent on the insurance premium and arrears formed part of the “total charge for credit”, and therefore did not form part of the credit.

As the loan agreement stated that the amount of credit was 1750, this misstated the amount of credit provided, and accordingly the agreement was unenforceable.

Further, the Judge held that the lenders’ practise of applying the contractual rate of interest at 34.9% on default arrears and charges amounted to an “extortionate credit bargin” within the meaning of the Consumer Credit Act 1974.

In addition, the Judge held that he had power to make a “Time Order” under Section 127 of the Consumer Credit Act 1974, to retrospectively reduce the interest rate applied to default arrears and charges to simple interest at the Court Special Account Rate.

Permission to Appeal was granted to the lenders.

Paul Brant, Counsel for the Defendants, Mr & Mrs Meadows

Individuals experiencing debt difficulties should contact their Citizens Advice Bureau, Debt Advisor, or Solicitor.