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Panorama: British law firm says it is writing off one in four consumer debts that it deals with
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A Panorama documentary to be broadcast tonight on µþµþ°äÌý°¿²Ô±ð reveals how growing numbers of people are escaping their consumer debts – by finding flaws in the paperwork.
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The programme speaks to a British law firm which claims that it is successfully writing off one in four of the consumer debts it deals with.
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Top 100 law firm Stephensons says it has had 1,000 credit card and loan debts written off – many as a result of simple flaws in the credit agreement paperwork.
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And Panorama shows that some debtors are taking on the banks themselves, without outside legal assistance.
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Borrowers Basil and Amanda Rankine have had £37,000 in debt written off by studying their credit agreements and then challenging the lenders.
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The Rankines say that, if they include debts that have effectively been frozen, the total is closer to £100,000.
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The programme looks at how an entire industry has emerged, offering to find flaws in borrowers' credit agreements – and therefore getting debts paid off.
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Solicitor Andrew Leakey of Stephensons said: "Of the agreements we see, we think about one in four may have a problem under the Consumer Credit Act of one sort or another.
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"The ones that we see are often being filtered by other people – so it's about possibly one in ten (that could be written off).
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"It can be how the loan was sold or indeed how charges have been put into the paperwork... in the wrong place, that kind of thing.
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"The other warning flag is if a lender is asking you to resign an agreement. There maybe a reason that they're doing that – they may be trying to correct a problem that's already there in the existing paperwork."
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However, he warned that simple errors such as spelling mistakes or incorrect dates probably would not be enough.
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"You need to show some prejudice – and probably serious prejudice... that will then assist you to show that it's an unfair relationship.
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"Inappropriate policies, interest rates that are too high, difficulties that a particular clause has caused, such as hidden legal fees – those kind of things."
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Basil and Amanda Rankine first started researching the possibility of writing off debt after the collapse of their mortgage brokerage company left them with debts of £120,000.
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They studied the Consumer Credit Act, which lays down rules for lenders – and had their first success with an HSBC credit card.
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"I wrote a letter to HSBC, thought I had everything correct, sent it off," Mr Rankine said.
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"A few months later they said, 'We're prepared to write the balance off'. That was about £10,000 on the HSBC credit card."
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HSBC wrote it off because they had lost the paperwork.
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Realising they were on to something, the couple tried the same procedure with several other lenders, highlighting a long list of flaws in the credit agreements.
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They were amazed when some of these lenders also agreed to write off their debts.
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"Some would say they couldn't find a copy of the agreement, so they were prepared to write it off. Others would just say they're prepared to write it off without giving an explanation – they wouldn't commit themselves and say this is the point that was wrong," Mr Rankine said.
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Encouraged by their £37,000 success, the Rankines then decided to take on some of their other lenders in court.
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But they had pushed their luck too far. A High Court judge threw out their case accusing them of deliberately trying to wriggle out of debt.
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However, as some lenders had failed to claim their money back during the case, these lenders could now take no further action.
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This meant the Rankines had escaped tens of thousands of pounds more in debt payments.
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But there was a nasty sting in the tail for the Rankines and a warning to others planning to go a stage further, and take lenders to court.
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Having earlier proved it was possible to escape debts through writing loophole letters, the Rankines were hit with a £100,000 court bill – effectively leaving them back where they started.
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Sir Roy Goode, who was instrumental in the creation of the Consumer Credit Act, confirmed that, as the credit crunch bites, the act, originally designed to protect the consumer, is now being used by borrowers to escape thousands of pounds in debt.
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"The rules relating to the formation of agreements are extremely complex. It is very easy for a creditor to make a little slip.
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"Indeed in some respects some of the rules are not very clear. So any slip that is made entitles the consumer to refuse to pay unless the court gives leave to enforce the agreement."
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Typical credit agreement flaws include: whether the agreement has been signed; if the APR is accurate and in the right place; whether the agreement has been lost altogether.
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However, the British Bankers' Association warned that the costs of borrowers failing to pay their debts will be passed on to other customers.
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"It is unfortunate when some people look to the loopholes to get out of credit agreements... because the money that they don't repay has to be repaid by the rest of us," it said.
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Notes to Editors
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Use of any of the above copy is subject to the following credit - Panorama: Can't Pay, Won't Pay will be broadcast tonight at 8.30pm on 91Èȱ¬ One.
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