The second secured loan had fallen into arrears. At the date proceedings were raised, the client owed the lender in excess of £25,000. The client’s difficulties had been caused by running up a high level of unsecured debt and prioritising this over payments to the second secured lender.
By the time the client sought advice from LSA, she had paid off her unsecured creditors, leaving only her main mortgage and second secured loan. Offers of repayment were made to the pursuers which were rejected.
LSA, on behalf of the client, submitted an application in terms of Section 129 of the Consumer Credit Act 1974 requesting that the court make a “time order”. Such an order allows the court to provide for the rate of payment by a debtor to a creditor that the court, “having regard to the means of the debtor or hirer and any surety, considers reasonable”. The test is justice. Significantly, under Section 136 of the Consumer Credit Act 1974, the court also had the power to include “such provision as it considers just for amending any agreement or security”. The court can therefore amend any term of the credit agreement when granting a time order.
The court, after hearing on the time order application, decided it was just to grant the application.
The time order provided that the client was to make payment to the pursuers at a higher rate of payment but that no interest or charges were to be applied on the arrears and penalty charges that had accrued to date. This totalled the overwhelming majority of the sums owed to the pursuers and will save the client (defender) a considerable amount of money given that the variable interest rate was most recently 13.69%.
Time orders can only be applied in respect of unsecured debts and secured debts that are regulated by the Consumer Credit Act 1974. Main mortgages are exempt from regulation under the 1974 Act.
This case represents a significant new weapon in the armoury of mortgage advisors. Contact LSA’s Inverclyde Housing Rights Project for further information: