As more people find themselves in debt, one couple found loopholes in their credit agreements to avoid paying tens of thousands of pounds. But a High Court judge had the final word.
The Rankines had 13 credit cards
Amanda and Basil Rankine ran up debts of £120,000 after their mortgage advice business collapsed and they found themselves unable to afford their monthly payments.
Their debts were spread over 13 credit cards, four loans, car finance and an overdraft. They decided to study the Consumer Credit Act and contacted lenders claiming they had found mistakes in their credit agreements.
The Act lays down the rules which companies have to follow when they advertise or sell credit.
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"I studied the Act and decided that there were things that didn't match so I put together a bit of a letter to HSBC, thought I had everything correct, and sent it off," Mr Rankine told the BBC's Panorama programme.
"They wrote back, and after a few months said we're prepared to write balance off."
The Rankines, from Rugeley in Staffordshire, looked at all their credit agreements and identified potential loopholes.
These included whether the correct annual percentage rate (APR) was used, whether the forms had actually been signed and if the lenders had kept a copy of the paperwork.
In this way, they managed to have a number of their 13 credit cards and loans written off, to the tune of £37,000, including the sum from HSBC.
Sir Roy Goode, an eminent commercial lawyer who was instrumental in drafting the Act, said the rules relating to credit agreements were "extremely complex".
"So any slip that is made entitles the consumer to refuse to pay unless the court gives leave to enforce the agreement," explained Sir Roy.
Mr Rankine said: "Now more people challenge agreements, and more people will realise… the law is there so they have a choice. Challenge or repay at their level, or challenge and repay at your level.
The couple decided to take their remaining creditors to court over loopholes they believed they had spotted, and in an attempt to set a legal precedent that may benefit others. But the case was dismissed by a High Court judge, who said the couple were wriggling out of debt.
Despite the judgement, a legal technicality - which meant the lenders could only claim the money back while the court proceedings were going on - meant the couple still managed to get most of their debts frozen.
That took their total debt clearance to £100,000, leaving more than £20,000 outstanding. However, a legal bill of £100,000 left the Rankines back where they started.
At least they were now earning enough to manage the legal costs. With some irony, they are paying it back through consultancy work on the Consumer Credit Act.
They don't accept they lost the case and they say they would prefer to be paying a legal bill than paying a debt they thought was unlawful.
The Rankines did their own work in scrutinising their credit agreements, but a whole industry is emerging online of companies claiming to get debts written off, and securing compensation, by rendering credit agreements unenforceable.
In August the Office of Fair Trading (OFT) and the Ministry of Justice (MoJ) urged people in debt to consider the consequences before using the services of these businesses.
"Consumers should think very carefully before committing themselves to making claims and handing over hundreds of pounds in advance to do so, even where refunds may be promised if the claim is unsuccessful," the OFT and MoJ wrote in a joint consumer alert.
People struggling with loans are advised to seek free and impartial advice from organisations such as their local Citizens Advice Bureau.
Below is a selection of your comments.
Another case of people refusing to accept responsibility for their own actions - and very irresponsible actions at that! So they manage to wriggle out of paying huge debts - who pays? You & me, that's who!
Pete B, Bromsgrove, UK
While I'm sure there are plenty of cases where people have been treated unfairly by credit companies, it sickens me to know that so many people who spent money they didn't have will wriggle out of paying it. If you don't have it don't spend it!
EW Lindley, Birmingham
Unbelievable! Makes you wonder why any of us decent folk bother to pay our debts off. Take out large loans your can't afford, & when you can't be bothered to pay it back due to greed & over stretching your finances, challenge the credit companies, get your debt written off & go on holiday! Result! I agree with what the judge says in this case.
It seems wrong to me to have run up debts using other people's money (which is, after all, what banks lend you) and then try to 'wriggle' out of it based on a technicality. If this was the other way round, i.e. a bank trying to get away with not paying a customer something because of the way a letter or document was written, everyone would be up in arms. I have debts that I would like to get rid off, but I'm prepared to do this by taking accountability for my own situation and previous actions. There are plenty of other routes open to those who are struggling to pay off debts. If the Rankines felt that their credit was 'unlawful' then they should not have taken it out in the first place.
Vicky, Essex, UK
It's a bit unfair on those of us that have worked hard to avoid debt that other people can have money for nothing. Sir Roy Goode should be sacked and a new law drafted simplifying credit law and making it crystal clear to both the loan giver and the customer. Banks that need every penny to survive the crunch should not have to write off people loans. The system is wrong. Thank you Labour.
Rufus Herring, Exeter
Questions need to be asked about the credit industry as a whole. How and why were the Rankines allowed to amass 13 credit cards? Blame for a good proportion of their financial problems must be laid at the doors of the creditors.
Alex, Birmingham, UK