Southern Pacific Personal Loans Ltd v Walker & Anor

For consumer-credit purposes, a charge forming part of the total charge for credit remains distinct from credit even when repayment is deferred and interest is charged on it. Section 9(4) of the Consumer Credit Act 1974 does not prohibit such interest. The amount of credit is determined by identifying and excluding charges for credit, having regard to the agreement, the borrowing’s purpose and the true cost to the debtor. An agreement stating £17,500 as the amount of credit, separately identifying an £875 fee, and showing £18,375 as the total amount financed complies. Paragraph 10(2) of Schedule 1 to the Consumer Credit (Agreements) Regulations 1983 requires disclosure of the total other charges, not a broader cost-of-credit figure including interest on the fee.

Southern Pacific Personal Loans Ltd brought possession proceedings against Mr Michael Walker and Mrs Suzanne Walker under a fixed-sum regulated credit agreement. The agreement recorded a £17,500 loan, an £875 broker administration fee and £18,375 as the total amount financed. A District Judge made a suspended possession order on 21 June 2007. On appeal, HHJ Halbert held on 27 April 2009 that the agreement was wholly unenforceable and ordered discharge of the charge over the property.

The Court of Appeal considered whether the fee was credit or a charge for credit, whether the amount of credit was correctly stated, and whether the agreement complied with the information requirement concerning other charges.

1. Appeal allowed. The Court of Appeal set aside HHJ Halbert’s order. The agreement was not wholly unenforceable.
2. Section 9(4) of the Consumer Credit Act 1974 supplies a statutory distinction between credit and an item entering the total charge for credit. Such an item is not credit even where time is allowed for its payment. The provision does not prohibit interest on the item. Interest is not a necessary feature or indicator of credit, and deferred repayment or interest does not convert a charge into credit.
3. The court must consider substance in all the circumstances, including the agreement documents, the purpose of the borrowing and the true cost to the debtor. The reasoning in Wilson v. First County Trust Ltd [2001] QB 407 applied. The £875 broker administration fee was a charge for credit and was correctly excluded from the amount of credit. The agreement clearly stated £17,500 in box C, identified the fee separately in box D, and described £18,375 in box E as the total amount financed. Nothing in the legislation prohibited stating that larger figure.
4. The alternative argument also failed. Paragraph 10(2) of Schedule 1 to the Consumer Credit (Agreements) Regulations 1983 required the total amount of other charges included in the total charge for credit. It did not require a general statement of the cost of credit including interest on the fee. The stated £875 fee complied with the requirement.
5. Schedule 1 information requirements were not prescribed terms for section 127(3). Although section 127(1) therefore involved a discretionary enforcement jurisdiction for a contravention, the issue did not arise because there was no contravention.

• Court of Appeal (Civil Division) — On 12 November 2009, allowed Southern Pacific Personal Loans Ltd’s appeal and set aside HHJ Halbert’s order.
• Chester County Court — On 27 April 2009, HHJ Halbert allowed the borrowers’ appeal, held the agreement wholly unenforceable and ordered discharge of the registered charge.
• Chester County Court, District Judge Gilham — On 21 June 2007, made a suspended possession order requiring payment of current instalments and arrears.