McGuffick v The Royal Bank of Scotland Plc

Temporary unenforceability under section 77 of the Consumer Credit Act 1974 suspends the creditor’s remedies. It does not extinguish the creditor’s contractual rights or the debtor’s corresponding obligations.

Enforcement does not include commencing proceedings, demanding payment, serving a default notice, threatening proceedings, instructing debt collectors or reporting accurate information to credit reference agencies. Such reporting may continue during non-compliance where it serves legitimate responsible-lending purposes.

The Consumer Protection from Unfair Trading Regulations 2008 confer no private right of action. Accurate credit reporting may also constitute fair and lawful processing for legitimate interests under the Data Protection Act 1998.

The claimant had borrowed under a valid fixed-sum regulated credit agreement and later fell substantially into arrears. After receiving a request under section 77(1) of the Consumer Credit Act 1974, the bank supplied the agreement but omitted the required signed statement of account. The agreement was therefore temporarily unenforceable under section 77(4).

The claimant sought injunctions restraining or qualifying the bank’s reporting to credit reference agencies and compelling compliance with section 77(1). He also relied on the Data Protection Act 1998, the Consumer Protection from Unfair Trading Regulations 2008 and the statutory unfair-relationship provisions.

The case began in Chester County Court and was transferred to the Commercial Court as a test case. The central questions concerned the legal effect of temporary unenforceability, the meaning of enforcement, the lawfulness of credit reporting and the availability of injunctive relief.

1. The claim failed. Temporary or redeemable unenforceability under section 77(4) of the Consumer Credit Act 1974 does not extinguish the creditor’s contractual rights or suspend the debtor’s obligations. The agreement remains valid, but the creditor cannot enforce it while the statutory default continues. Compliance with section 77(1) restores enforceability.

2. The authorities concerning unenforceable contracts showed that contractual rights and liabilities may continue although remedies are barred. Passages in Wilson v First County Trust Ltd (No 2), [2003] UKHL 40, suggesting that rights were extinguished or never acquired were delivered in the human-rights context, were internally inconsistent and were obiter. They did not determine the contractual effect of temporary unenforceability under section 77.

3. “Enforcement” did not extend to commencing proceedings or to antecedent measures such as demanding payment, serving a default notice, threatening legal action or instructing a debt collector. Reporting or threatening to report accurate information to credit reference agencies was still further removed from enforcement. It was legitimate information sharing directed towards responsible lending, rather than enforcement of the agreement.

4. The Consumer Protection from Unfair Trading Regulations 2008 confer enforcement functions on designated public authorities and create no private right of action for an individual consumer. Nothing in the relevant domestic consumer-credit provisions was shown to be inconsistent with the underlying Directive. The Regulations therefore did not justify enlarging the meaning of enforcement.

5. No restraining or mandatory injunction was appropriate. Credit reporting was lawful, and qualifying it by reference to temporary unenforceability was neither required nor practically useful. The claimant could use the statutory notice-of-correction procedure. Compelling delivery of the signed statement would also serve no useful purpose because the remaining non-compliance was technical and caused no prejudice.

6. A notice under section 10 of the Data Protection Act 1998 should specify why processing causes or is likely to cause substantial and unwarranted damage or distress. More fundamentally, the reporting was fair and lawful and served the legitimate interests of lenders and credit reference agencies in making responsible lending decisions. No order under section 10(4) was justified.

7. The unfair-relationship claim under sections 140A and 140B also failed. It depended on the same rejected allegations that the bank lacked relevant rights and that credit reporting constituted unlawful enforcement.

• High Court (Commercial Court): The claim was transferred from Chester County Court by order of Andrew Smith J so that the issues could be determined as a test case. The court dismissed the claims for injunctive and statutory relief.
• Chester County Court: HHJ Halbert referred the case to the Commercial Court of his own motion.