Court of Appeal decides on section 18 of the Consumer Credit Act 1974

Story & another -v- National Westminster Bank plc - Court of Appeal decides on section 18 of the Consumer Credit Act 1974 - multiple agreements

We have not yet received an approved transcript, but the facts appear to be that the consumers borrowed £20,000 under two facilities in their joint names for £5,000 and £15,000 respectively. At the same time the Bank advanced further sums by way of a mortgage and an overdraft facility. All the arrangements were confirmed in a single letter from the Bank. The Bank eventually sought repayment and the consumers argued that the loans were to be treated as provided under separate agreements not exceeding £15,000 within section 8 of the Consumer Credit Act 1974. Alternatively there was a multiple agreement within section 18. It was argued that the £5,000 loan was to refinance existing borrowing and therefore was restricted-use credit and that the loan for £15,000 was unrestricted-use credit.

The Court of Appeal held that the various facilities were all contained in one agreement for the purposes of the CCA. Secondly the two loans for £5,000 and £15,000 respectively were not divisible into parts as the agreement did not restrict the consumers in their use of the £5,000 loan and therefore there was no significant distinction between the two loan facilities. They could both be regarded as unrestricted-use credit.

It will be interesting to read the approved judgment. We have always advised in the past that the distinction between restricted and unrestricted-use credit is not sufficient to place the restricted and unrestricted use elements of an agreement into separate parts for the purposes of section 18. There is no significant distinction to be drawn under the Act as between restricted-use and unrestricted use credit. However, we have not seen the transcript and this is an extremely important case in view of the fact that, to date, this is the first authoritative guidance from the courts.