Why lender refusals to supply information are good news
Lenders usually respond to your request for information by simply not giving you all the information you ask for. A few will respond along the lines of:
(Discovery happens before a court hearing. It's when you force the lender to produce the documents it will use to prove the alleged debt when it gets into court. The idea is that the two of you should know how strong each other's case is and what their case is actually based on so that you can resolve it yourselves before you use the court's time to resolve it. Hint: lenders seem remarkably reluctant to produce the documents that would demonstrate how strong their case is).
A refusal to supply you with evidence is good news. If they do fail to give you the information you have asked for, you may be able to scuttle any court case they do try to bring. The courts have been told to show bias against claimants that refuse to cooperate. A reader explains...
"Another legal circular I came across [published by Davies Arnold Cooper solicitors' Property and Construction Insurance Group] was to do with Lord Justice Woolf's new Civil Procedures Rules. "The new approach to litigation means that the court will be under a duty to ensure that:
Parties are put under a corresponding duty to cooperate with each other and the court to ensure that these objectives are met. The extent to which the parties have complied with this duty will be in the court's mind when deciding on issues of costs."
"A further circular aimed at the banking lawyers [published by Lawrence Graham solicitors and titled Banknotes] reiterates how the court's objective is to create a level playing field between the parties. It states that in many cases this could prevent a bank from taking steps that the other party might not be able to afford. Further, it says that it is necessary for the bank's solicitors to deal with all issues and position the bank to avoid adverse cost orders and even striking out in court. Delay and expense can be avoided as long as the "cards on the table" objective is met. A claimant bank will need to demonstrate that it has clearly explained its claim and has sought to establish and explore any potential defences with a view to avoiding litigation - that may include the exchange of documents. It concludes by saying that this may sound the death knell for the low skilled debt collection factories, who rely on unqualified staff and standard form letters before action.
Another reader has this to say about the last point:
By any interpretation, stating "we will not provide any other documentation prior to disclosure" clearly contravenes the duty implied in the second circular where it says:
"A claimant bank will need to demonstrate that it has clearly explained its claim and has sought to establish and explore any potential defences with a view to avoiding litigation; that may include the exchange of documents."
Readers may fear that under the same rules they must return income and expenditure forms. No. An income and expenditure form is not related to the debt. It is merely a tool which the bank might use to assess whether you are worth suing or not. But an income and expenditure form does not relate to whether you owe the debt or not. If you are questioning the debt, your income and expenditure are irrelevant. They are only relevant to how much you can pay if you do agree to pay the alleged debt.
How does their refusal to cooperate help me?
The relevant part of the Woolf reforms is called the Civil Procedure Rules. The Civil Procedure Rules set out "Pre-action Protocol" that the lender and you both have to follow:
They are (roughly):
If the lender wants to show that it stuck by the Civil Procedure Rules, it must show that it tried:
The same applies to you the borrower, but there isn't much you can do about any of this until the lender has proven its claim to you - by giving you the documentation that this site asks for. You certainly don't have to give you income and expenditure details to some lender that is already breaking these rules.
Courts do not require strict compliance with the rules above, but where the case does go to court, the court may decide that non-compliance with a protocol should result in adverse consequences. Meaning that the lender gets hit for costs.
Now you may think that you don't want to go through this even if the lender does get hit for costs. But what the lender isn't telling you is that it doesn't want to go through this either.
There is a specific set of new rules about debt that are currently being discussed. The draft debt rules state that a lender should write a letter to a repossessee before it starts court action and that the letter should give a clear summary of the facts upon which the claim is based. The letter should normally include:
There's some talk about requiring lenders to give more than seven days notice of legal action, so those second class-stamped envelopes giving you two days notice should be carefully filed away ready to be shown to the lender after it has issued a writ. At that point, it will know that it is going into court after breaking the rules. That's a nasty feeling.
The legal view on all this is that judges will expect the lender to have behaved in a reasonable manner before issuing a writ and that judges will punish with lenders if they have behaved unreasonably at a pre-litigation stage and then go on to start court action. Rumour has it that the most common punishment for lenders whose repossessees complain about the lender's conduct, will be to refuse the lender their costs. That can make the whole exercise of chasing your pretty unprofitable for a lender.
Judges will only punish lenders if the repossessee complains about having to pay costs.
Now, let's look at lender attitudes to specific documents that you should be asking for once you receive a shortfall letter.
Refusal to hand over mortgage deeds
Most lenders refuse to hand over mortgage deeds if you ask for them. Unfortunately, the contract that you have breached is based on the mortgage deeds. So the lender is going to have to produce them before it can get you into court - as long as you insist that it does.
Why do they refuse to produce the mortgage deeds whenever you ask? There are several reasons:
A report from a Christina Rendle (former Barrister) in the Mail on Sunday 19th November edition states:
"Lenders seem to hold all the cards but that is not necessarily the case, in some situations borrowers may be able to prove that lenders are not entitled to chase them for debts " she says "Mortgage deeds that were not signed by both the lender and the borrower could prove to be invalid " Many banks and building societies did not bother to sign deeds themselves, Rendle says, " I know of two cases that rest on the validity of the mortgage deed. There could eventually be light at the end of the tunnel for thousands of borrowers"
Refusals to supply MIGs
Recent events show that lender refusal to hand over MIGs may be significant for the ex borrower fighting a shortfall claim. One particularly interesting 'case' involved the Royal and Sun Alliance, who initiated proceedings against Stuart and Maxine Carey from Essex in an attempt to sue them (under the law of subrogation) for the amount it had paid out to the lender on the Carey's MIG policy, after repossession. The Careys used Peter Walker of Concept Management. On the 5th September 2000, 3 days before the County Court hearing, the insurer dropped the claim and wrote off the 'debt'. This occurred when the judge insisted that the insurer produce all documentation to prove the claim.
Peter Walker's views on MIGs are very controversial - as detailed on the HRP site in the Repossession section. His view, that older MIGs were so badly worded that it is unclear that the borrower is not the intended beneficiary of the policy, almost certainly does not apply to MIG policies taken out after 1993. He may be right and he may not be right when it comes to MIGs written before 1993. The problem for lenders (and insurers) is that they do not want him to be proved right in court and do want him to be proved wrong.
In the case of the Careys, events suggest that the insurer didn't want to produce the documentation. This might indeed support the view that older MIG policies are ambiguously worded, as Peter Walker suggests.
Of course, seeing the MIG policy you paid for is another matter. Abbey National has responded to some repossessee's requests to see their MIG policies with a claim that its insurance affairs, and therefore the MIG policy, are confidential.
The 'It is confidential' claim is absolute tosh. They do not want to produce it precisely because it does not point out the 'Who is the beneficiary?' problem.
An additional point is worth making here about MIGs. The lender has a number of legal duties when it sells your repossessed property, and one of them is to 'mitigate' its loss. The ex borrower could argue that, if the lender has not claimed on its MIG, the loss has not been fully mitigated. This is another argument the ex borrower can use when claiming a right to see the MIG policy s/he paid for.
This means that you *can* use the 'Show me my MIG policy' argument to counter lender court action. They will almost certainly refuse - even though they are very likely to have to produce the policy after serving any writ on you but prior to the actual court hearing. (Note: this is also true of bankruptcy hearings where the ex borrower can argue for a 'set-off' and ask for the production of relevant documents.) So effectively you will have allowed the lender to stuff their own case.
But they will never admit that you have stuffed them. They will just continue to write to you.
It may also be possible to argue that the lender misrepresented the terms of the mortgage loan to the borrower, if the lender did not give clear details of the lack of protection the MIG offered to the borrower. Although apparently untested in court, it might be possible for a borrower to argue that the misrepresentation was such that they would not otherwise have entered into a loan agreement. For example, a borrower could argue that they had only entered into a loan agreement with the lender because they had been clearly told not to worry about any shortfall because the MIG would cover such a situation. The borrower would then additionally be able argue that they should be placed in the same financial position as if they had never taken out the loan.
However, proving that the terms of one's mortgage contract were misrepresented is extremely difficult, unless the borrower has witnesses or written evidence to support their contention that they were seriously misled about the lack of protection a MIG would be able to offer them.
Lenders would argue that no such witnesses or written evidence exist because no-one was ever misled about the purposes of their MIG by a lender. But see this letter to see just how reticent one lender was in the early 1990s when asked about the purposes of a MIG by a borrower who had just paid for one. Here the lender had a clear chance to state unequivocally that this MIG offered no protection whatsoever to this borrower (now being chased for a large shortfall by the lender). The lender chose not to do so.
Lenders still not handing over the documents you asked for?
One reader suggests these tactics...
"Just keep sending letters asking them to give you the information you want. Every letter you send forms part of the evidence any judge will study if AN (Abbey National) takes you to Court. The more you keep asking reasonable questions & they keep unreasonably refusing to answer them, the stronger your case gets. Always sound polite & conciliatory in anything the judge might see, but take every opportunity to remind AN of their failings. If they don't rebut your claims in writing, it looks like their admitting them or treating you (& the court) with contempt. Remember, all you're trying to do is get to the truth & settle this matter amicably with the minimum of fuss & trouble to everyone, especially the Court, m'lud.........."
and
"In the case Abbey bring you to court, they will be required to show a copy of the mortgage deed signed by you as evidence of the contract they claim exists between you & which they're seeking to enforce. If they haven't got a copy of it, then they've got no evidence there's a contract & therefore nothing to ask the court to enforce. Try pointing this out to them & see what they say, but I would do so only whilst also pointing out to them Woolf LJ's Civil Procedure Rules & asking them whether they intend to comply with them by doing all in their power to avoid civil proceedings (which I believe must include providing all information normally disclosed only at Disclosure)."
and another reader says:
"In my belief the whole issue of the Halifax, or other lenders, waiting any lengthy period of time until it suits them to take someone to court is now extremely questionable.
The Woolf reforms now encourage a "level playing field" approach to litigation. Therefore a period of intentional delay in pre-action which is only of benefit to one party may not be interpreted as contributing to a "level" condition. A judge may well question why a defendant, having received a letter from a claimant promising Court Proceedings within a matter of days or weeks, is only actually being taken to court years later. Claimants will need to be able to prove that they have complied fully with any Pre-Action protocol."
And another reader says:
"I would say that when my solicitor rang Eversheds they admitted to not having evidence one way or another about the claim. My solicitor then wrote confirming the telephone conversation and saying she didn't know how they hoped to succeed in a claim without any evidence. She also stated that Eversheds' stance on not disclosing any supporting documentation in support of their claim before court proceedings, was wholly unreasonable and contrary to the spirit of the Civil Procedure Rules (Woolf) and that if they did commence proceedings that I would bring my solicitor's letter to the Court's attention on the issue of costs.
The endless correspondence with Eversheds ceased immediately. They did not respond to the letter and I have not heard anything since (last August 1999)."
There are other odd things lenders frequently do that should warn you that they are less committed to proving their case than their letters suggest.
The Lender claims it didn't contact me earlier because it didn't have my new address but I gave it my address. Why do they lie and can I prove them wrong?
An employee of a lender explained why this happens:
"I can only comment on the data access and availability of data from my own experiences having worked in IT for banks, insurance companies, credit card companies and building societies. Somebody else working for the same companies in different roles, or who worked at a branch, would have a completely different perspective.
The banks do not traditionally allow access to other systems between departments. The reasons for this are:
that the banks are all suffering from "Information Overload". This means that they are unable to now store all the information that they would like to store (which is everything) and even if they did then accesses by the computer system would cause a shutdown in terms of response times. So, they limit storage space and they limit access to information by other departments/groups in the bank.
Or, put another way:
Information storage = cost.
Information retrieval = cost
Access facilities to data = cost
Getting it wrong = yet more cost
Solution = don't store it, don't retrieve it, don't provide access to it, forget it.
2. The banks and the banks staff have never understood the Data Protection Act. They have a large number of staff acting as an interface between the business and the computer systems that have little or no understanding of what laws even apply. (Ever been told "The Data Protection Act wont let us....") the banks therefore try to restrict access by their own staff who then have to fill out internal information requests to ensure that everything is done properly. This in turn causes more of an information overload situation. In time the staff just don't bother.
3. Tradition plays a part. The banks don't like to tell you anything if they don't have to, they never have. The laws has now changed regarding data access so the banks get round it by either not storing anything, restricting access (even to their own people) or by simply stating that they don't have the information.
This often means that repossession and shortfall staff do not have access to the address you gave for your, say, savings account. If the bank/building society has been taken over or has taken over your original mortgage lender itself, its repossession shortfall staff may not have seen letters you sent to the original mortgage lender.
When I asked for copies of documents they wrote: "Are you denying you had the mortgage?"
In early 2001, we started seeing signs that Abbey National debt collector Dibb Lupton Alsop was responding to requests for documentary evidence to support Abbey National's shortfall claims. Here's a typical example of a reader question about this:
I sent a letter on 22/01/01 once again asking the DLA to send me a copy of the MIG and the Morgage deeds. Wednesday 24/01/01, recieved a reply today saying that their client has not got a copy of the Morgage deeds and if i want a copy i should apply to the land registry office. Is this true? Also if they have no Morgage deeds no money judgement order what are they basin their claim on? Once again they refused to send me a copy of the Mig policy. They have suggested that i seek independent legal advice now as they have been instructed to issue legal proceedings. They have also said(on the morgage deeds) that they fail to see how they prove their clients claim. They keep asking me am i denying that i ever had the mortgage. Are they trying to get me to own up to this Mortgage? Does this mean that they have no proof?
And here's our suggested response:
You should reply that:
"You note that they are regrettably still refusing to provide you with copies of the documents on which they base their claim.
As a result, you are unable to confirm the terms and conditions on which the contract was set up. As a result of that you are unable to verify the basis on which they are making their alleged claim.
You note that their refusal appears to be in breach of Civil Procedure Rules.
You look forward to them reconsidering their unfortunate approach and sending you the evidence you have requested so that you can speedily process their claim."
They are a big, powerful organisation with lots of resources who want lots of money from you. So why do you think they are being so slow to act in their own interests?
Answer: because they *are* acting in their own interests. To give you this documentation would not be acting in their own interests.
Chances are that it would only be in their own interests to give you full proof if they were planning to take you to court, where you could require them to give you full proof. (Actually you would require them to show you full proof after they start a claim and before it comes to a court hearing but I think you get my point).
They say they don't have documents any more, or that they are time-expired or "confidential" What do I do?
If they don't have the documents any more and you are ready to see them in court, they are going to have a hard time proving their claims. This is especially useful if you are claiming they undersold the property, because it makes their administration look shabby.
On time-expired documents our former lender employee says:
"If they are asking you for money based on something which is time
expired then you must have the right to go back anyway. They open the door
for you to do this by asking for the money, so the time limit can't apply."
As for the "It is confidential" argument, no one can (successfully) demand money from you using a document that you are not allowed to see. They can demand money until they are blue in the face but they will have a hard time demanding it in front of a judge.
The reality is that lenders don't want to show documentary proof of their claim because it will require them to make a trip to their document warehouse to get the file. And as a lender employee told us:
"[The banks' view] is that retrieval of records from the warehouse is a nightmare - just forget it."
When I asked for the mortgage deed they wrote: "The Land Registry has it"
They are confusing the title deed for the mortgage deed. The mortgage deed may well also have been sent to the Land Registry but the Land Registry will have returned it to the lender after processing the title transfer.
The lender should hold it. It is the legal document on which their claim is based. Without it there is no proof of the terms on which the lender claim the debt. Without it there is no debt. But they *do* hold a copy somewhere. You should stress its importance and keep asking for it.
On long-term document storage, our former lender employee says:
"Many banks and lenders just want to store the stuff as cheaply as possible. It's building the indexing and retrieval system that pushes the cost up. So they sign storage contracts that strictly forbids the possibility of ever retrieving the documents. Then they are complying with the legal requirement to hold on to documents without the associated costs."
| Home Page | Receive free news and updates |
| Tell a friend about this site | |
| Last modified: | |
| © The Home Repossession Page 1997- | |