Basil and Amanda Rankie in the UK took matters into their own hands when it came to dealing with MBNA, Capital One, HSBC, and other credit card debts. Using contract law in the UK they were able to get the court to nullify their credit agreements and wipe off their debt.
This isn’t a new trick. There has been a question about the enforceability of credit agreements in the UK for some time now. And this created an explosive industry in the UK to challenge similar agreements and claim that they could be terminated.
As you would expect, the UK government didn’t take very kindly to this and have been working to crack down on these debt elimination companies with accusations that they are unfairly taking advantage of consumers.
Well the Rankine’s decided their approach had legs so they started up a website to sell their credit agreement cancellation services to others. And here is where I think they ran into trouble.
Their business model was curious and it perplexed me that that they would “buy” credit card agreements off of individual consumers and fight them. Unless there is a huge legal loophole involved here I can’t see how they could purchase the debt without the acceptance of the original creditor.
Apparently the Office of Fair Trading in the UK (equivalent of the FTC in the U.S.) was very skeptical of the claims themselves. The OFT came out and said that companies offering to help people become debt free through buying or selling on debts is a ‘debt sale scam’ and warned consumers to steer clear of them. It argues the law does not permit the sale of debt without the original lender’s permission.
Daniella Lipszyc, a specialist in contact law with Ultimate Law in Altrincham, Cheshire, said the central issue here is a loophole Basil has identified: lenders terminate a contract after a borrower falls behind in repayments, before they ask for the whole amount to be repaid.
This loophole is the window created – after the contract has been terminated – that the Rankines are using to sidestep contract law to buy debt.
Daniella said: ‘They are right, technically. The problem is they want to assign the liability for the debt to themselves, which is the bit I can’t see working. The liability for the debt is a personal one, much like a personal injury claim; you can’t assign a personal injury claim to someone else – it’s yours alone, it’s personal. There’s also an implied obligation to repay the debt.
‘Whether this holds up in a court of law remains to be seen.’ Source
The Rankine’s company, Credit Card Killer, charges clients a flat fee of £450 plus 10% of the outstanding debt for a loan agreement, in return for ‘buying’ it off them for a nominal payment of £1. There is a further charge of £350 plus 10% for additional agreements.
I’m sure this isn’t the last we’ve heard about this but don’t get your hopes up that this has become an easy way out of debt in the UK or the U.S.