The fact that a default notice is technically non-compliant will not necessarily invalidate the notice if it can be shown the borrower has suffered no prejudice as a result of the non-compliance.
In American Express Services Europe PE Limited v Brandon, Brandon failed to make payments on his credit card. AMEX served a default notice under s87(1) of the Consumer Credit Act 1974 (CCA). It required a minimum payment to be made "within 14 calendar days from the date of this default notice". No payment was made. AMEX ended the agreement and demanded the unpaid balance. Brandon's default also meant that late payment charges of £25 and over limit charges of £25 were applied to his account.
S88(2) CCA provides that a notice given after 1 October 2006 must give the debtor at least 14 days after service to remedy the breach. By s 176 CCA, a default notice is deemed served on a date it would be delivered in the normal course of the post. The notice here was served on 19 June 2007 and demanded that Brandon make payment within 14 calendar days from the date of the default notice. Service would have been deemed after 19 June and Brandon alleged the notice period was therefore too short, did not give the statutory period required, was therefore invalid and AMEX could not rely on it. He also alleged that the charges were penalties and therefore irrecoverable.
The court held that as AMEX did not take any further steps until 11 July 2007, Brandon had not been prejudiced by the technical breach. The default notice was therefore valid.
As to the default charges being penalties, the judge at first instance held that lenders do suffer loss when borrowers fail to make payment on time or go over the agreed limit and that default puts pressure on cash flow and reserves. He held that the charges applied here were a reasonable pre-estimate of loss and therefore recoverable. This was upheld on appeal.
Things to consider
So long as no prejudice to the borrower can be shown, this judgment will be very useful in trying to persuade the courts that technical breaches should be overlooked. As a High Court decision this judgment will bind County Courts, although we understand that leave to appeal is being sought from the Court of Appeal.