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The Electronic Signature in Consumer Credit Finance

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TWM Solicitors, having now merged with Wright & Wright Solicitors, have the conduct of a ground breaking High Court action concerning the admissibility and enforceability of certain Consumer Credit Act documentation in UK proceedings. The action also considers the impact of the business exemptions within the Act and the impact of loss of possession for pawnbrokers with regards their priority in relation to other interests in the security assets.

A critical area which we are now leading is the use of electronic signatures in consumer credit documentation- a growing business area in the modern financial services era.

The common misinterpretation (or more realistically the common assumption) is that the UK legislation soundly follows the text and essence of the EU’s Electronic Signatures Directive (99/93/EC).

We can advise that the UK iteration of that Directive is not as secure as Consumer Credit businesses may think, or require. Indeed, whilst the Consumer Credit Act 2006 clearly suggests that electronic signatures are intended to be evidence of acceptance of a credit commitment, our experience suggests that this is not the case.

The Electronic Communications Act 2000 falls short of asserting that an electronic signature, mark or clickthrough is the equivalent of an acceptance of the contract terms to which it relates. Instead, it simply suggests that it is admissible in evidence in legal proceedings in relation to any question as to the authenticity of the communication or data or as to the integrity of that communication or data (section 7(1)). In other words, that the data is good evidence of the data and contract itself but not the act of signing.

This ambiguity leaves a lender’s entire loan book exposed to questions of enforceability and priorities over underlying assets- rendering the lender potentially unsecured if security is taken. If lenders of any nature (online, offline, consumer credit or otherwise) are concerned we recommend two intermediate steps are taken before any consultation,

1. review any signature or execution areas on the face of the agreements or screens: are they clear and bespoke to the signing client?

2. maintain (or collate if not currently maintained) a record of all online or virtual transactions against offline with copies of the executed agreements in non editable formats

We at TWM are happy to consult with any consumer finance or credit business, online or offline, in relation to their credit business or processes, enforceability and recovery. The risk of exposing an entire online loan book is too great to ignore.

Please contact our Head of Consumer Lending, and lead in the current High Court action, Julian Sampson at julian.sampson@twmsolicitors.com for more information.

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