Is a loan to finance a site purchase and the building of a house a "housing loan" for the purposes of the Consumer Credit Act 1995?

The recent case of Hurley v Pepper [2022]  IEHC 29 raised a question as to the correct interpretation of the Consumer Credit Act 1995 (CCA) and whether a loan provided to fund the purchase of a site and the subsequent construction of a house came within the definition of a "Housing Loan".  Under the CCA, there was an exception to the requirement for a cooling off period for consumer contracts, where the credit agreement was a housing loan. The Plaintiff argued that the loan he drew down with Irish Nationwide Building Society was not a housing loan as there was no dwelling on the property at the time of the loan, and therefore the exemption under  section 29 of the CCA did not apply.  The Plaintiff claimed that the lender was not entitled to enforce the loan agreement, or any security given for it on the basis that the lender did not comply with the requirements of section 30 of the CCA. 

Facts

The Plaintiff commenced proceedings seeking a declaration that the credit agreement and mortgage were unenforceable due to the Defendant's failure to comply with section 30.  It was acknowledged by the Defendant that the requirements of section 30 were not complied with but submitted that the pertinent question was whether section 30 applied to the loan. 

The Defendant issued a motion to dismiss the Plaintiff's claim on the grounds that it disclosed no reasonable cause of action, was bound to fail, was frivolous and/or vexatious and/or constituted an abuse of the process of the Court. 

In its judgment, the Court considered at length both the jurisdiction of the Court to determine the issue by way of a motion to strike out, and also the substantive provisions of the CCA.  Having analysed the relevant provisions, the Court was satisfied that the Defendant had met the relevant threshold for a dismissal of the Plaintiff's claim, as the Plaintiff had no prospect of successfully arguing that the credit agreement was an agreement to which the requirements of section 30 of the CCA applied.  The proceedings were accordingly dismissed.

Conclusion

This is an important decision for financial institutions, affirming that loans which were provided for the purpose of borrowers buying new build properties fall within the definition of a housing loan and are therefore exempt from the requirements of section 30 of the CCA. 

For more information in relation to any of the above please contact Ciara Murphy or your usual contact in Beauchamps.