Background
This Judgment of the Court of Appeal dealt with three appeals from the High Court, all of which raised an identical legal issue. This concerned the definition of "housing loan" contained in section 2 of the Consumer Credit Act 1995 (the 1995 Act) and whether it included a loan made for the purposes of purchasing a site and building a house on that site, which house did not exist at the time the loan agreement was entered into.
Under section 30(2) of the 1995 Act a credit agreement must include a written statement advising the consumer that they have a right to withdraw from the agreement without penalty within ten days of receipt of a copy of the credit agreement (a cooling-off period) and that under section 38 a creditor cannot enforce a credit agreement unless the requirements of Part III of the 1995 Act, which includes section 30, have been complied with. However, under section 29 of the 1995 Act, Part III is stated to apply to “all credit agreements other than housing loans”.
Facts
The loan agreements did not include a cooling-off period. Therefore, if the loan agreements were not deemed to be housing loans, then regardless of the appellants’ default in repayment of them, they would be deemed unenforceable under section 38 by reason of the failure to comply with section 30(2).
The loans in each case were for the purposes of purchasing a site on which a dwelling house was to be constructed and the amount of money involved was intended to and did cover both the site purchase and building costs. All relevant steps were taken prior to 1 August 2004 when the definition of “housing loan” in the 1995 Act was amended by the Central Bank and Financial Services Authority of Ireland Act 2004. This revised definition makes it clear that the term covers both loans in respect of the purchase of existing houses and loans for the purpose of enabling the borrower to have a house constructed on land.
Among the arguments put forward, the appellants claimed that the words “to provide” in the definition of “housing loan” in the 1995 Act could not be treated as a synonym of either “to purchase” or of “to construct" and contended that in order for a house to be provided it must already be in existence.
Decision
Butler J. rejected the appeal and concurred with Allen J.'s Judgment in the High Court that the use of the phrase "to provide" a house when describing the purpose of a housing loan in the 1995 Act definition was not limited to the purchase of a house. He noted that "the definition of “housing loan” in section 2 of the 1995 Act does not require that the house to which the loan relates be in existence at the time of the loan agreement. The loan may be one made for the purposes of enabling the borrower to provide the house. “Provide” in this context has a broader meaning than purchase and can include the provision of a house through its construction."
This decision should settle the legal position in respect of all loans taken out prior to 1 August 2004 where the purpose of the loan was to fund the construction of a house to be used as a principal residence of the Borrower or their dependent or where the Borrower was a consumer.
Hurley & Ors -v- Pepper Finance Company (Ireland) DAC [2024] IECA 80
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