Time for time orders

March 2023

Steve Wilcox has worked in debt advice since the 1980s. He is the editor of Quarterly Account, the Institute of Money Advisers journal.

In this article, Steve explains the history of time orders, and why they have historically been underused by the courts. Steve makes the case for advisers to refamiliarise themselves with this important tool in mortgage repossession using Shelter's new resources for professionals.

Steve works as a Specialist Debt Adviser at Shelter, giving second-tier advice and support to debt professionals across England and Wales.

Why we need time orders

When I started in debt advice, time orders had an almost mythical status.

The Bradford Debt Counselling Unit was one of a few organisations leading the way in the fledging debt advice industry. I listened in awe as colleagues from the Unit talked about how a court can make a time order to suspend mortgage possession proceedings.

I started as a CAB volunteer in 1986 and wanted paid employment in the advice sector. My manager said to me that debt advice was going to be the next big thing. How right she was! The huge growth in consumer borrowing had begun, and would continue through the following decades.

At the time, even the UK's major cities would be lucky to have two or three specialist debt advisers and there was virtually no provision outside big urban areas. Few would have envisaged how the industry would grow to meet an ever-increasing demand.

Mortgage repossessions

Mortgage repossessions were on an upward trajectory and peaked at 75,000 in 1991.

Secured loans were part of that picture. Owners with equity in their property could get 'easy credit' through secured loans. Lenders paid little regard to whether the borrower could afford repayments. Even less regard was paid to the risk of income shocks in future months.

The Office of Fair Trading regulated the consumer credit industry. They were inadequately prepared and resourced to police an industry rife with malpractice.

In 1997, the OFT published their 'non-status lending guidelines'. There were rich pickings for lenders who could charge high rates of interest, fees, and charges. Combined with ill-informed consumers and inadequate regulation we had the perfect storm for consumer exploitation.

Inevitably, advisers saw more clients with unaffordable secured loans facing repossession

Looking to the future

While mortgage repossessions have been on a steady decline, interest rates have recently hiked and inflation has risen to over 10%.

We have huge tranches of interest-only mortgages coming to the end of term without any repayment vehicle in place. Repossessions are predicted to be on the rise.

My first time order application

I made my first time order application as a very 'wet behind the ears' volunteer in 1987.

The Consumer Credit Act 1974 regulates most secured loans. It was argued that the courts could make a payment order at an affordable rate and reschedule the total outstanding debt as necessary, under section 129 of the Act.

This would be a much wider power than those that applied to first mortgages, where the court could only reschedule repayment of the arrears, with the current monthly instalment continuing to fall due.

My application was dealt with by a registrar (before they became district judges!) at Sheffield County Court. This registrar had a track record of being sympathetic to the plight of people with problem debt. He made a time order with a payment the client could afford. This meant the client had the opportunity to keep their home rather than be evicted.

Lender's appeal

The mortgage lender, Cedar Holdings, appealed. Their appeal focused on the meaning of the words 'any sum owed' in the Consumer Credit Act. They argued the Court could only reschedule the arrears, not the total debt. This would have seriously limited the Courts' powers.

My immediate reaction was blind panic.

It had been stressful enough representing before the registrar, but representing before a Circuit Judge was not something I was anything like ready for. Thirty-five years on, I'm still not.

Fortunately, help was at hand. One of the UK's leading mortgage solicitors, Derek McConnell, worked at Sheffield Law Centre. He agreed to take on the case and instruct a barrister.

Appeal hearing

Observing the hearing proceedings was a painful experience. Much of the factual information and legal argument had been distorted. But the outcome was successful for the client. The Court confirmed a time order could reschedule the total outstanding debt.

The decision was at County Court level, so persuasive, but not binding. The Civil Court Practice (also known as the 'Green Book'), used by most district judges at the time, referred to the case.

Southern and District Finance v Barnes

In 1995, the Court of Appeal considered the courts' powers to make time orders. It set out several principles in Southern and District Finance v Barnes.

Time orders: as rare as hen's teeth

Despite the courts' powers, time orders have been almost as rare as hen's teeth. And applications for first mortgage time orders as rare as Dong Tao's teeth (a Dong Tao being a rare type of hen).

It's difficult to say why this has been the case, but there are undoubtedly several reasons.

Lack of guidance

There is little certainty about the application process or the likely outcome. Advisers and clients don't have any clear framework and making an application can be a 'shot in the dark'.

District judges don't have confidence in their powers. It's never actually been necessary for a client to make a time order application in mortgage possession proceedings.

Section 129(1)(c) of the Consumer Credit Act provides that the court can make a time order "in an action brought by a creditor or owner to enforce a regulated agreement or any security, or recover possession of any goods or land to which a regulated agreement relates".

Lack of representation

District judges have sold borrowers short by failing to provide the protection the law offers.

Our adversarial legal system favours those who have the resources to use legal representation. District judges are generally more inclined to make the order a lender wants than to stick their neck out for an unrepresented borrower.

It's unlikely a borrower will be able to get a time order without representation. But debt advisers, particularly those funded by the Money and Pensions Service, will be all too familiar with the targets imposed on them. In our experience, many debt advisers cannot provide representation or find the time to prepare the detailed documents that are likely necessary to get a time order.

While Legal Aid might in theory be available, it's difficult to get, particularly for representation.

First mortgages

Given the limited impact of time orders for secured loans, it was hardly surprising there was never pressure from the debt advice sector to expand the provisions to first mortgages.

It was with a kind of surprised disbelief that debt advisers learned that this is exactly what had happened upon reformulation of s126 Consumer Credit Act on 1 April 2014. This brought Regulated Mortgage Contracts within the ambit of Part 9 of the Act, which includes the time order provisions at s129 and the power to vary agreements at s136. 

This only came into the spotlight following implementation of the Mortgage Credit Directive on 21 March 2016.  This brought the regulation of second (and subsequent) charge loans under the FCA’s mortgage regime. There was concern that the right to apply for a time order might be lost.  As it turned out, the scope of the time order provisions had already been extended to cover most first, second and subsequent mortgages on residential property, and this would remain.

Regrettably, though, it seems that borrowers rarely apply for time orders for first mortgages.

All the same hurdles that affect secured loans apply but with the extra burden that this all seems so new and revelatory. Can we really ask the court to suspend possession on payment of less than the current monthly instalment on a mortgage, if that's all our client can afford?

Well, if we can persuade the court it would be just to do so, yes!

A net with large holes

It's clear that many borrowers whose homes might have been saved by a time order have fallen through this net with large holes.

How to help borrowers

It's time that time orders start to protect struggling mortgage borrowers.

There has never been a more appropriate time to help our clients ask for time orders. If we don't do it, who will?

As we do, we can expect district judges to become more familiar with the legal protections in their cupboard and be ready to use them when circumstances demand.