Mental Capacity Bill should protect consumers from unfair contracts, says Citizens Advice
21st January 2005
People need better legal rights if their state of mind makes them incapable of understanding consumer contracts they have signed up to, Citizens Advice said today.
The national charity is urging peers to support amendments to the Mental Capacity Bill - due to be considered by a House of Lords committee on Monday (24 January) - which would give people the right to cancel or challenge agreements when there is clear evidence that a contract has not been understood by the consumer because of their mental incapacity.
Evidence from Citizens Advice Bureaux shows that difficulties in managing personal finances due to loss of mental capacity can lead to severe debt problems, often ending up in court, and sometimes resulting in people losing their homes.
A CAB in the north east saw a debt client who had taken out loans with a large high street bank while detained as an in-patient at a local psychiatric hospital, which he gave as his home address. Despite confirmation from his psychiatrist that he was incapable of understanding the agreement he had entered into, the bank was adamant that the contract was valid and refused to write off his debts.
In another case, a man in the south east suffering from manic depression and living on incapacity benefit was persuaded by a salesman who cold-called him at home to take out a loan of £10,600 to buy a new kitchen. Repayments over 10 years would have added up to a total of £24,000. When he failed to make payments he was pursued by the bank and their solicitors, even though workmen installing the kitchen had been sufficiently concerned by his behaviour as to ask their office whether they should continue.
Greater protection for vulnerable consumers already exists in Scotland, where Citizens Advice says it works well. In Scottish common law a contract is void if a person was incapable of understanding and transacting the business in question.
In one Scottish case a man with bi-polar disorder bought a yacht and a horse during a manic phase of his illness. A report from his consultant on his state of mind when he made the purchases persuaded his creditors to write them off.
Citizens Advice Director of Policy Teresa Perchard said:
"Citizens Advice very much welcomes this Bill, which goes a long way to resolving the tension between protecting the welfare interests of people with impaired mental capacity, and upholding their rights as individuals to make their own decisions.
"But without these amendments, the bill is at serious risk of disadvantaging people with mental health problems when it comes to everyday purchases, by failing to provide appropriate protection in a competitive marketplace. We often find people are subjected to high pressure selling, or can be tricked into signing contracts for loans or major purchases.
"It is not right that consumers who don't have the mental capacity to fend off tricksters should have to pay the price.
"It must be plainly clear that there is not a valid contract if one of the parties involved doesn't know what they're doing. In criminal law a person is not held liable for their act if it can be demonstrated that they don't understand that what they have done is wrong. The same principle should be applied in consumer law."
Last updated: February 23, 2007