Practitioners will be familiar with the powers given to the courts by the Administration of Justice Acts 1970 and 1973 to prevent mortgage borrowers in financial default from being evicted by their mortgagees.

Less well recognised are the equivalent powers contained in the Consumer Credit Act 1974 dealing with 'regulated agreements' by way of the granting of a time order.Put very simply, most consumer loans of less than £15,000 made to individuals will be regulated agreements.

When the loan is secured on land by way of a legal charge this is known as a secured loan.

These loans are typically second charges taken out for home improvement or other consumer purposes.Under s.129 of the 1974 Act, a debtor under a regulated agreement can apply for a 'time order' when he or she is served with a default notice or when the creditor takes proceedings to enforce the agreement.

In this context the proceedings are possession proceedings.

Under s.129, a time order 'shall provide for...

as the court considers just...

the payment by the debtor...

of any sum owed...

by such instalments, payable at such times, as the court having regard to the means of the debtor...

considers reasonable...' (s.129(2) (a)).

S.136 goes on to provide that: 'The court may, in an order made under this Act, include such provision as it considers just for amending any agreement or security in consequence of a term of the order'.

In 1987 a circuit judge at Sheffield County Court in Cedar Holdings Ltd v Jenkins [1988] CCLR 34 upheld a district judge's ruling that these provisions were wide enough to allow the court to regulate the rate of payment of the entire outstanding debt - not just the arrears as at the date of the hearing - and to reduce the interest rate under the agreement.Subsequently, some judges have followed this interpretation and others have accepted the narrower construction of the sections determining that the court only has the power to direct the rate of payment of the arrears (as opposed to the balance of the debt payable over the remainder of the term of the loan) and that there was no power in court to vary the interest rate.

The years since Jenkins have seen a veritable legal lottery.It was against this backdrop that the Court of Appeal determined the case of Southern & District Finance plc v Barnes [1995] The Times, 19 April.

In fact the Court of Appeal had before it three appeals which were heard at the same time.

In addition to Barnes there were the borrower's appeal in J & J Securities v Ewart and the lender's in Equity Home Loans v Lewis.

Apart from the issue as to the correct construction of two sections, there were two other points raised in the cases.In Barnes and Lewis the lenders had not 'called in' the loans and there was no accelerated payment clause making the balance of the debt immediately payable.

In Ewart demand for the whole debt had been made.

Could a lender take possession proceedings without being taken to have demanded payment of the whole debt? In Lewis the borrower cross appealed, arguing that in computing the 'sum owed' it was necessary to take into account the statutory rebate which would be set off against the balance of the debt in the event of the loan being paid off.In giving judgment, the Court of Appeal was mindful that both the finance industry and consumer agencies were looking for general guidance on the application of the time order provisions.

In the lead judgment Leggatt LJ set out a number of principles.1.

When a time order is sought or a possession claim is brought in relation to a regulated agreement, the court must first consider whether it is just to make a time order, taking into account all the circumstances of the case including the position of the creditor as well as the lender.2.

When a time order is made it should normally be made for a stipulated period on account of temporary financial difficulty.

If, despite the giving of time, the debtor is unlikely to be able to resume repayment of the total indebtedness by at least the amount of the contractual instalments, no time order should be made.

In such circumstances it will be more equitable to allow the agreement to be enforced.3.

The expression 'sum owed' means every sum which is due and owing under the agreement.

Where possession proceedings are brought this will normally comprise the total indebtedness.

In assessing what instalments to order, the court should have regard to the means of the debtor.4.

The court has the power to amend the rate of interest under s.136.5.

If a time order is made when the sum owed is the whole of the outstanding balance due under the loan, then there will inevitably be consequences for the term of the loan or for the rate of interest or both.6.

Where justice requires the making of a time order then the court should suspend any possession order that it makes so long as the terms of the time order are complied with.The court then sought to apply these principles to the three cases.

In Lewis the loan was for £4000 payable over 15 years at 44.1% APR with monthly instalments of £105.56.

The circuit judge ordered the total indebtedness to be paid by six monthly instalments of £25 and then 174 monthly inst alments of £96.81 and reduced the interest rate to nil.

The Court of Appeal expressly approved the judge's approach.

The borrower's argument on the rebate point was rejected with the court following its earlier decision in Forward Trust Ltd v Whymark [1990] 2 QB 670.In Barnes £12,000 was borrowed over ten years at 30.8% APR.

At the hearing in the county court the outstanding balance under the loan was £14,977.

The assistant recorder misconstrued s.129 by holding that he could only regulate the rate of payment of the arrears and not the outstanding balance.

Remitting the case to the county court, the Court of Appeal held that it would have been proper for the rate of interest to have been reduced.Ewart involved a loan of £6983.40 over seven years at 2.31 % per month (31.5% APR) with a monthly instalment of £190.80.

The Court of Appeal upheld the district judge's determination that the monthly instalments should be reduced to £150 and a consequential reduction in the interest rate to 2% per month.The Court of Appeal ordered the lenders to pay the borrowers' costs on the appeals and directed that the lenders should not add any of their costs of the appeals to the security.

It would follow therefore that a lender who unreasonably refuses a proposal from a borrower which subsequently is incorporated into a time order is at very real risk as to costs.

Leave to appeal to the House of Lords was refused.The Court of Appeal's judgment is to be welcomed as it puts to an end a long period of legal uncertainty.

It can only be hoped that district judges will now feel able to make full use of this social legislation to assist mortgage borrowers with consumer credit loans who find themselves unable to meet their commitments.