Migración

This section, entitled "Consumer Credit Act 1974 (as amended)" contains a discussion of the material consequences of the CCA for the designated accounts.

Enforcement of improperly executed or modified credit card agreements

If a credit card agreement has not been executed or modified in accordance with the CCA, then it may be unenforceable against a cardholder without a court order and in some instances may be completely unenforceable. As is common with many other UK credit card issuers, the originators' credit card agreements may not in all circumstances comply in all respects with the CCA or other related legislation.

As a result, these agreements may be unenforceable by the relevant originator against a cardholder automatically or without a court order. The originators give no guarantee that a court order could be obtained if required. With respect to those credit card agreements which are not enforceable under the CCA or other related legislation such that a court order could not be obtained, the originators estimate that this will, on any pool selection date or additional selection date, represent less than 1 per cent. of the aggregate principal receivables in the designated accounts. Any resultant losses arising on these accounts will be written off and borne by the investor beneficiaries and originator beneficiaries based on their respective interests in the receivables trust. However, the credit card agreements that do not comply with the CCA are still legal, valid and binding obligations of the relevant cardholder and it will still be possible to collect payments from cardholders willing to pay their debt and demand arrears from cardholders who are falling behind with their payments. Further, it is unlikely that an originator will have an obligation to repay or account to a cardholder for any payments received by that originator notwithstanding any such non-compliance with the CCA.

Unfair relationship test

As of 6 April 2008, an unfair relationship test has applied to all new and existing credit agreements.

There is no statutory definition of what constitutes an unfair relationship. The test allows the courts to be able to consider a wider range of circumstances surrounding the transaction, including the creditor's conduct before and after making the agreement. Once the cardholder alleges that an unfair relationship exists, the burden of proof is on the creditor to prove the contrary.

If a credit card agreement is found to be unfair, the court may require the creditor repay sums to the debtor, to do, not do or cease doing anything in relation to the agreement, reduce or discharge any sums payable by the debtor or surety, return surety, alter the terms of the agreement or direct accounts to be taken.

In addition, it is possible that certain clauses of a credit card agreement may be found to be unfair under the UTCCR. Such unfair clauses may be found by the courts to be unenforceable against the cardholder.

The possible unenforceability of, or liabilities due to an underlying credit card agreement constituting an unfair relationship, may result in unrecoverable losses on accounts to which such agreements apply. If losses arise on these accounts, they will be written off and borne by the investor beneficiary and originator beneficiary based on their interests in the receivables trust.

Liability for supplier's misrepresentation or breach of contract

Transactions involving the use of a credit card may constitute transactions under debtor-creditor-supplier agreements. A debtor-creditor-supplier agreement includes an agreement by which the creditor advances funds to finance the debtor's purchase of goods or services from a supplier.

Section 75 of the CCA provides that, if the supplier is in breach of the contract (whether such contract is express or implied by law) between the supplier and a cardholder in a debtor-creditor-supplier agreement or if the supplier has made a misrepresentation about that contract, the creditor may also be liable to the cardholder for the breach or misrepresentation. The liability of an originator for a designated account in the circumstances described above is called the "originator section 75 liability". In these circumstances, the cardholder may have the right to reduce the amount owed to the originator under his or her credit card account. This right would survive the sale of the receivables to the receivables trustee. As a result, the receivables trustee may not receive payments from that originator that it might otherwise expect to

receive. However, an originator will not be liable where the cash price of the item or service supplied concerning the claim is less than £100 or greater than £30,000 but the liability of the creditor is unlimited.

The receivables trustee has agreed to indemnify the originators for any loss suffered by the originators arising from an originator section 75 liability. This indemnity cannot exceed the original outstanding principal balance of the affected charge on the designated account.

The receivables trustee's indemnity will be payable from available spread on the receivables. Any amounts that an originator recovers from the supplier will reduce that originator's loss for purposes of the receivables trustee's indemnity. The originators will have rights of indemnity against suppliers under section 75 of the CCA. The originators may also be able to chargeback the transaction in dispute to the supplier under the operating regulations of VISA^® or MasterCard^®.

If an originator's loss for purposes of the receivables trustee's indemnity exceeds the available spread available to satisfy the loss, the amount of the excess will reduce the relevant originator interest accordingly.

Transfer of Benefit of Receivables

The transfer by each originator to the receivables trustee of the benefit of the receivables is governed by both English law and by Scots law, as applicable, and takes effect in equity only, except in the case of receivables which are governed by Scots law, in which case the transfer takes effect under a declaration of trust which is governed by Scots law pursuant to which the beneficial interest in the trust property is vested in the receivables trustee.

The receivables trustee has agreed that, as regards receivables that are governed by English law, notices of assignment will not be given to cardholders of the assignment of the benefit of such receivables and, as regards receivables that are governed by Scots law, a full assignation followed by notice of assignment will not be required, in each case, unless RBS's long-term senior unsecured indebtedness as rated by Moody's, Standard & Poor's or Fitch Ratings were to fall below Baa2, BBB or BBB, respectively. The lack of assignation and notices of assignment has several legal consequences.

Until notice of assignment is given to the cardholders (which will be following an assignation occurring in the case of receivables governed by Scots law) each cardholder will discharge his or her obligations under the designated account by making payment to the relevant originator. Giving notice of assignment to cardholders (and following an assignation in the case of receivables governed by Scots law) would mean that cardholders should no longer make payment to the originators as creditors under the credit card agreements, but should instead make payment to the receivables trustee as assignee of the receivables. If notice of assignment is given (and following an assignation in the case of receivables governed by Scots law) and a cardholder ignores it and makes payment to the relevant originator for its own account, that cardholder would nevertheless still be bound to make payment to the receivables trustee. The originators, having transferred only the equitable benefit or the beneficial interest of the securitised receivables to the receivables trustee (by way of assignment or Scottish declaration of trust), are the bare trustees of the receivables trustee for the purposes of the collection of the receivables that are the property of the receivables trust and are accountable to the receivables trustee accordingly.

Until notice of assignment is given to a cardholder (which will be following an assignation occurring in the case of receivables governed by Scots law) who is a depositor or other creditor of an originator equitable set-offs may accrue in favour of that cardholder against his or her obligation to make payments under the credit card agreement to that originator. These rights of set-off may result in the receivables trustee receiving less monies than anticipated from the receivables.

The transfer of the benefit of the receivables to the receivables trustee has been and will continue to be subject both to any prior equities that have arisen in favour of the cardholder and to any equities that may arise in the cardholder's favour after the transfer. Where a notice of assignment is given to a cardholder (and following an assignation in the case of receivables governed by Scots law), certain rights of set-off may not arise after the date of the notice of assignment.

Under the terms of the receivables securitisation agreement, the originators represent that each receivable assigned to or held on trust for the receivables trustee is an eligible receivable unless the receivable is

the legal, valid and binding obligations of the cardholder enforceable unless they are not in compliance with the CCA, in which case they may only be enforceable with a court order and, in a small number of cases, may be unenforceable against the cardholder in accordance with their terms. The eligibility criteria also require that each receivable is not, save as specifically contemplated by any rule of English law or Scots law, currently subject to any defence, dispute, set-off or counterclaim or enforcement orders apart from in the limited cases described in the previous sentence.

Notice of assignment to the cardholder and, in respect of any receivables transferred after the closing date pursuant to an English law governed contract for assignment not in written form, a written assignment in respect of those English law governed receivables or, in the case of Scots law governed receivables the subject of a Scottish declaration of trust, an actual assignation followed by a notice of assignment to cardholders would be necessary to perfect the transfer so that the receivables trustee would take priority over any interest of a later encumbrancer or transferee of the relevant originator's rights who has no notice of the transfer to the receivables trustee.

Notice to the cardholder and, where necessary, assignation followed by a notice of assignment to cardholders would prevent the credit card agreement from being amended by the relevant originator or the cardholder without the consent of the receivables trustee.

As regards receivables that are governed by English law, lack of notice to the cardholder means that, for procedural purposes, the receivables trustee will have to join the relevant originator as a party to any legal action that the receivables trustee may want to take against any cardholder.