In 2006 the Consumer Credit Act 1974 was amended by Parliament in order to better protect consumers against unscrupulous practices by lenders. Amongst a range of amendments, the most striking was the addition of a new ‘Unfair Relationship’ test. Section 140 (a-c) explains that the Courts may intervene where they find unfairness in any of the following:

  1. Any term of the agreement
  2. The way in which the lender has enforced their rights under the agreement
  3. Anything else the lender has done or not done

The test is purposefully framed in broad terms to ensure they are weighted towards the consumer rather than the lender. Where the Court finds any of the above to render the relationship unfair, they have wide ranging powers to allow them to remedy the ‘unfairness’, these include:

  1. Require the lender to write off all or part of the loan
  2. Require the lender to do or not do something in relation to the agreement
  3. Require the lender to pay compensation to the borrower

Since the inclusion that came into force in 2008, the Unfair Relationship provisions have been used to ensure the balance of power is shifted firmly towards the consumer. Examples of how the provisions can better protect you are as follows:

  • Where the lender has failed to inform you that they would receive a substantial commission from the insurer in respect of a PPI transaction (see our page on Rejected PPI Claims)
  • Where the lender has paid your credit broker a substantial amount of commission in respect of a secured loan 
  • Where the lender has advanced monies in circumstances where you could not afford the loan or where you were borrowing out of desperation
  • Where the lender has applied unfair charges to your account when you incurred mortgage arrears
  • Where the lender has applied unfair redemption penalties to your account
  • Where the lender has advanced a loan on an interest only basis in circumstances where you had no means of repaying the capital

To arrange a free initial consultation with one of the members of our Financial Litigation team, contact us online or by phone.

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