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Unfair relationships

The Consumer Credit Act 1974 enables borrowers to challenge unfair credit agreements in court and obtain redress, if the overall relationship is unfair to the borrower.

This is in addition to consumers being able to take disputes to the Financial Ombudsman Service (FOS). See alternative dispute resolution scheme.

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The introduction of provisions

The provisions were introduced by the Consumer Credit Act 2006. They applied to new agreements from 6 April 2007, and to pre-existing agreements from 6 April 2008. Agreements completed before the new provisions took effect remain subject to the previous extortionate credit bargains provisions.

The 2006 Act also enhanced the right to apply for a time order, which is a court procedure that can give borrowers more time to repay a debt.

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The unfair relationships provisions

Section 140A of the 1974 Act provides that a court may determine that the relationship between a lender and a borrower arising out of a credit agreement (or the agreement taken with any related agreement) is unfair to the borrower because of:

  • any of the terms of the credit agreement or a related agreement
  • the way in which the lender has exercised or enforced its rights under the credit agreement or a related agreement, or
  • any other thing done (or not done) by or on behalf of the lender either before or after the making of the credit agreement or a related agreement.

The courts have a wide range of powers where a credit relationship is found to be unfair, including:

  • altering the terms of the credit agreement or a related agreement
  • reducing the amount payable by the borrower
  • requiring the lender to refund money to the borrower
  • removing any duty placed on the borrower under the agreement, and
  • imposing requirements on the lender or an associate.

In addition, where unfair relationships harm the collective interests of consumers, the OFT and other enforcers (including Local Authority Trading Standards services) can take enforcement action under Part 8 of the Enterprise Act 2002.

The OFT has published guidance on Part 8 action and unfair relationships. See Unfair relationships - Enforcement action under Part 8 of the Enterprise Act 2002 (pdf 440kb).

It is not the role of the OFT to take up complaints on behalf of individual consumers. If a consumer has a complaint against a lender, and considers that the overall relationship is unfair, s/he should speak to a Citizens Advice Bureau or other debt adviser.

Alternatively, if the consumer has pursued the complaint with the lender but is dissatisfied with the outcome, s/he can approach the Financial Ombudsman Service.

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Time orders

Section 129 of the 1974 Act provides that a court can make a time order, giving the consumer more time to repay a debt under a regulated consumer credit or consumer hire agreement, if the court considers it 'just' to do so. In addition, section 136 provides that an agreement may be amended as a consequence of a time order - for example, by reducing the rate of interest or extending the term of the agreement.

The consumer can apply for a time order following receipt of a default notice, or a notice of enforcement action under the Act. The court can also make a time order as part of proceedings brought by the lender for enforcement of the agreement or to recover possession of goods or land (for example, mortgage repossession).

A consumer can also apply for a time order following receipt of an arrears notice, provided that s/he first gives notice to the lender and submits an alternative payment proposal, and at least 14 days elapse before an application is made to the court.

A guide to time orders is available on the National Debtline website.

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Case summaries

The OFT has produced a list of unfair relationships cases (of which it is aware), together with case summaries. These are based on the court judgments (where available). For copyright reasons, the OFT is unable to release copies of the actual judgments, but these may be obtained by application to the relevant court or a law website. The list was last updated in January 2013

View the list of unfair relationships cases and download case summaries.

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