Unfair relationships

An “unfair relationship” could include the terms of an agreement, the ways in which enforcement is being carried out, or anything else. The new rules are retrospective and will make lenders responsible for the transgressions of their brokers, even when these do not fall within the antecedent negotiation rules.

The method is the same as for extortionate credit, and there is no doubt that anything that is extortionate will also be an unfair relationship, but hopefully a lot more will be.

Any Court can re-open any credit agreement, whether regulated or not, where it considers that the bargain was an unfair relationship. The debtor must raise the matter and it is for the creditor to rebut it (s.171).

Successful cases are below:

A debtor has secured a five-year block on repossession in a claims management case against his lender, after using consumer credit law to challenge his secured loan agreement. Peter Bentley, of Bridgend, Cardiff, used the meaning of unfair relationships under Section 140A of the Consumer Credit Act (CCA) 1974 to claim that his loan contract with Blemain Finance was an unfair one. Blemain also agreed to charge no further interest on the £40,000 loan and cut his repayments from £550 to £150 a month. At the High Court in Cardiff, Judge Milwyn Jarman also prevented the lender from levying any charges or legal costs "whatsoever." The judge barred Blemain for enforcing repayment via repossession for five years, but even after this period, it can only bring repossession proceedings if there are at least 12 months? arrears on the new level of payments. Bentley's lawyers, Consumer Credit Litigation Solicitors (CCLS), successfully argued that Blemain had loaned the money to Bentley irresponsibly and that the agreement took advantage of his desperate situation. CCLS argued that shortcomings in the decision making procedure on granting the loan, such as in the under writing, affordability checks and valuation processes, led to the credit agreement being unfair. Andrew Settle, solicitor for CCLS, said: "The relationship between the parties was an unfair one within the meaning of Section 140A of the CCA 1974. CCLS is utilising a significant number of legal arguments, like those used on behalf of Mr Bentley, in thousands of cases on behalf of our clients." CCLS successfully demanded to have the loan account re written, which is believed to be the first time a loan account has been rewritten under settlement, as a result of the unfair relationships test. Bentley's case was taken on by claims management company Cartel Client Review. Carl Wright, chief executive of Cartel Client Review, claimed that Blemain made the offer to Bentley in a bid to prevent a judge in a High Court setting a legal precedent against its lending practices. He added: "A legal precedent could have driven a coach and horses through all its loan accounts. The consumer credit rule book is being rewritten as a result of High Court settlements like Blemain Finance v Bentley." Bentley's financial problems started when his mother died in 2007. He began part-time work to look after his father, who was suffering from Alzheimer's, and then took out a £40,000 secured loan in February 2007 to alleviate his financial predicament. His caring responsibilities led to a drop in working hours, and therefore a fall in income, and he then fell behind on his repayments. Blemain later chased Bentley for repayments on the loan, which by the time of this case being heard in court, had increased to £47,000.

This page was last updated on 12/01/10 (c) Bob Imrie