You Think Your Credit Agreement Is Unfair
If you believe your credit agreement contains unfair terms, charges excessive interest, or arises from irresponsible lending, you may be able to challenge it under the Consumer Credit Act 1974's unfair relationship provisions or complain to the Financial Ombudsman Service.
Quick Answer
The Consumer Credit Act 1974 ss.140Aโ140C give courts broad power to reopen a credit agreement or any related transaction if the relationship between the creditor and debtor is unfair โ by reason of the terms, the way the creditor exercised its rights, or any other related matter. The Financial Ombudsman Service provides a free alternative to court action.
Full Explanation
The unfair relationship provisions in the Consumer Credit Act 1974 (CCA) ss.140Aโ140C, inserted by the Consumer Credit Act 2006, give courts the broadest possible power to intervene in credit agreements where the relationship between creditor and debtor is unfair. The test is deliberately open-ended: the court considers the terms of the agreement, the way in which the creditor has exercised or enforced its rights, and any other relevant matter.
In practice, claims succeed where: the interest rate is very high (payday loans at thousands per cent APR have been challenged โ Kerrigan v Elevate Credit International Ltd [2020]); the lender carried out inadequate affordability checks in breach of FCA Handbook rules (CONC 5); the lender added PPI or other insurance products without the borrower's informed consent; or the agreement contains terms that are inherently unfair.
Where the court finds an unfair relationship, it has wide remedial powers under s.140B: it can reduce or discharge the debt, require repayment of sums paid, alter the terms of the agreement, set aside any security, or require accounts to be provided. The burden of proof shifts to the creditor once an unfair relationship is alleged (s.140B(9)).
For FCA-regulated lenders, the FCA's Consumer Credit sourcebook (CONC) imposes detailed rules on creditworthiness and affordability assessments. Breach of these rules is relevant to the unfair relationship test and to FOS complaints.
The Financial Ombudsman Service is the free, accessible alternative to court proceedings for most consumers. The FOS can award up to ยฃ430,000 and its decisions are binding on regulated lenders. It has handled hundreds of thousands of PPI complaints and is active on irresponsible lending and high-cost credit complaints.
Legal Basis
- ยงConsumer Credit Act 1974 ss.140Aโ140C โ unfair relationship test; court's power to reopen credit agreements
- ยงFCA Consumer Credit sourcebook (CONC) โ FCA rules on affordability, responsible lending, and fair treatment
- ยงKerrigan v Elevate Credit International Ltd [2020] EWHC 2169 โ unfair relationship finding for high-cost short-term credit
What To Do
Write to the Lender Raising the Unfair Relationship
Send a formal complaint letter to the lender identifying the specific aspects of the relationship you consider unfair โ for example, excessive interest, inadequate affordability checks, or undisclosed commission. Ask for a full account of all interest and charges paid, a copy of the original credit agreement, and the lender's response.
Escalate to the Financial Ombudsman Service
If the lender does not resolve your complaint within 8 weeks (or gives a final response you disagree with), escalate to the FOS at financial-ombudsman.org.uk. Submit all correspondence, the credit agreement, statements, and any evidence of financial difficulty at the time of the loan.
Consider a Court Claim Under CCA 1974 s.140A
For higher-value claims or where the FOS route is unavailable, instruct a solicitor to bring a county court claim under CCA 1974 s.140A. The burden of proof shifts to the creditor once an unfair relationship is alleged (s.140B(9)).
Important Deadlines
Important Warnings
Do not stop making payments during a dispute without taking specialist debt advice โ this will damage your credit rating and may lead to enforcement action while the complaint is pending.
The FOS has a 6-year time limit (or 3 years from when you became aware of a problem) for most financial complaints. Act promptly.
Claims management companies may offer to pursue unfair credit claims for a fee of 25โ30% of any award. The FOS and court route are available to you directly at no cost.