The Consumer Credit Act introduced “unfair relationships” provisions in 2008.
This allows customers to challenge loan agreements that could create an unfair relationship between them and the lender.
A Court may rule that a credit agreement may create an unfair relationship between a lender and its customer if:
- any of the terms of the credit agreement or a related agreement creates an unfair relationship;
- the way in which the lender has exercised or enforced its rights under the credit agreement creates an unfair relationship; or
- any other thing done (or not done) by or on behalf of the lender either before or after the credit agreement is entered into creates an unfair relationship.
The Courts have a wide range of powers where a relationship is found to be unfair, including:
- altering the terms of the credit agreement;
- reducing the amount payable by the customer;
- requiring the lender to refund money to the customer; and
- removing any duty placed on the customer under the agreement.
Once a customer complains, the lender will have to prove that it did not act unfairly. A customer's claim or complaint can include allegations of things done, or not done, by a lender's agent (which may include a motor dealer under Section 56 of the CCA).
If a consumer feels that they have not received a satisfactory response to their complaint, they can refer it to the Financial Ombudsman Service (FOS) for investigation and adjudication, or go to court. The FOS can help with complaints about most matters involving financial products and services provided in (or from) the UK. This includes:
- credit cards and store cards;
- loans and credit;
- hire purchase;
- pawn broking; and
- financial advice.
Further information on the FOS is set out in the ‘FLA Lending Code and dispute resolution' module.