Unfair relationships — what does the future hold?

The ‘unfair relationship’ concept in respect of credit agreements was introduced into the Consumer Credit Act 1974 (CCA) on 6 April 2007. Seven years later, this article reflects on how the provisions of the test have been interpreted and applied by the courts and how the law is likely to develop.

The unfair relationship provisions replaced the former extortionate credit bargain regime. Previously, the court had the power to reopen the credit agreement if it found a credit bargain was such that it required the debtor to make payments that were ‘grossly exorbitant’ or otherwise ‘grossly contravene ordinary principles of fair dealing’. In practice, the courts were generally slow to intervene and these provisions were therefore rarely invoked and even more rarely produced a successful outcome for the debtor.

The Department for Trade and Industry proposed in its 2003 white paper that it should be easier for consumers to challenge unfair agreements and that the definition of ‘extortionate’ should be widened to cover unfair practices both at the time of entering the credit agreement as well as any subsequent events that may have led to unfairness. These proposals formed the basis of the unfair relationship provisions in the CCA…

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