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Originally a PPT doc - http://www.google.co.uk/url?sa=t&sou...xcC_Wg&cad=rja
but has some interesting CC level cases in on UR.
but has some interesting CC level cases in on UR.
Unfair relationships and the courts
Responsible Credit Convention
20 October 2010
Guy Skipwith
Citizens Advice Specialist Support
Unfair relationship provisions
Sections 140A – 140D CCA 74
Sections 140A – 140D CCA 74
- Replaced extortionate credit provisions on 6.4.07 for agreements made on or after this date
- Applied retrospectively to all agreements on 6.4.08
- Do not apply to:
- Hire agreements and FSA regulated mortgages
- Where UR claim issued before 6.4.08
See Sadeer v Nine Regions
- Agreements that were ‘completed’ before 6.4.08
See Soulsby v FirstPlus
Section 140A CCA 74
- Court must consider all matters it thinks relevant
- Court can find relationship unfair because of:
- The terms of the agreement or related agreement
Related agreements include consolidated loans,
PPI loans and linked transactions
- The way the creditor has exercised or enforced
its rights under the agreement
- Any other act or omission by the creditor either
before or after the making of the agreement
Relevant matters
- Interest rates
Rates must be ‘so much higher than those applicable in the particular market sector, or payable by borrowers in similar circumstances … so as to make the relationship as a whole unfair’
- The individual circumstances of the borrower
- Unfair terms under the UTCC Regulations
- Codes of practice, e.g. the Lending Code and the FLA code
- Part 8 Enterprise Act 2002
Guidance on unfair practices
Relevant matters
- OFT guidance
- Guidance on secure lending
- Debt collection guidance
- Irresponsible lending guidance
- Guidance on ss77/8 CCA 74
- OFT licensing criteria
- Unfair, improper and oppressive practices
Powers of the court (s140B)
Where there is an unfair relationship, the court can: - Order the creditor to repay money to the debtor
- Order the creditor to do or not do anything
- Order the creditor to reduce or discharge what is payable by the debtor
- Amend the terms of the agreement
Cases - high interest rates
Nine Regions and Betterplace (Log Book Loans)
- Loans secured by bills of sale
- APRs of up to 384.4% not unfair
- Last resort short-term loans
- Substantial risk to the creditor
Sadeer, Singh, Mannion and Shaw (High Court)
Cases - high interest rates
- 330% APR
- Loan rolled over
- Relationship not unfair
- Interest and default charges written off because of creditor’s misrepresentation
- Enforceability of loan and bill of sale not considered because borrower represented himself as employed
Mannionv Nine Regions
Mannion
Cases - high interest rates
- APR reduced on consolidation loan from 485.35% to 343.5% (rate on repaid loan)
- Weekly default charges not permitted where loan repayable monthly
- Bailiff action to repossess car not unfair
Morrison v Betterplace (Log Book Loans)
Cases - high interest rates
- Patel v Patel (High Court)
Rate of 20%, compounding monthly, unfair because 13% higher and three times base rate applicable at the time
Particular circumstances – borrower ‘looked up’ to the lender, a personal family friend, and had ‘trust and confidence in him’
- Tamini v Khodari (CA)
Flat fee of 20% on a series of short-term non-commercial loans for gambling for up to £250,000 not unfair
Successful PPI cases
- Undisclosed commission on sale of PPI unfair – MBNA v Thorius and Yates v Nemo
- Unilateral imposition of PPI without discussion or needs analysis unfair – Wollerton v Black Horse
- Unfair because PPI was a condition of the loan, no discussion of the need for PPI and debtor not told it was cancellable – Roach v Black Horse
- Unfair due to cost and suitability of PPI, and amount of commission – Yates v Nemo
Unsuccessful PPI cases
Harrison v Black Horse
- PPI for 5 years of 23 year loan
- Undisclosed commission of 87% taken by creditor
- PPI policy ‘not good value’ and 5 year term ‘too short’
- Relationship not unfair
- No duty of ‘utmost good faith’ or fiduciary
relationship between creditor and debtor
- Non-disclosure of 87% commission not unfair
- Lender not responsible for broker’s
misrepresentations
Unsuccessful PPI cases
Black Horse v Speak (High Court)
- PPI not compulsory and not misrepresented as optional in agreement
- Because no misrepresentation, no breach of ICOB
- ‘Demands and Needs’ questionnaire completed so no breach of ICOB
- Relationship not unfair
Shared appreciation mortgages
- Barclays and Bank of Scotland
- Some 15,000 SAMs taken out from 1997 to 1998
- Zero-rate or very low interest
- Loans repaid on sale of property and lender also entitled to up to 75% of appreciation of value in last 10 years
- Group action issued claiming unfair contract terms and unfair relationships
- Trew v Bank of Scotland
- Trial of ‘common issues’ awaited
Other cases
Carey v HSBC (High Court) - Failure to comply with a ss77/78 CCA request does not in itself make relationship unfair
Barrons Finance v Obulisi
- Secured loan at 3.7% per month to repay first mortgage arrears
- Multiple breaches of CCA
- Vulnerable debtor
- Relationship unfair
- Loan rewritten as an unsecured loan at 8% APR repayable over 5 years
Questions
Are the unfair relationship provisions working? Do they give consumers better protection?
Have they improved creditor’s behaviour?
Do they give consumers a better mechanism for
challenging unfairness?
Comment