The Consumer Credit Act 1974 enables borrowers to challenge unfair credit agreements in court and obtain redress, if the overall relationship is unfair to the borrower. This is in addition to an enhanced ability for consumers to take disputes to the Financial Ombudsman Service (FOS).

The provisions were introduced by the Consumer Credit Act 2006. They applied to new agreements from 6 April 2007, and to pre-existing agreements from 6 April 2008. Agreements completed before the new provisions took effect remain subject to the previous extortionate credit bargains provisions.

The Unfair Relationships Provisions

Section 140A of the 1974 Act (as amended) provides that a court may determine that the relationship between a lender and a borrower arising out of a credit agreement (or the agreement taken with any related agreement) is unfair to the borrower because of:

• Any of the terms of the credit agreement or a related agreement
• The way in which the lender has exercised or enforced its rights under the credit agreement or a related agreement,
• Any other thing done (or not done) by or on behalf of the lender either before, or after, the making of the credit agreement, or a related agreement.

The courts have a wide range of powers where a credit relationship is found to be unfair.

• Altering the terms of the credit agreement or a related agreement
• Reducing the amount payable by the borrower
• Requiring the lender to refund money to the borrower
• Removing any duty placed on the borrower under the agreement - this would effectively cease the agreement
• Imposing requirements on the lender or an associate.

It is estimated that 70% of credit agreements dated before April 2007 are unenforceable. This being the case you could be entitled to a refund of excess interest, hidden charges or even a complete waiver of payments altogether.

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