The unfair relationship test is set out in section 140A of the Consumer Credit Act.
It permits the court to make an order under section 140B if it determines that the relationship between a creditor, e.g. Barclays Partner Finance and debtor, e.g. you, arising out of the agreement (or related agreement) is unfair to the debtor based on one or more of the following:
- Any of the terms of the contract or any similar agreement
- How the creditor has exercised or enforced any of his rights under the agreement or any related agreement
- Any other thing is done (or not done) by, or on behalf of, the creditor. (Either before or after making of the agreement or any related agreement).
Contrary to the normal position that ‘he who asserts must prove’, where the debtor alleges that the relationship is unfair, it is for the creditor to prove that it is not. 140B(9) of the Act puts the burden on lenders to prove that a relationship is not unfair.
The provisions apply to both regulated, and unregulated credit agreements and section 140A gives the court a broad discretion to “have regard to all matters it thinks relevant”.
The discretion applied by the court has proved the unfair relationship regime to have a broad-reaching effect.
The court will focus on the relationship as a whole and not whether the agreement itself was unfair. Accordingly, the court may review the relationship between the lender and borrower after the agreement has concluded, and the review could extend to consider the entire history of the banking or credit relationship.
In 2014, Plevin v Paragon Personal Finance Ltd established that the lender doesn’t need to have breached a duty to the borrower before the relationship could be found to be unfair. The Supreme Court revisited the issue of unfair relationships in relation to PPI mis-selling claims.
In particular, the court was concerned with the non-disclosure of commissions payable out of a PPI premium where the lender had committed no breach of the ICOB regulations. Prior to Plevin, the finding of an unfair relationship was based on the standard imposed by the regulatory authorities pursuant to their statutory duties.
Plevin viewed this basis in the broader context of the standard of commercial conduct reasonably to be expected of the creditor.
This wider context now allows the court to consider the fairness or unfairness of the banking relationship even in circumstances where the lender has complied with their duties to the borrower.
If you have purchased a Timeshare or Fractional ownership and paid for it by linked finance or credit card, then you may qualify for a refund and compensation.