Unfair Credit Condition

Director General of Fair Trading v First National Bank plc (CA TLR 14 March)

A bank’s standard conditions of business which had the effect of making interest run on a judgment obtained for the sums owing by a customer under an agreement regulated by the Consumer Credit Act 1974 was unfair pursuant to Regulation 4 of the Unfair Terms in Consumer Contracts Regulations 1994. It enabled the bank to obtain judgment against a debtor under a regulated agreement and an instalment order under s71 of the County Court Act 1984 without the court considering whether to make a time-order under s129 of the Consumer Credit Act 1974 or, if it did, whether also to make an order under s136 of that Act to amend the agreement and reduced the contractual interest rate. It allowed the bank to obtain interest after judgment in circumstances when it would not obtain interest under the County Court Act 1984 or the County Courts (Interest on Judgment Debts) Order 1991 with no specific benefit to compensate the borrower. The bank had not adequately considered the consumer’s interests and in that respect the term created an unfair surprise and therefore did not satisfy the test of good faith.