Lloyd's Maritime and Commercial Law Quarterly

Professor Francis D Rose

Document

The unfair relationship test, consumer credit transactions and the long arm of the law

Sarah Brown *

The Consumer Credit Act 2006 has introduced a new unfair relationship test, as a replacement for the extortionate credit bargain test contained in the Consumer Credit Act 1974, ss 137–140. This gives the court far-reaching powers to intervene in credit transactions but provides little guidance as to how these powers should be applied. This article looks at the implications of the new sections. It examines the potential extent of the new test by means of comparison with the old, by looking at relevant factors, assessing the possible approach of the various agencies involved in its application and considers what this means for parties to present and future consumer credit transactions.

I. INTRODUCTION

The Consumer Credit Act 2006 (“CCA 2006”) has introduced a number of amendments to the existing consumer credit legislation contained in the Consumer Credit Act 1974 (“CCA 1974”). The 2006 Act has been fully in force since 31 October 2008. The aim of the reform was couched in terms of fairness to both creditor and consumer, but the underlying basis of the desire for change was protection for the consumer, more particularly the vulnerable consumer and his/her exposure to unfair creditor behaviour. Ensuring adequate information and transparency in the market-place were regarded as

* Lecturer in Torts and Business Law, University of Leeds. Grateful thanks are extended to Andy Campbell for his time and comments.

The following abbreviations are used:

APR: Annual Percentage Rate;

Brown: S Brown, Consumer Credit and Over-indebtedness: The Parliamentary Response Past Present and Future (PhD, Leeds, 2006);

Catchpole: P Catchpole, “Consumer Credit Act 2006 Concerns for Mortgage Lenders”, Mortgage Finance Gazette , May 2007;

CCA: Consumer Credit Act;

CPUTR: Consumer Protection from Unfair Trading Regulations 2008;

FSA: Financial Services Authority;

FSMA: Financial Services and Markets Act 2000;

Guidance : Unfair Relationships Enforcement Action under Part 8 of the Enterprise Act: 2002 OFT Guidance (OFT 854, 2008);

OFT: Office of Fair Trading;

PPI: Payment protection insurance;

RIA: DTI (BERR), Consumer Credit Bill: Full Regulatory Impact Assessment (2005);

UTCCR: Unfair Terms in Consumer Contracts Regulations 1999;

White Paper: DTI, Fair, Clear and Competitive: The Consumer Credit Market in the 21st Century : White Paper (Cm 6040, 2003).

THE UNFAIR RELATIONSHIP TEST

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, click Log In button.