When Do The Terms Of An Unregulated Agreement Amount To An Unfair Relationship Under s.140A Consumer Credit Act 1974

Summary

The recent decision in Greenlands Trading Ltd & Another v. Girolama Pontearso [2019] EWHC 1282 (Ch) has shed some light on the court's approach to claims made by borrowers that the terms of their loan agreement amount to an unfair relationship under section 140A of the Consumer Credit Act 1974 (CCA).

Background

Ms Girolama Pontearso obtained a six-month bridging loan of £132,000 from Fourth Bridgefast Partnership, secured on a residential property with a monthly interest rate of 1.35 per cent and a default interest rate of 3 per cent per month. She intended to refinance the loan against the security of a separate commercial property but this strategy did not materialise. Following her default on the first bridging loan, she agreed to take further bridging loans from Greenlands Trading Limited and Wargrave Trading Limited (the Lenders), also for six months, but with a monthly interest rate of 1.45 per cent and a default interest rate of 3 per cent per month, again with a similar exit strategy.

Subsequently, Ms Pontearso defaulted on her repayments and the Lenders issued proceedings for possession and a money judgment. She defended on the basis that there was an unfair relationship under section 140A CCA, which reads as follows:

"(1) The court may make an order under Section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following:

(a) any of the terms of the agreement or of any related agreement;

(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;

(c ) any other things done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).

(2) In deciding whether to make a determination under this section the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor)."

No expert evidence about industry standard rates was provided at trial but the judge accepted the Lenders' evidence and made the orders sought.

The appeal

Ms Pontearso's appeal was on the following basis:

The judge was wrong to accept evidence from the Lenders that the 3 per cent default interest rate followed standard industry practice, as it was unsupported...