They were brought into force on 6 April 2007 following a White Paper published in December 2003. The Government was concerned that the extortionate credit bargain provisions in the CCA were “relatively limited and provide little protection for consumers”. In their place, the Government proposed to introduce a broader test to make it easier for consumers to complain.

In May 2006, Professor Sir Roy Goode KC wrote to the Government expressing his concern that the broadness of the unfair relationship provisions could lead to a significant amount of litigation and complaints about what is, or is not, unfair.

The name Nostradamus comes to mind.

The unfair relationship provisions look at whether the relationship (and not an agreement) arising out of a credit agreement (taken, where relevant, with any related agreement) is unfair to the customer because of one or more of the following factors:

• the terms of the agreement or any related agreement;
• the way in which the lender has enforced or exercised their rights; and
• any other thing done, or not done, by or on behalf of the lender either before or after entering into the agreement.

The burden is on the customer to prove the facts which they say cause the relationship to be unfair.

Following the Supreme Court’s decision in Smith v Royal Bank of Scotland plc [2023] UKSC 34, the position is clear. The customer must both (a) set out the grounds upon which they say the relationship is unfair and (b) prove the facts on which they positively rely. It is only then that the burden of proof moves to the lender to prove the relationship is not unfair.

An important feature of the unfair relationship provisions is that they require a fact sensitive assessment of the relationship. What may be fair in one relationship may be unfair in another.

Take the following example: a customer enters into a regulated hire purchase agreement. There’s no unusual features. But on page three of the agreement, the agreement sets out (in clear terms) provisions explaining what happens if the customer exceeds a mileage limit. Two customers enter into that agreement: one carefully reads the documentation and is actually a motor finance lawyer who drafts such terms but the other does not bother to read the agreement at all. In the first situation, the Court will be slow to find unfairness but it may be more prepared to do so in the other.

So the same facts can lead to different results. And this is expressly set out in the CCA: Section 140A(2) says the Court must “have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor)”.

If the Court finds an unfair relationship then Section 140B of the CCA sets out a very broad range of powers to remedy the unfairness. But that does not mean the Court’s powers are completely unlimited. The Court must, instead, do the minimum necessary to redress the unfairness. Or, to put it another way, the Court must only award a remedy which is proportionate to the nature and degree of unfairness found (as decided by Patel v Patel [2009] EWHC 3264 (QB)), and must not give the customer a windfall (see Kerrigan & Others v Elevate Credit International Limited t/a Sunny (in administration) [2020] EWHC 2169 (Comm)). Like the approach to unfairness, two cases with the same facts could lead to a different remedy.

Going back to basics, the unfair relationship provisions require the customer to prove the facts, require a fact sensitive approach and allow a flexible approach to remedy. This is very different from, for example, a breach of contract claim where there is considerably more certainty on whether a claimant will win and, if so, what they will be entitled to.

This puts the FCA into a difficult position when considering a consumer redress scheme which has certainty at its heart. The unfair relationship provisions and a consumer redress scheme are therefore unhappy bedfellows. But, for now, we will need to wait to see if they continue to live unhappily together (subject to any challenge), or whether some compromise will be made by the FCA.