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Unfair relationships under the Consumer Credit Act 1974

When assessing the issues of “unfair relationships” and deemed agency under the Consumer Credit Act 1974 (“the Act”), the Court of Appeal has once again robustly decided in favour of the debtor.

In Scotland and another v British Credit Trust Ltd [2014] EWCA Civ 790, the defendant finance company appealed against a decision that the relationship between itself and the claimant debtors was unfair within the meaning of s.140A of the Act.

The claimants purchased new windows and doors following a visit from a salesman from Zenith. The claimants required a loan to purchase the goods and Zenith agreed to organise a loan with the defendant. During negotiations, the salesman misrepresented to the claimants that they needed to purchase payment protection insurance (“PPI”) to secure the loan.

At first instance, the judge found that Zenith had made the misrepresentation. By virtue of the interplay between s.11(1)(b), s.12 and s.56(2) of the Act, the negotiations were deemed to have been conducted by Zenith on its own behalf and also as the Defendant’s agent. Zenith’s conduct was therefore relevant when determining whether the relationship was unfair within the meaning of s.140A of the Act. The defendant argued, inter alia, that the agency deemed by s.56(2) had no relevance to s.140A and no debtor-creditor-supplier agreement existed in relation to the PPI.

The Court of Appeal held that all the negotiations conducted by Zenith in relation to the PPI were antecedent negotiations within the meaning of s.56(1)(c) of the Act. By virtue of s.56(2), such negotiations were deemed to have been conducted by Zenith in its capacity as agent to the appellant. Accordingly, they rendered the appellant liable for misrepresentation, Forthright Finance Ltd v Ingate (Carlyle Finance Ltd, third party) [1997] 4 All ER 99, applied.

The representations made by Zenith constituted “any other thing done (or not done) by or on behalf of, the creditor” within the meaning of s.140A(1)(c) of the Act, Plevin v Paragon Personal Finance Ltd and another [2013] EWCA Civ 1658, applied. The defendant was therefore deemed liable. The fact that s.75 provided a remedy for certain misrepresentations or breaches did not exclude those acts from consideration under s.140A. A misrepresentation by a creditor could equally fall within the scope of s.140A.

Elizabeth Dwomoh / 1st Jul 2014


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