An unregulated mortgage did not breach the Consumer Credit Act 1974

The Court of Appeal has upheld a County Court decision in Pontearso v Greenlands Trading Ltd and another [2019] EWHC 278 (Ch) that an unregulated mortgage should not be characterised as giving rise to an unfair relationship under Section 104A of the Consumer Credit Act 1974 (“CCA”).

In coming to their decision, the Court of Appeal discussed a previous case, Chubb and Bruce v Dean and another [2013] EWHC 1282 (Ch) and whether the level of default interest that applied to the loan would give rise to an unfair relationship under Section 104A of the CCA. It was agreed that the proper test in determining whether there is an unfair relationship between lender and borrower would be to consider all the facts of the case, rather than focusing on the levels of default interest applicable. In Pontearso it was suggested that the judge in Chubb had wrongly determined the issue of an unfair relationship by reference to the Unfair Terms In Consumer Contracts Regulations 1999 (“UTCCR”) as there could be a number of facts that make a relationship unfair under Section 104A CCA that wouldn’t meet the test under regulation 5 of the UTCCR.

The case of Chubb preceded the decision in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61, where Lord Sumption stated there is a difference between determining whether an unfair relationship had arisen between borrower and lender or whether a specific term in a loan agreement was unfair under the UTCCR. The test in Plevin is now deemed to be the test to be applied in determining whether an unfair relationship has arisen.

The case of Pontearso will be of significant interest to those involved in the bridging and unregulated mortgage markets, where interest and default interest rates are commonly disputed. The case highlights that the court will not focus on a single term of a loan agreement in determining whether an unfair relationship has arisen, but rather take into other factors such as the level of sophistication of the borrower.

Matthew Stayt

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