Challenging a credit agreement as an unfair relationship

If a credit agreement has gone wrong and the terms or the lender's behaviour feel stacked against you, the unfair relationship rules give a court the power to look at the whole picture, not just the small print. They were brought in by the Consumer Credit Act 2006, which introduced new rules about 'unfair relationships' between borrowers and lenders¹. Only a court can decide whether an agreement is unfair under these rules².

The most important feature for a borrower is who has to prove what. Once a claim is made, it will be up to the creditor to prove that the agreement is not unfair³. That reverses the usual position, where the person complaining has to make the case.

The court's powers are wide. It can change the terms of the agreement or order the lender to pay money back to you⁴. Under section 140B of the Consumer Credit Act 1974, where an agreement is found to be unfair, the courts have a power to provide remedies to the consumer⁵. There is a fee to pay when you put in a direct claim, and a risk of considerable extra costs if the claim is not successful².

What an unfair relationship is and what a court can do about it

The unfair relationships test was introduced by the Consumer Credit Act 2006, allowing the court to look at the terms of the agreement and the behaviour of the creditor⁸. That second part matters. A claim is not limited to what is written in the contract; how the lender behaved before, during and after the agreement can be part of the picture.

The court has wide powers to alter terms of the agreement, or even to order the creditor to pay money back to you⁸. The Consumer Credit Act 2006 unfair relationships rules put it plainly: the court can change the terms of the agreement or order the lender to pay money back to you⁴. Under section 140B of the Consumer Credit Act 1974, where an agreement is found to be unfair, the courts have a power to provide remedies to the consumer⁵.

This is a separate route from the general law on unfair contract terms. Under Part 2 of the Consumer Rights Act 2015, a term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer⁹. An unfair term of a consumer contract is not binding on the consumer, but the consumer may choose to rely on it¹⁰. The two regimes can both be relevant to a credit agreement, but they are decided on different tests.

Which agreements are covered, and which are not

The unfair relationship provisions extend to unregulated credit agreements and unauthorised firms, which provides further protections for consumers¹¹. That is broader than many people assume: a loan does not have to be a regulated agreement for the rules to be available.

For regulated agreements, a consumer credit agreement is a regulated agreement within the meaning of the Consumer Credit Act 1974 if it is not an exempt agreement under section 16¹². A consumer credit agreement is a regulated credit agreement if it is a regulated credit agreement for the purposes of Chapter 14A of Part 2 of the Regulated Activities Order, and, if entered into on or after 21 March 2016, is not an agreement for the acquisition or retention of property rights in land or in an existing or projected building¹.

That 21 March 2016 date is the hinge for secured borrowing. The rules can be used for some secured loans that were taken out before 21 March 2016⁶. For anything secured on land agreed on or after that date, the position is different, as the next section explains.

Separately, the Consumer Rights Act 2015 Part 2 applies to a contract between a trader and a consumer, and does not include a contract of employment or apprenticeship¹⁰. It does not apply to business customers, so business lending covered by the Consumer Credit Act is excluded from its scope¹¹.

Where the unfair relationship rules do not apply

The clearest limit is mortgages. The rules cannot usually be used for regulated mortgage contracts⁶. Regulated mortgage contracts include first charge mortgages and secured loans². The same exclusion appears across the guidance: the rules cannot be used for regulated mortgage contracts¹³.

There is a narrow opening for older secured borrowing. The rules can be used for some secured loans that were taken out before 21 March 2016⁶. If a secured loan predates that date, it is worth checking whether it falls within the rules rather than assuming it does not.

There are other carve-outs. The unfair relationship provisions do not apply in relation to a non-commercial agreement or to a small agreement¹⁴. For regulated fixed-sum credit agreements, applicable agreements exclude non-commercial agreements, small agreements and green deal plans¹⁵. And Part 2 of the Consumer Rights Act 2015 does not apply to a term of a contract, or to a notice, to the extent that it reflects mandatory statutory or regulatory provisions or international convention provisions¹⁰.

Where the law of a country outside the EEA is chosen for a consumer contract, Part 2 of the Consumer Rights Act 2015 still applies if the contract has a close connection with the United Kingdom¹⁰.

The lender has to prove the agreement is fair

The reversal of the burden of proof is the practical heart of the regime. It will be up to the creditor to prove that the agreement is not unfair³. The same rule is stated for unfair relationship claims generally: it will be up to the creditor to prove that the agreement is not unfair³.

That principle runs through the newer redress schemes too. Under the motor finance commission consumer redress scheme rules, for each relevant arrangement the lender must determine whether it is more likely than not that there is or was an unfair relationship arising out of a failure to provide adequate disclosure, and that the consumer suffered loss or damage as a result¹⁶. The same test appears in the scheme rules covering stage 1 and stage 2 of the third step¹⁷.

Those scheme rules also contain a tie-breaker on evidence. Where evidence relied on by the lender conflicts with evidence provided by the consumer and is of equal relevance, the lender must resolve the conflict in favour of the consumer unless it can demonstrate a clear basis for not doing so¹⁶.

The same instinct appears in consumer law more widely. Article 15 of the Distance Marketing Directive provides that any contractual term or condition that puts the burden of proof on the consumer, rather than the trader, to show non-compliance with the Directive is an unfair term¹⁸.

How to bring an unfair relationship claim

An unfair relationship claim is a court claim, so the first step is usually to try to resolve the dispute without going to court. A formal complaint to the lender costs nothing, and if it is not resolved you can escalate to the Financial Ombudsman Service¹⁹. The Ombudsman's decisions are not the end of the road: consumers can still go to court if they do not want to accept the Ombudsman's decision²⁰.

If a court claim is the route, the sequence is broadly:

1. Gather the agreement, statements and any correspondence about how the credit was sold and administered.
2. Raise a formal complaint with the lender and give it a chance to respond.
3. Escalate to the Financial Ombudsman Service if the complaint is not resolved fairly¹⁹.
4. If the dispute is not settled, take advice before issuing a court claim, because a fee applies and there is a risk of considerable extra costs if the claim is not successful².

Timing matters if the lender has already started court action. Debts regulated by the Consumer Credit Act must have defaulted before the people you owe can begin court action²¹. If a claim has already been issued against you, the unfair relationship argument can form part of your response, and the court is the body that decides it.

There is a Scotland-specific point on time limits. The 1973 Act does not impose a period of prescription on an unfair relationship claim under section 140A of the Consumer Credit Act, or on certain related claims¹⁷.

What a court can order a lender to pay back

The remedies are deliberately open-ended. The court can change the terms of the agreement or order the lender to pay money back to you⁴. The court has wide powers to alter terms of the agreement, or even to order the creditor to pay money back to you⁸. Under section 140B of the Consumer Credit Act 1974, where an agreement is found to be unfair, the courts have a power to provide remedies to the consumer⁵.

In practice, the shape of a remedy depends on what the court finds. Where the Financial Ombudsman Service finds instances of unfair or unauthorised fees, it will usually tell the credit broker to refund the fee, sometimes with interest, refund additional costs incurred, and pay compensation for distress or inconvenience²². That is the Ombudsman's approach rather than a court's, but it shows the kind of outcome a consumer might expect where a fee was the problem.

There is a separate statutory refund right for credit broking fees. Under Section 155 of the Consumer Credit Act 1974, customers are entitled to a refund of all but £5 of a credit broking fee if they have not taken out a loan found by the broker within 6 months²². The credit broker is allowed to keep £5 of any fee if the customer has not taken out a loan²².

Court fees and where to get help

There is a fee to pay when you put in a direct claim for an unfair relationship². Depending on your circumstances, you may not have to pay it⁷. There is also a risk of considerable extra costs if the claim is not successful². That combination, a fee up front and a costs risk if it fails, is why advice before issuing a claim matters.

Free, impartial help is available. Business Debtline and National Debtline both publish guidance on complaining about a lender, including the unfair relationship route, and can advise on whether a claim is realistic². The Financial Ombudsman Service is free to consumers and can look at complaints about credit broking and other consumer credit matters²². Its decisions do not stop a consumer going to court if they do not want to accept the outcome²⁰.

If money is tight more generally, the wider options are set out in Debt: a complete guide to help, solutions and your rights and Free debt advice: where to get it and what happens. Where a lender has already issued a claim, County court judgments (CCJs): claims, defences and payment and Replying to a Letter Before Claim to avoid a CCJ cover the practical steps. If a lender is chasing payment while a dispute is live, How lenders must treat you when you fall behind explains the conduct rules that apply.

How an unfair relationship differs from extortionate credit

The unfair relationships test replaced the idea of 'extortionate credit' in the Consumer Credit Act 1974⁷. The older legislation, contained in sections 137 to 140 of the 1974 Consumer Credit Act, identified the factors to be taken into account when deciding whether credit was extortionate²³. That test focused on whether the cost of credit was excessive.

The replacement is broader. The Consumer Credit Act 2006 brought in new rules about 'unfair relationships' between borrowers and lenders¹, and the test allows the court to look at the terms of the agreement and the behaviour of the creditor⁸. A rate that looks high is not, by itself, the question; the question is whether the relationship as a whole is unfair.

The Consumer Credit Act 1974 remains in force and is up to date with all changes known to be in force on or before 28 September 2026²⁴. It has been criticised by government as prescriptive, confusing and duplicative, in requiring credit providers to communicate with customers in technical language which they may not understand²⁵. A separate statute, the Digital Markets, Competition and Consumers Act 2024, prohibits unfair commercial practices, replacing and updating the Consumer Protection from Unfair Trading Regulations 2008, subject to transitional provisions²⁶. That is a different regime from the unfair relationship rules, and it does not remove them.