Section 140A and the Unfair Relationship Test
Section 140A of the Consumer Credit Act 1974 gives courts a broad power to find that a credit relationship between lender and borrower is unfair, and to grant remedies if it is. It sits alongside the FCA’s CONC affordability rules and is sometimes pleaded together with them in court claims. The Financial Ombudsman doesn’t apply Section 140A directly, but it does take the same kinds of unfairness into account when deciding what is fair and reasonable.
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What Section 140A actually says
Section 140A allows a court to make an order under Section 140B if it determines that the relationship between a creditor and a debtor is unfair to the debtor because of any of the following:
- Any of the terms of the agreement.
- The way in which the creditor has exercised or enforced any of their rights under the agreement.
- Any other thing done (or not done) by, or on behalf of, the creditor — either before or after the making of the agreement.
That third limb — “any other thing done or not done” — is what makes Section 140A so wide-ranging. It captures conduct that goes beyond the contract itself, including how credit was sold, what was disclosed, and how the lender behaved during the relationship.
What courts have found unfair
Section 140A case law has covered a wide range of issues, including:
- Undisclosed commissions — particularly the motor finance commission cases that have been working through the courts since 2024, where commission paid by lender to broker was not disclosed to the borrower.
- Irresponsible lending — credit given despite clear signs the borrower could not sustainably afford it.
- High-cost lending to vulnerable borrowers — particularly where the lender knew or should have known about the vulnerability.
- Refinancing and rollovers — repeated rollovers of short-term loans where each new loan was used to repay the last.
- Failure to act on signs of distress — continuing to lend or to enforce when the lender’s own data showed the borrower was in difficulty.
How Section 140A connects to unaffordable lending
Affordability is one of the things a court can take into account under Section 140A, but Section 140A is broader. A relationship can be unfair even if the affordability checks were technically adequate, where there are other factors — undisclosed commission, hidden charges, predatory enforcement — at play. Equally, a single instance of unaffordable lending may or may not, on its own, make the whole relationship unfair; it depends on the wider circumstances.
For most borrowers complaining about unaffordable credit, the FCA’s CONC framework is more directly relevant, because that is what the Financial Ombudsman applies. Section 140A becomes more important when:
- The complaint is being run in court rather than at FOS — for example, because the FOS award limit (currently £430,000 for complaints referred from 1 April 2024) is not enough.
- There are issues that go beyond pure affordability — like undisclosed commission, secret profit, or coercive enforcement.
- The lender is no longer FCA-authorised, so FOS can’t hear the complaint, and a court action is the only route.
The remedy
Where a court finds a relationship unfair under Section 140A, Section 140B gives wide-ranging remedies, including:
- Reducing or discharging any sum owed by the borrower.
- Ordering the lender to repay sums already paid.
- Setting aside any obligation imposed by the agreement.
- Altering the terms of the agreement.
- Directing the return of any property.
The breadth of these remedies is one of the reasons Section 140A is sometimes preferred for the most serious cases.
Limitation
A Section 140A claim is generally subject to the six-year limitation period in the Limitation Act 1980, running from the date the cause of action accrued. There has been important case law (including the Supreme Court’s decision in Plevin v Paragon Personal Finance) clarifying when time starts to run. In practice, the relationship is often treated as continuing while the credit agreement subsists, which can extend the practical window for a claim — but the rules are technical and specific advice is sensible for older lending.
FOS or court?
How the Financial Ombudsman handles unaffordable lending complaints.
Related guides
- What is unaffordable lending?
- The CONC rules on affordability — a plain-English guide
- How the Financial Ombudsman handles unaffordable lending complaints
- Which types of credit can be claimed as unaffordable?
- Do I have an unaffordable lending claim?
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