Consumer Credit Act 1974

Wilson v First County Trust (No 2) H of L TLR 11 July

Mrs Wilson borrowed £5,000 from a pawn broker on the security of her BMW 318 convertible. She was also charged a document fee of £250 which was added to the loan. The agreement stated that the loan was for £5,250. It was a regulated agreement and as such was unenforceable if the amount of the credit was not correctly stated. Was the document fee part of the loan? ‘Yes,’ said the circuit judge, therefore the amount was correctly stated and the agreement enforceable. ‘No’ held the Court of Appeal, therefore the agreement was unenforceable with the result that Mrs Wilson could keep the loan, pay no interest and claim her car back! The Court of Appeal was concerned that this incongruous result was because the inflexible exclusion of a judicial remedy by s127(3) of the Consumer Credit Act 1974 prevented the Court from doing justice and the Court declared the provision to be incompatible with the European Convention on Human Rights. The Secretary of State for Trade and Industry appealed to the House of Lords, who held that they were entitled to have regard to the policy objectives behind the legislation by looking at ministerial statements when the bill was passing through Parliament. It was open to Parliament to respond to a perceived social problem by a uniform solution right across the board if a tailor-made response fitting the facts of each case may be an insufficient deterrent and protection. Bargaining power lay with the lender and the social evils flowing from that were notorious. Severe though it was, the sanction was appropriate and therefore s127(3) was compatible with article 1.