Appeal court reverses case where unregulated agreements were held to be regulated

4 minute read
16 October 2015

In February, we reported on the decision in NRAM PLC v McAdam and others, in which the High Court held in excess of 40,000 unregulated consumer credit agreements to be regulated - at a cost of some £258 million to the lender - due to the way they had been administered by NRAM.


Briefly, for administrative convenience NRAM had used the same form of pre-contractual and contractual documentation for both its regulated and unregulated agreements. As a result, NRAM had repeatedly referred to, and indeed treated, the unregulated loans as being regulated by the Consumer Credit Act 1974 (CCA).

NRAM had, however, failed to comply with the prescribed requirements of s77A CCA when sending periodic statements to its borrowers. NRAM argued that in relation to the unregulated agreements it did not have to comply with those requirements.

First instance decision

The High Court held that on a proper construction of the unregulated loan agreements NRAM had held out that the agreements would be treated as regulated agreements and the borrowers would have the protection and rights conferred by the CCA. This finding would cost NRAM £258 million in repayment of interest and default charges. NRAM successfully appealed.

Court of Appeal decision

The Court of Appeal held as follows:

  • Although it was possible to 'contract in' to the CCA, very clear words were required before it could be concluded that the parties intended to do so.
  • On the true construction of the loan agreements, the language of the express references to the CCA was not consistent with an intention by either party to incorporate the provisions of the CCA into the agreements.
  • There was no express or implied agreement that the borrowers were to have some or all of the protections of the CCA as if it applied to an unregulated agreement. The language used simply asserted, wrongly, that the agreements were regulated by the CCA. The wording did not reflect any bilateral agreement between the parties that they intended to apply the provisions of the CCA by contract to an agreement that was outside its scope.
  • Given the above findings, the court held there was no estoppel by convention or representation. The wording used was not capable of being regarded as a shared assumption that, whether or not an agreement was regulated, it would be treated as if it was.
  • The various statements were, however, both representations and contractual warranties which could give rise to claims for misrepresentation under the Misrepresentation Act 1967 and for breach of warranty.


This is a helpful decision for any motor finance company whose documentation may have been drafted or administered in a similar way to NRAM.

Although the Court of Appeal held that there were misrepresentations and breaches of warranty, which could still form the basis of a claim against a lender, limitation defences may be available for NRAM as those breaches and misrepresentations arose when the loan agreements were entered into more than six years ago.

This article was originally published in the September edition of Motor Finance.

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