The claimant had lent the defendant sums totalling £56,450 between 1979 and 1983. Between 1982 and 2001, the defendant made payments totalling £72,336, but according to the claimant, interest had continued to accrue at 20% per annum so that over £6 million was now outstanding.
At the times the loans were made, they made good business sense for the defendant and so were legally binding agreements. There was an imbalance in their relationship as the defendant looked up to the claimant because of his greater education and achievements. To charge an interest rate almost three times greater than the base rate was completely out of line with the terms of the original loans and in the circumstances exorbitant.
The court has a very wide discretion under section 140B of the Consumer Credit Act 1974 and so reduced the sum payable by the defendant.
This case provides a good example of when a court will intervene under the Consumer Credit Act 1974 to ensure that the terms of a loan agreement are fair.
Patel v Patel [2009] EWHC 3264 10 December 2009