Disputes about loans

Photo by Armand Valendez on Pexels.com
16 June 2022

It has been recently reported in the press that, in the US, Apple will be offering and approving loans to its customers.  The lending business is called Apple Pay Later.  As reported in the Financial Times, by taking ownership of the lending process, Apple will have better access to data and it will help the business to expand its financial products internationally.  On the downside for Apple, if a customer defaults on the loan, Apple will have to manage that loss.

Undoubtedly, before deciding whether to enter the lending sector, Apple will have taken comprehensive legal advice about its product to ensure that its commercial interests are protected. Taking robust advice before making a loan is important because disputes between lenders and borrowers are quite common.

However, it is not just major commercial entities that should take advice before agreeing to offer a loan.  Many people do not realise that, in this jurisdiction (England and Wales), informal loans made to private individuals or small companies could well be a “regulated” loan under the Consumer Credit Act 1974 (“the Act”).  

If a loan is regulated, the lender must have approval from the FCA to enter into the agreement.  Lending under a regulated consumer credit agreement without authorisation from the FCA is a criminal offence. If a regulated agreement does not comply with the obligations set out in the Act, the lender may be prohibited from enforcing the terms of the loan, if the borrower defaults.

Other scenarios that can lead to disputes about loans include:

  • whether new terms were correctly incorporated into the loan agreement;
  • whether the person who signed up to the loan, on behalf of a corporate, was authorised to do so;
  • whether any onerous terms were reasonably brought to the borrower’s attention;
  • whether charges or interest have been incorrectly applied to a loan.

The law relating to lending is complex and businesses and individuals wanting to offer a loan should consider seeking legal advice before doing so, even if lending to family and friends.

If a dispute about a loan is unavoidable, securing early legal advice about how to resolve that dispute is recommended.

© Melissa Worth, December 2021

The Dispute Adviser

A legal blog by Melissa Worth
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