Lending money to the public is, for obvious reasons, a heavily regulated activity and, as a case concerning timeshare properties showed, any involvement by those who are not authorised to carry out such activity can render credit agreements entirely unenforceable.

A bank had entered into more than 1,400 regulated credit agreements with members of the public by which they borrowed money to pay for the timeshare properties. About £47 million was payable under those agreements. It later emerged, however, that they had been brokered by a company that was not authorised under the Financial Services and Markets Act 2000 to perform that role.

As a result, the bank faced the prospect of the agreements being unenforceable against the borrowers, who would also be entitled to recover any money or property they had transferred to the bank pursuant to them. The bank, however, said that it had not intentionally contravened the requirement to only engage with authorised third parties when making the agreements and the Financial Conduct Authority (FCA) ordered that the agreements should be retrospectively validated under Section 28A of the Act.

In challenging that decision before the Upper Tribunal (UT), lawyers representing 45 of the borrowers argued that they had suffered detriment as vulnerable consumers. It was said, amongst other things, that the agreements had not been adequately explained to them and that they had been put under pressure to sign them. False representations were alleged to have been made by the unauthorised broker and borrowers claimed that they had been given insufficient time to consider before the agreements were executed.

In the light of those arguments, the bank and the FCA both conceded that the decision to grant validation orders should be reconsidered. The UT found that evidence of consumer detriment arising from the agreements was relevant and should be fully taken into account by the FCA.