How to claim compensation for unenforceable credit agreements

In the first instance, you should contact your lender and tell them you believe your credit agreement may be unenforceable under S26, 26A or 27 of the Financial Services and Markets Act 2000 (FSMA). You should explain why that’s your view and ask your lender to confirm that they agree and, if not, why not.

If they agree, you can try to agree with them the amount of compensation you’re owed.

If you don’t take these steps, it may cause delays when you submit your application to us.

You can apply to us to decide the amount of compensation if:

• your lender says your agreement is unenforceable and assesses your application but doesn’t offer you compensation
• you’re unhappy with the level of compensation offered
• your lender refuses to assess your application, or
• your lender doesn’t reply to you

It’s important to note that, if your lender offers you compensation but you decide to apply to us instead, we may decide on a lower level of compensation than your lender has offered you.

Complete the application form[2]

If we consider that your credit agreement is unenforceable, you may be able to claim compensation for any loss you experienced due to parting with money or property under the agreement. For example, where your credit file was damaged due to the agreement, which then resulted in a financial loss.

In the application form, make sure you:  

• provide details on why you think the agreement may be unenforceable
• detail each loss you’ve suffered separately and tell us how much you’re looking to claim for each example
• provide evidence in support of each loss

We’ll review your credit agreement to decide if:

• it’s unenforceable, and
• we have the power to decide how much compensation the lender must pay

If we agree that your credit agreement is unenforceable and that we have the power to assess any compensation owed, we'll:

• let you know when a case officer has been assigned to consider this
• assess your application and keep you up to date on the process
• assess each compensation claim in your application (we’ll only assess the specific claims you make in the application form)

Please make sure you send us any additional information and evidence we ask for to help us make a decision.

Once the case officer has assessed your application, they’ll make a recommendation to our FCA decision maker.  

The decision maker will form an initial view on the amount of compensation to be paid. They’ll produce a draft ‘Notice of Determination’ which sets out their initial view and explains how they reached it. This is not our final decision.

We’ll share the draft Notice with you (or whoever is representing you) and your lender. This gives you and your lender the opportunity to reply to the Notice before we make our final decision. For example, you can explain anything you believe we’ve got wrong or send us any additional information or evidence.

You’ll generally have a set period (often 28 days) to reply to the draft Notice. If you need longer, contact us using the details in the draft notice.

Our decision maker will consider any points you and your lender make in your reply. If they identify further points you can help with, they’ll let you know. They’ll then decide the amount of compensation your lender should pay you and will send you and the lender a final Notice of Determination.

If we don’t get a reply from you or your lender, the draft Notice will be converted to a final Notice of Determination.

The final Notice of Determination is our final decision on your application, unless you or the lender challenge our decision before the Upper Tribunal[3].