Director General of Fair Trading v First National Bank plc [2002] 1 All ER 97

• NB this case concerns 19954 regulations which are materially the same as 1999 ones except the terms are in different places.

• The numbering for the 1999 regulations are given: Defendant was a bank with a clause in its standard terms that said that if a customer should default on a loan repayment, Defendant could recover the whole value of the loan account, interest owed and the costs of seeking judgment.

• HL held that the term was not unfair within the 1999 Regulations. 

Lord Steyn

• Article 6(2)(a) must be interpreted restrictively so as to avoid endless disputes on whether a term is definitional or an exclusionary provision.

• The same is true of 6(2)(b) since, on a liberal interpretation, one could argue that every term in a contract is in some way remuneration.

• Reg. 5 has 3 requirements: contrary to good faith (GF), causes imbalance and is to detriment of consumer. GF = “open and fair dealing”. “Significant imbalance” refers to the “substantive unfairness” of the contract, but also overlaps with GF.

• The clause in the contract here isn’t unfair. 

Lord Hope

• It isn’t unfair since the bank has a right to collect the money owed to it. 

Lord Bingham

• Like Lord Steyn, he says only the most important terms are “definitional” since a broad approach that includes lots of terms would reduce the scope of the regulation greatly (only non-definitional terms are covered by the regulations).

• This term is NOT definitional.

• GF = same as Steyn’s definition, but “open and fair dealing” itself prevents the exploitation, by the supplier, of the consumer’s “necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position [etc.]”.