Court of Appeal finds for TSB in "mortgage prisoners" litigation

Following the determination of two preliminary issues, a group of 392 former Northern Rock customers has had their claims against TSB significantly curtailed. 

In Breeze & Others v TSB Bank plc, the claimants contend they are “mortgage prisoners” who have been trapped into paying unduly high interest rates since TSB acquired their residential mortgage contracts and, in some instances, linked unsecured loans in 2016.

The Court of Appeal has now upheld the High Court’s decision on two important preliminary issues.^[1]  First, it has found that TSB did not breach the express terms of the mortgage contracts in how it applied interest.  Secondly, it has found that if the relationship between the claimants and TSB was unfair within the meaning of s.140A and s.140B Consumer Credit Act 1974 (“CCA”), a court could not order relief in respect of the claimants’ regulated mortgage contracts because this would be precluded by s.140A(5) CCA.

The decision will have significant implications on the group claim.  It will also dissuade other claimants from trying to find “back door” routes to obtaining relief in respect of regulated mortgage contracts under s.140A and s.140B CCA.

The issues for the Court of Appeal

The claimants have brought their claims against TSB on various bases, two of which were dealt with as preliminary issues.

In summary, the issues for the Court of Appeal were:

1. Express terms:  Had TSB breached the express terms of the mortgage contracts by applying a higher rate than it had applied to other mortgages?

2. Consumer Credit Act:  If the relationship between the claimants and TSB was unfair within the meaning of s.140A and s.140B CCA, could the court make an order for relief in respect of the regulated mortgage contracts?

Both issues had been decided in TSB’s favour at first instance.

The Court of Appeal’s judgment

The Court of Appeal found for TSB on both issues.

Express terms issue

The Court held that the terms of the mortgage contracts did not require TSB to align the interest rate with other TSB mortgage products.  TSB was contractually entitled to charge the rate applied by Northern Rock and to amend that rate in accordance with the terms of the contract.

Consumer Credit Act issue

It was common ground that where claimants had linked unsecured loans, those loans were “credit agreements” for the purposes of the unfair relationship provisions of the CCA.  It was also common ground that when a court determines fairness under s.140A(1) CCA, it is relevant to consider the relationship under the credit agreement and any other “relevant agreement”.

The claimants contend that if the unsecured loans were taken as the credit agreements under the CCA, the mortgage contracts were relevant agreements and a court would need to have regard to their terms when considering the fairness of the relationship between the claimants and TSB.  Whilst TSB disputes this, the issue fell outside the scope of the preliminary issues trial and, for the purposes of that trial, it was assumed the claimants were correct.

The claimants contended that if the court found their relationship with TSB was unfair, it could make an order related to their mortgages, specifically an order for repayment of sums paid under the mortgages.  TSB’s case was that s.140A(5) CCA simply precludes this.  Section 140A(5) CCA states that an order cannot be made under s.140B CCA in connection with a regulated mortgage contract.

The Court of Appeal found for TSB.  It considered the claimants’ arguments were a “transparent attempt to avoid the consequences of the statutory scheme by using their unsecured loans as a back door to obtain relief in respect of their regulated mortgage contracts”. 

Further commentary

The judgment strikes at the heart of the claimants’ case and will also have a significant impact on other cases involving other former Northern Rock customers.

Of broader significance is the Court of Appeal’s decision on the Consumer Credit Act issue.  It makes clear that regulated mortgage contracts are simply out of scope of the CCA and cannot be brought in through the “back door” of a linked credit agreement. 

The restriction in s.140A(5) CCA is, in the Court of Appeal’s judgment, “categoric” and regulated mortgage contracts fall to be considered under the regulated framework in the Financial Services and Markets Act 2000 (FSMA) and the Mortgage Conduct of Business Rules (MCOB).

The powers available to the court to remedy unfairness where s.140A and s.140B of the CCA apply are broad and, at a stroke, can impact whole customer portfolios and even sections of the market (e.g. PPI and motor finance).  The Court of Appeal’s decision on the CCA’s scope with regard to regulated mortgage contracts provides welcome certainty.

Article co-authored by Robyn Byrne, Trainee Solicitor at CMS.

^[1] Breeze & Others v TSB Bank plc [2026] EWCA Civ 32.