(1)This section applies to an agreement which is unenforceable because of section 26 or 27 , other than an agreement entered into in the course of carrying on a credit-related regulated activity .
(2)The amount of compensation recoverable as a result of that section is—
(a)the amount agreed by the parties; or
(b)on the application of either party, the amount determined by the court.
(3)If the court is satisfied that it is just and equitable in the circumstances of the case, it may allow—
(a)the agreement to be enforced; or
(b)money and property paid or transferred under the agreement to be retained.
(4)In considering whether to allow the agreement to be enforced or (as the case may be) the money or property paid or transferred under the agreement to be retained the court must—
(a)if the case arises as a result of section 26, have regard to the issue mentioned in subsection (5); or
(b)if the case arises as a result of section 27, have regard to the issue mentioned in subsection (6).
(5)The issue is whether the person carrying on the regulated activity concerned reasonably believed that he was not contravening the general prohibition by making the agreement.
(6)The issue is whether the provider knew that the third party was (in carrying on the regulated activity) contravening the general prohibition.
(7)If the person against whom the agreement is unenforceable—
(a)elects not to perform the agreement, or
(b)as a result of this section, recovers money paid or other property transferred by him under the agreement,
he must repay any money and return any other property received by him under the agreement.
(8)If property transferred under the agreement has passed to a third party, a reference in section 26 or 27 or this section to that property is to be read as a reference to its value at the time of its transfer under the agreement.
(9)The commission of an authorisation offence does not make the agreement concerned illegal or invalid to any greater extent than is provided by section 26 or 27.
Cases considering section 28 (30)
[2026] EWCA Civ 346 · 23 March 2026Interprets
Confirms a judicial discretion to allow enforcement or retention of money or property where an agreement is unenforceable under section 26 or 27, if just and equitable. (see paras [20]; [41]–[42])
Defines the agreements to which the section 28 discretion applies by reference to agreements unenforceable because of section 26 or 27, subject to the stated exclusion. (see para [20])
Cited only.
Confirms that the court may permit enforcement or allow money and property to be retained if satisfied that this is just and equitable. (see paras [20]; [41])
Treats the matters to which the court must have regard as significant when assessing whether successor claims were contemplated. The provision refers to the person carrying on the regulated activity, not a successor. (see paras [20]; [41])
Uses the regulated person’s reasonable belief about contravention as the relevant consideration in a section 26 case. The omission of any successor-focused provision supports confining the recovery remedy to the contractual counterparty. (see paras [20]; [41])
Uses the provider’s knowledge of a third party’s contravention as the relevant consideration in a section 27 case. The omission of any successor-focused provision supports the confined reading of section 27(2). (see paras [20]; [41])
Interprets the repayment and return obligations as apt to require restoration to the original contractual counterparty. Their wording is less apt if property is recovered from a successor in title. (see para [42])
Interprets the provision as addressing the value of property passed to a third party, rather than preserving a right to recover the property itself from that third party. This supports confining the section 26(2)(a) and 27(2)(a) remedies to the contractual counterparty. (see paras [20]; [39]–[40])
Cited only.
[2021] EWCA Civ 474 · 1 April 2021Interprets
The just-and-equitable discretion was exercised afresh and relief refused because consumer protection, statutory risk allocation, the pattern of introductions and later warning signs outweighed the provider’s absence of actual knowledge (see paras [106]-[117]).
In deciding whether to grant section 28 relief in a three-party case, the court must have regard to the knowledge issue specified by section 28(6) (see para [106]).
The express reference to reasonable belief in the two-party provision supported construing section 28(6) as requiring actual knowledge. Satisfaction of the statutory consideration does not itself require relief (see paras [109]; [111]).
The provider must have actual knowledge of the third party’s contravention; constructive knowledge does not satisfy the subsection. Absence of actual knowledge does not compel relief, and what the provider reasonably should have known may still inform the overall discretion (see paras [108]-[111]).
[2018] EWCA Civ 676 · 28 March 2018Limits
Section 28(3) showed that FSMA did not impose blanket unenforceability: the court retains a just-and-equitable discretion to enforce an agreement. This supported treating the statutory regime as not dictating the result. (see paras [28], [59]-[60])
The reasonable-belief issue in section 28(5) reinforced rejection of treating compromise as administration. On the assumed facts, knowledge acquired by the time of compromise would place the lender in a worse position. (see paras [28], [51])
Section 28(7) showed that enforceability can depend on the borrower’s election and that the statute does not create blanket unenforceability. The court used this reasoning in treating FSMA as not decisive in the consent-order context. (see paras [28], [59]-[60])
10 more judgments, and what each says about section 28, are in the
case-law panel in the full Act.
73.This section gives the court discretion to allow the contract which would otherwise be unenforceable under section 26 or 27 to be enforced against the customer. The section also allows for the method by which the amount of compensation which a person may obtain is to be fixed. In order to enforce the contract, the court must be satisfied that it would be “just and equitable” to do so having particular regard to whether:
where the person contravening the prohibition is a party to the agreement, that he reasonably believed that he had not acted in breach of the prohibition; or
where the contravention was by a third party, that the authorised person providing the service did not know that the agreement resulted from a contravention.