Handicap is only given during LIVE friend matches. If you or your friend are not the same Rank, then a "Handicap" will be applied to the lower ranked player automatically. This allows the lower rank friend a greater chance of an even game.
How to turn "Handicap" OFF
After your friend accepts your LIVE match and the match up loading is completed. Select Options from the menu. Change the "Handicap" option to OFF and select the "Resume" button.
Click on "Start" to begin the match.