Greg Standing explains a thorough and
tidy explanation process isn’t just good business, it’s a solid
defence against PPI claims.
Motor finance companies will be aware
that claims against them relating to the sale of payment protection
insurance (PPI) policies have been rife for a few years now. In my
experience, claims management companies are now moving on to new
targets and dealers are receiving claims direct with increasing
regularity.
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In many cases, customers have been
ill-advised in pursuing the claims to trial in light of the
contemporaneous evidence available. One such case is Goodman and
Goodman v Central Capital Ltd (2012).
Although there is nothing particularly
new in this case, it is a useful reminder to sellers of such
products of the benefit of having an approved script available when
speaking to customers, training employees to use and stick to it,
and maintaining good records.
In Goodman, the claimants wished to
consolidate their various credit cards and borrowings into a single
loan repayable over 25 years. They approached the defendant to
arrange finance for them.
When speaking to the claimants, the
defendant’s employees followed a tightly scripted process of
fact-finding and recommendations that had been approved by the
Financial Services Authority.
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By GlobalDataIn all, three conversations were had
with the claimants referring to different amounts of loans with
different lenders.
On each occasion, PPI cover was also
offered for a period of five years with the claimants being told
the cost of that cover. In relation to two offers, the claimants
also received documentation to sign.
A loan was entered into in January
2007. The claimants subsequently alleged they had not been told
that the PPI cover was optional and claimed that the policy was not
suitable for their demands and needs.
The judge had regard to the claimants’
witness statements, which were made some five years after the
events in question, and to the contemporaneous evidence from the
defendant’s recorded sales calls and loan documentation. The judge
referred to the importance of contemporaneous documentation in
assessing the credibility of a witness. He also referred to the
fact that the lack of such documentation being disclosed can also
be very telling and lead a judge to draw adverse inferences.
Here, the contemporaneous transcripts
of the telephone calls and the documentation cast grave doubts on
the reliability of the claimants as witnesses.
The evidence indicated that in all
three telephone conversations the claimants had had with the
defendant it was demonstrably communicated to the claimants that
PPI was optional and that the premium for it would be added to the
loan.
Additionally, the documentation sent
to the claimants following the calls showed clearly that insurance
was not a condition of the proposed loan and again referred to the
premium being added to the loan to increase the total borrowing.
The credit agreements themselves also referred to the PPI as
“optional”.
The claimants’ response to this
evidence was that they had not concentrated during the telephone
calls with the defendant and had not considered the documentation
received in any great detail, just signing where indicated. The
judge considered this to be a lamentable explanation.
As to the unsuitability of the PPI
policy, the claimants’ evidence in court was that the policy should
have been for 25 years to cover the length of the loan and should
have covered both of their earnings, not just Mr Goodman’s.
However, in their witness statements,
the claimants also contended that they would never have taken out
the policy had they been advised it was optional and informed how
much it would cost given that Mr Goodman’s employment was
stable.
The court considered that this
“breathtaking volte face” was a classic example of witnesses giving
evidence on oath to suit their case as it necessarily changed due
to judgments given in other similar cases.
For example, Harrison v Black Horse
which confirmed that the cost of the insurance was not relevant
where the customer had not raised cost as a concern in their
demands and needs statement.
The court held that the
contemporaneous documents and agreements showed the claimants
knowingly and knowledgeably signed up to the PPI policy after being
carefully and informatively handled by the defendant.
The claim was dismissed and the
claimants were ordered to pay the defendant’s costs.
Comment
This is the latest in a long line of
judgments on PPI claims where the availability of records has
helped the seller to defeat the customer’s claim.
This has proved to be the case, and
the court has preferred the evidence of the seller’s standard
procedure, even where the employee who dealt with the customer is
no longer in their employment and the only first hand witness
evidence available is that of the customer.
Good housekeeping is the key!
Greg Standing is a partner in
Wragge & Co’s motor finance litigation team
