High Court victory on PPI
mis-selling claim.
Black Horse Ltd vs Speak, the
lender advanced the sum of £7,012.39 to the defendants pursuant to
a regulated consumer credit agreement.
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The loan comprised a cash advance
of £5,000 and a payment protection insurance (PPI) premium of
£2,012.39. Proceedings were issued for non payment.
The defendants counterclaimed
that:
- PPI was a requirement of the loan
and should therefore have been shown as part of the total charge
for credit (TCC). It was in fact shown as part of the amount of
credit meaning one of the prescribed terms was mis-stated which
made the agreement irredeemably unenforceable. - If PPI was not actually a
requirement, the lender had misrepresented that it was. - The lender had breached the
Insurance Conduct of Business rules (ICOB). - The lender’s conduct in relation
to the sale of the PPI was such that an unfair relationship
arose.
Based on the evidence and
underlying documentation of the lender, Judge Waksman concluded
that the PPI policy was not mandatory but had been required by the
borrowers.
There was therefore no obligation
to state the cost of the PPI as part of the TCC. Given this
finding, there could be no misrepresentation either.
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By GlobalDataAs to the breach of the ICOB rules,
the requirement is that reasonable steps must be taken to ensure
that a personal recommendation to buy a non-investment contract is
suitable for the customer’s demands and needs at the time the
recommendation is made.
The court found that in order to
assess the borrowers’ needs for a PPI policy, the lender’s
representative had, as required, completed a demands and needs
questionnaire with one of the defendants who had confirmed he was
authorised to speak for both.
Judge Waksman held that, where
there is no allegation of undue influence or circumstances which
could be said to put the lender on notice, the lender can proceed
on the basis of taking the relevant information from one only of
joint borrowers where that borrower was authorised to give it.
Judge Waksman rejected the lender’s
argument however, that it is enough for an organisation to take
reasonable steps to communicate with consumers in a clear, fair and
not misleading manner, by, for example, giving adequate training to
staff so that a disobedient representative’s actions would not
necessarily place the lender in breach.
The organisation will be
responsible for its representatives’ actions.
The unfair relationship claim did
not fall to be determined due to the judge’s other findings,
although he did confirm that mis-selling of PPI is capable of
giving rise to an unfair relationship.
Comment
This is the latest in a
long line of good result for lenders. As a High Court judgment it
will also bind County Courts where most of these mis-selling claims
are handled.
This case shows the
importance of lenders having internal processes in place which
ensure compliance with regulatory obligations, and that those
processes are complied with by their employees.
The author is a partner at
Wragge & Co LLP’s Finance, Insolvency, Recoveries and Sales
team y
