In an unprecedented move in November 2014, the Supreme Court ruled that the non-disclosure of commission by a PPI provider was unfair, the first time that the ‘unfair relationship’ provisions contained within the Consumer Credit Act 1974 had been considered at such a high judicial level. However, a recent subsequent hearing in the Manchester County Court determined that the appropriate relief was the repayment of the commission element of the PPI only, not the entire PPI premium plus interest.
Mrs Plevin had brought a PPI mis-selling claim against Paragon Personal Finance Limited (“Paragon”), just one of the many such claims which have been issued over the last five years. The court was asked to determine whether the relationship between Mrs Plevin and Paragon was unfair under s140A of the Consumer Credit Act 1974.
Although Mrs Plevin made multiple claims against Paragon, the court’s decision hinged solely on whether the non-disclosure of a 71.8% commission was unfair. In a previous case, Harrison v Black Horse Limited, it was established that the key requirement in determining whether there had been unfairness was whether the lender had complied with its regulatory obligations. If it had done so, it would be difficult to make a ruling of unfairness.
Overturning Harrison v Black Horse Limited, the Supreme Court found that even where there had been compliance with the regulatory framework, determining whether a relationship was unfair demanded a wider range of considerations, such as the characteristics of the borrower, her sophistication or vulnerability, the facts she could reasonably be expected to know or assume, the range of choices open to her, and the degree to which the creditor was or should have been aware of these matters.
The court therefore ruled that the non-disclosure of the commission was unfair and remitted the case to the county court for determination of the appropriate relief for Mrs Plevin.
At the relief hearing, Mrs Plevin argued she should be entitled to a return of the entire PPI premium plus interest, whereas Paragon submitted that the relief should be limited to the 71.8% commission. In making his decision, the judge made several important factual findings. Firstly, the PPI was not compulsory; Mrs Plevin had positively requested its inclusion. Secondly, Mrs Plevin merely stated that she would have questioned the PPI product had she known of the commission; she did not state that she would not have taken it out. Finally, Mrs Plevin had made clear that she wanted PPI and had had the benefit of it for the full term.
As such, the judge agreed with Paragon that the appropriate relief would be repayment of the commission element of the PPI only. In so doing, he distinguished his own earlier judgment in Yates & Lorenzelli v Nemo Personal Finance, in which the borrowers were found not to have made an informed choice on the PPI product as there had been misrepresentation that it was compulsory.
Adam Finch, Litigation Partner at Harrison Clark Rickerbys commented: “The Plevin decision is a mixed blessing for both borrowers and lenders. On the one hand, it removes the certainty previously offered by Harrison v Black Horse Limited, where it would be difficult to find unfairness provided the regulatory framework had been complied with. By contrast, the parties will now need to take into account a wide range of factors in determining whether there was an unfair relationship, which is likely to result in greater numbers of contested claims.
“On the other hand, the decision on the level of relief does introduce a welcome distinction between the quantum of the relief available in those cases in which there has been misrepresentation as to the need for a PPI product, and those in which the consumer requests the product but is not fully informed about the associated costs. Our specialist team is well placed to offer legal advice in this area.”
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