PPI - BEHIND THE HEADLINES

Withdrawal of the challenge to the Court of Appeal decision in Harrison v Black Horse Limited will have a significant effect on court proceedings alleging PPI mis-selling.

For further information please contact Jeremy Bouchier (Solicitor and Chief Legal Officer).

 In contrast with at times uncomfortable media coverage regarding PPI, including the financial provisions announced by various Banks for compensation, creditors have taken some comfort from a flurry of first instance decisions which have rejected claims of PPI mis-selling.  A lender who is able to present evidence regarding its standard PPI set up procedures and a suitably informed witness will be encouraged by the forthright approach of many trial Judges which has resulted in the rejection of “template” style allegations that are not consistently maintained under cross-examination and fly in the face of common sense. This is so even in circumstances where the lender cannot provide (perhaps not surprisingly) confirmation that its standard procedures were applied on a particular account. The all too familiar claim that a customer was told the PPI was compulsory (even though the facility documentation indicated otherwise) has proved particularly vulnerable when tested in court. 

Further encouragement can be taken from the recent approval by the Supreme Court of a Consent Order which has withdrawn the appeal in Harrison v Black Horse Limited.  This highlights the importance of the Court of Appeal decision in that case and thus how the troublesome (from the creditors point of view) “unfair relationship” provisions introduced by the 2006 amendments to the Consumer Credit Act should be interpreted and applied to allegations of PPI mis-selling. The lack of meaningful statutory guidance (either in section 140 of the CCA or elsewhere) of what factors need to be considered and the potentially unlimited remedies available to a court (in the event such a relationship was found to exist) for some time caused much disquiet amongst lenders when faced with allegations of unenforceability, misconduct of the account and latterly PPI claims. The effect of the section was in marked contrast with the “extortionate credit bargain” section it replaced which had always been restrictively interpreted by the courts.

 The conclusion of the Court of Appeal that an “unfair relationship” could not exist where there was no breach of the specific FSA regulations governing PPI set up procedures perhaps has plugged a gap which some (perhaps more in hope than anything else) felt was left by the primary legislation and emphasising a general principle that the effect of the CCA cannot be out of step with the industry specific rules in force at the relevant time. In circumstances where only one PPI product was offered, allegations of an unfair relationship based on the non-disclosure of the commission and/or its size compared to the PPI premium will be difficult to sustain.

 Although, at the beginning of the judgment, the Court of Appeal stressed the narrow scope of the appeal, the ruling remains significant and should result in a number of claims (which have been stayed pending the anticipated Supreme Court hearing) being discontinued/struck out either in whole or in part.  Initial fears over the “unfair relationship” provisions will to some extent have been eased by the importance placed by the Court on the relevant regulatory landscape both in terms of applicable rules and policy statements/reports issued by the FSA.  The recent development will no doubt ensure that the Court of Appeal ruling will be applied with continued enthusiasm by lenders.

 


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