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PPI in the Dock
A new case has highlighted another area of the industry that may be set for further scrutiny.
In the case of Black Horse Limited vs Speak, Mr and Mrs Speak obtained a loan from Black Horse for £5,000. At the same time they also got a single premium payment protection insurance (PPI) policy, which was payable over the same period and at the same rate of interest as the loan.
The Speaks failed to maintain their repayments. Subsequently proceedings were issued by Black Horse for recovery of all the sums due.
Mr and Mrs Speak since claimed the PPI was mis-sold to them, specifically that they were told it was a pre-condition to the granting of the loan.
The loan predated 6 April 2007, so if it was deemed not to contain the prescribed terms contained in schedule six of the Consumer Credit (Agreements) Regulations 1983, it would be rendered irredeemably unenforceable.
The Speaks argued – as the PPI was compulsory – it should have been documented as a charge for credit, rather than as credit per se. However, the court decided the PPI was not compulsory so there was no requirement to document it as a charge for credit.
Again, Mr and Mrs Speak tried to argue that if the court decided the PPI was optional, then Black Horse has misrepresented the situation. Similarly, the court backed the position of the bank employee and found no misrepresentation at any point.
The court added that a finding of misrepresentation would be tricky to uphold when the debtor fails in the main allegation that the PPI was mandatory. In essence, if this was the case and the court decided the policy was mandatory, the representation would be true.
In addition, the Speaks alleged the bank had failed to communicate in a clear, fair and not misleading way – which was therefore breaching rules laid out by the Insurance Conduct of Business (ICOB). Once more, this was rejected by the court.
The was also an allegation that the bank had failed to ensure its PPI recommendations were suitable. On this point, the bank was held to have properly completed the demand and needs questionnaire, so no breach had occurred.
Finally, an argument based on the idea of an unfair relationship had occurred as a result of alleged misrepresentation and breach of ICOB failed due to the previous findings as listed above.
PPI: An Overview
If PPI is compulsory it must be treated as a charge for credit, even if the consumer can cancel it within 30 days. In the above case, Black Horse argued that, because the cash loan and PPI were documented separately, the amount of credit was correctly stated. The Court disagreed and stated that section 9(4) of the Consumer Credit Act 1974 requires credit and charges for credit to be separated. Such an argument would mean the PPI was treated as both.
Original article courtesy of Credit Today. For further information visit www.credittoday.co.uk
