The PPI Aftermath

In May this year, the BBA announced that it would no longer pursuing an appeal against the dismissal of the judicial review claim it had brought against the FSA and FOS relating to the FSA's complaint handling rules on the sale of PPI.

However, that doesn't mean anyone who claims will succeed – so what does it really mean?

First of all, mis-selling is not a legal definition. It is a collective term that covers a range of actions which may impact on whether a sale is legitimate. In addition, the FSA doesn't have a remedy for these issues. They just refer on the issue to the FOS. Consumers will still need to go to the civil courts for redress.

Claims are most obviously brought on terms of misrepresentation. Claimants need to prove a seller of PPI made an untrue statement of fact, which in turn encouraged them to sign up to the contract. Some examples of this are often related to ineligibility of products. For example, retired, self-employed or unemployed consumers sold PPI would not have been able to make a claim. If this hadn't been made clear at the time, then they could claim a mis-sale.

Suitability of the policy and cost are also issues to consider. However consumers will have to provide evidence of a mis-selling – or their claim will be destined to fail.

If cost is not raised as an issue, then it isn't possible to say the premium was disproportionately expensive. Comparative evidence must be included. Other tort-related claims may be based upon negligence, negligent mis-statement or deceit – with of course evidence in place to address those specific issues of the claim.

Allegations can also be made in relation to a breach of fiduciary duty. Claimants can find this difficult to prove, and it will depend heavily on whether the sale was made through the lender direct or via a broker.

More broadly, the unfair relationship provisions in section 140A of the Consumer Credit Act 1974 could be used by claimants. It remains to be seen how much resonance this actually has, but it is possible that will render the relationships unfair. Likewise the PPI premium could possibly be linked to the credit agreement.

In general terms, the litigation strategy will need to thoroughly sift out the claims that can be settled at the outset on the basis of inappropriateness or a systematic failure in the sales process. Those remaining claims will need to be examined closely to identify what representations were made and relied upon – and the truth of what was actually said.

It can never be overemphasised that clear evidence is always required to show what was said – and to whom – in order to counter the allegations raised. Transcripts of calls and evidence from those involved are vital. A 'demands and needs' questionnaire or statement might exist as a basis for the recommendation too – and clearly this is vital evidence.

If that evidence is missing or would be costly to produce, it is possibly commercially savvy to consider an early settlement. This will no only save time and costs, but will help to safeguard any reputational risk. IT's time to choose those battles very carefully.

Original article, by Nicola Hoskins, courtesy of Credit Today.