3.1 Law on Unfair Relationships under Consumer Credit Act 1974 altered following Supreme Court judgment on PPI case: Plevin v Paragon Personal Finance Ltd1 (England and Wales)

The Supreme Court dismissed an appeal in this case concerning the sale of Payment Protection insurance (PPI) alongside a loan, significantly altering the law on Unfair Relationships under ss140A to C of the Consumer Credit Act 1974 (the CCA).

Following advice from a personal loan company, Mrs Plevin had taken a loan out with the appellant, Paragon Personal Finance Ltd (Paragon), and purchased PPI alongside the loan. 71.8% of the PPI premium was taken in commission, but neither the amount of the commission nor the identity of the recipients was disclosed to Mrs Plevin.

The CCA allows the courts to exercise a range of powers relating to credit agreements where the debtor is an individual and which it considers to be unfair, including allowing the court to reopen unfair credit transactions.

Upon reaching the Supreme Court, the only point still in issue was whether the agreement between Mrs Plevin and Paragon was unfair under s140A(1) (c) of the CCA because of something “done (or not done) by, or on behalf of the creditor”. The appeal challenged the interpretation of this section of the CCA and asked whether it should be understood that an independent broker acts “on behalf of” a lender when they arrange a loan and insurance.

The Supreme Court overturned a previous Court of Appeal decision, holding that non-disclosure of the amount of a commission was unfair for the purposes of s140A(1)(c) of the CCA. While the non-disclosure element made the relationship unfair, the Court held that the failure to conduct a needs assessment did not. The Court stated that it was the duty of the personal loan company to conduct a needs assessment, as they recommended the respondent under the Insurance Conduct of Business Rules. The Court held that a lender is only responsible for things done, or not done, by its agent or deemed agent under the CCA, and the personal loan company was not acting as Paragon’s agent here.

Along with clarifying the meaning of “by, or on behalf of, the creditor” in the CCA, this important judgment presents the Supreme Court’s views on the interpretation of the CCA’s provisions on unfair relationships, and will likely lead to further analysis of current and future PPI claims.