Our client, ‘Sandra’ and her husband took out a loan, secured against their home, to pay off existing debts.
The couple took out the loan for £21,771 in June 2006 and agreed to repay the money over a period of five years. Their credit agreement included an advance of £18,000, broker fee of £450 and Payment Protection Insurance (PPI), which cost £3,321.
The company with whom they took out the loan was dissolved in 2010 and the couple’s loan was subsequently transferred to an assignee.
Sandra and husband ‘Trevor’ appointed us as their legal representative and instructed us to pursue a claim for mis-selling due to undisclosed commission being added to their loan. We issued a Letter of Claim to the assignee and the response revealed that the broker in the transaction was paid £1,845 in commission.
The broker also received nearly £1,500 in commission from the PPI policy premium. A further £600 was retained by the lender and £1,223 was paid to the PPI insurer.
Commission accounted for almost 65% of the PPI premium and it was our clients’ position that neither the loan or PPI commissions were disclosed to them by their lender or broker.
We therefore issued court proceedings against the assignor. Our argument centred on our allegation that the lender procured a breach of the fiduciary relationship that allegedly existed between the claimants and the broker. We also alleged that the relationship between the claimants and the lender and/or defendant is unfair under Section 140A CCA because of the alleged non-disclosure of commission.
The defendant disputed the claim due to limitations, and also argued that there was no unfair relationship created by them as they were not the original lender. However, as our clients’ loan was transferred to them, they were indeed the correct creditor.
Arguing against the PPI limitation claim, our clients relied on the Supreme Court Judgement in the Smith and another (Appellants) v Royal Bank of Scotland plc (Respondent) (2023), where Mr Justice Leggatt said: “From the bench that protection under the Consumer Credit Act 2006 ensures that the relationship between debtor and creditor has to be scrutinised for fairness over its lifetime rather than at a single point.”
And with regard to the unfair relationship, Mr Judge Birss concluded: “It is clear that the unfairness derives not simply from being deprived of information on its own, but from the customer being kept in ignorance of what was a material fact at the point in time that they were deciding whether to enter into the PPI agreement”.
We believed that our clients were entitled to a remedy consistent with the Supreme Court’s ruling in Plevin v Paragon Personal Finance Ltd (2014), highlighting the unfair nature of undisclosed commission payments on PPI policies.
Our clients also relied on the Doran v Paragon Personal Finance (2018) case, where similar claims resulted in substantial damages being awarded.
Therefore, our clients believed they were owed a refund of the loan commission, plus simple interest and the PPI premium commission, plus compensatory and simple interest. We carried out their instructions and our clients were successful in their claim.
However, in order to settle the claim quickly, they made a significant concession and they were awarded damages of £5,512.72, which includes the PPI commission plus contractual interest and simple interest at 2%, a conclusion that Sandra and Trevor were satisfied with after a complex and challenging process.
