In this case concerning payment protection insurance (‘PPI’) the Supreme Court has provided guidance on what gives rise to an “unfair relationship” under s.140A – C of the Consumer Credit Act 1974 (‘the Act’).
Section 140B of the Act provides that a court may reduce, set aside or alter any liability owed by a debtor to a creditor under a credit agreement if the relationship arising out of the agreement is unfair. Section 140A of the Act explains that a relationship may be unfair because of the terms, enforceable rights or anything done or not done by the creditor either before or after the agreement was made.
Before Plevin arrived at the SC the leading case on unfairness was Harrison v Blackhorse  Lloyds Rep IR 521. In Harrison the CA ruled that the “touchstone” relating to unfairness was whether the creditor had breached the standard imposed by regulatory authorities within the Insurance Conduct of Business Rules (‘the ICOB rules.”) If a claimant could not prove there had been a breach of the ICOB rules then the court was bound to find there was no unfair relationship.
Harrison has now been overturned. The SC held that the ICOB rules impose a minimum standard of conduct applicable to a wide range of situations. The rules provide some evidence of what the standard expected of a creditor is but they cannot be determinative of the question posed by s.140A. This section creates a much broader test of fairness which is a matter for the court’s judgment. A wide range of factors may be relevant to the consideration of fairness of the relationship including (a) the characteristics of the borrower (b) their sophistication or vulnerability (c) the facts which they could reasonably be expected to know or assume (d) the range of choices available and (e) the degree to which the creditor was or should have been aware of these matters.
Mrs Plevin successfully argued that non-disclosure of commissions payable out of her PPI premium to the tune of 71.8% made her relationship with her creditor unfair. The case will now be remitted back to the Manchester County Court to decide what relief if any under s.140B should be ordered.
Vaughan Jacob / 1st Dec 2014
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