In Stephen Kerry & Angela Kerry v Black Horse Limited (2010), a dispute arose as to whether the lender complied with the Financial Services Authority’s Insurance: Conduct of Business Rules ("ICOB").
Mr and Mrs Kerry obtained a loan from Black Horse Limited ("Black Horse") for £18,000.00 (the "Loan"). Mr and Mrs Kerry obtained further credit from Black Horse in the sum of £7,753.99 (the "Premium") to pay for an optional contract of payment protection insurance (the "Policy"). Interest was charged on both the Loan and the Premium and repayable over ten years. The agreement set out the amount of credit, the cost for credit, the total amount payable and the monthly repayment for both the Loan and the Premium. Black Horse took a legal charge over Mr and Mrs Kerry’s property to secure the monies. The agreement was also regulated by the Consumer Credit Act 1974 (the "CCA 1974").
Mr and Mrs Kerry issued proceedings against Black Horse alleging breaches of ICOB and seeking damages in the sum of £13,936.80 (the total amount payable for the Policy). The fact that the loan had been repaid after thirteen months was not detailed in the Particulars of Claim. At trial, counsel for Mr and Mrs Kerry conceded that the claim, after taking into account the rebate, was actually for £3,672.70.
The Court had to determine whether Black Horse had breached ICOB by recommending the Policy which was unsuitable, failing to undertake a proper assessment of Mr and Mrs Kerry’s demands and needs; and failing to consider the cost of the Policy.
HHJ Stephen Waine decided that:
- The allegation that the Policy was presented to Mr and Mrs Kerry in a pressured manner was completely rejected.
- The time period from introduction to completion of the agreement was about six weeks.
- The advance copy of the agreement clearly set out the cost of the Policy and Mr and Mrs Kerry had three weeks to consider their position.
- Mr and Mrs Kerry received the necessary documentation to read at their leisure.
- When Mr and Mrs Kerry met with Black Horse’s employee, they were taken through the demands and needs questionnaire. The employee also used a script, which underlined the fact that the Policy was optional and Black Horse’s link with the insurer.
- Although Mr Kerry was already entitled to sick pay, this did not make the Policy unsuitable. This was "wholly different from the cover that was being offered" and sick pay "was not specific for these loans" yet the Policy was. The Policy was therefore suitable for Mr and Mrs Kerry’s demands and needs.
- Whilst the cost of the Policy was high, the annual cost of it was £1,392.00 or £3.81 a day. HHJ Stephen Waine was "not convinced that the daily cost of £3.81 to cover a loan of £18,000 is in fact that unreasonable despite the headline figure".
- The agreement clearly set out the amount payable on early settlement and the figures had not been hidden. Because the financial risks were greater to Black Horse in the early years, and the rebate took account of this, there was nothing wrong in the rebate obtained.
- Because Mr and Mrs Kerry had no other real assets, the "insurance provided by this cover was highly relevant to the peace of mind of both the claimants."
- There was not any obligation on Black Horse to provide the details of the costs of other PPI policies.
HHJ Stephen Waine therefore decided that Black Horse had complied with its obligations under ICOB and the Claim was dismissed. Mr and Mrs Kerry were ordered to pay Black Horse’s costs.
This is another extremely welcome judgment for any lender or broker defending claims of misselling of payment protection insurance and is useful guide of the County Court’s approach. It is clear that the Court will properly consider allegations of a mis-sale and will be cautious in accepting such evidence at face value.
Mark Elder, Partner