Victory for PPI mis-selling couple

Posted: 25th March 2014

RCJIn a guideline decision expected to have an impact on many other similar cases, a couple who were mis-sold payment protection insurance (PPI) by a credit broker which flouted industry rules by failing to properly advise them of their options have had their right to more than £13,000 in compensation upheld by the Court of Appeal.

In order to consolidate their indebtedness, the couple had arranged a £54,500 loan through the broker, repayable over 25 years. That included a lump sum of £13,347 which was used to pay a PPI premium that offered protection over a five-year period in the event of unemployment, sickness or death.

The couple claimed that they had not wanted PPI at all but were misled into believing that it was compulsory. Alternatively, they argued that, if they had required PPI, they would have wanted it to cover the whole term of the loan, not just the first five years of the same.

Those arguments were rejected by a judge who found that the couple had entered into the PPI contract voluntarily and were aware that it was optional. Notwithstanding that the broker had admitted its failure to comply with the Insurance Conduct of Business (ICOB) rules, the judge found that that had not caused the couple any financial loss.

In allowing the couple’s appeal against that decision, the Court noted that, in clear breach of the ICOB rules, the broker had failed to take any steps to ensure that the PPI policy met the couple’s reasonable needs or to find out from them the period of insurance cover that they would prefer.

The broker should have elicited the couple’s wishes as to the policy term ‘by means of a fair and open question’ and its failure to do so was causative of their loss. The fact that the couple had knowingly purchased the five-year policy in the face of assurances that short-term cover would be cheaper did not take away from the fact that their wishes had never been the subject of a ‘fairly posed inquiry’.