In a landmark decision, the UK Supreme Court has ruled against a commercial lender in the case of Canada Square Operations Ltd v Potter, emphasising the significance of full disclosure in payment protection insurance (PPI) policies.
The unanimous decision concluded that a claim over PPI misselling was not time-barred due to the lender’s failure to disclose a ‘substantial commission’ charged on the policy. The judgment revealed that over 95% of the stated PPI premium constituted the lender’s commission, with the customer, Beverley Potter, unaware of this fact. The ruling has far-reaching implications for consumers seeking redress in similar cases.
What Happened in This Case?
Beverley Potter entered into a loan agreement with Canada Square Operations, (formerly Egg Banking plc), involving a cash amount and a PPI premium. The judgment disclosed that the majority of the premium represented the lender’s commission, a crucial detail concealed from the customer. Despite completing the payments in 2010, Potter raised a complaint in 2018, leading to compensation under the Financial Conduct Authority’s PPI misselling redress scheme.
The Supreme Court’s judgment clarified key legal points under the Limitation Act 1980. The Court highlighted that deliberate concealment of facts relevant to the claimant’s cause of action triggers the limitation period.
The Court rejected the idea that ‘deliberate’ included recklessness, emphasising the importance of the defendant’s intention to conceal the relevant facts. The decision provides welcome clarity, overturning previous Court of Appeal rulings that deviated from the clear language of the Act.
What Were the Legal Issues?
The legal issues in Ms. Potter’s case hinged on the interpretation and application of key provisions in the Limitation Act 1980. The pivotal precedent, Plevin v Paragon Personal Finance Ltd in 2014, established that the non-disclosure of substantial commissions could render the relationship between a creditor and borrower ‘unfair’ under section 140A of the Consumer Credit Act 1974.
This verdict laid the foundation for Ms. Potter’s claim, asserting that she had been misled regarding the lender’s commission on her payment protection insurance policy. The central question in the subsequent legal proceedings in 2018 revolved around whether her claim was time-barred under the Limitation Act, given the considerable time lapse since the loan agreement was initiated. The appeal raised crucial considerations regarding section 32(1)(b) and section 32(2) of the 1980 Act, addressing the postponement of the limitation period when relevant facts are deliberately concealed by the defendant.
This case serves as a significant legal benchmark in delineating the parameters of deliberate concealment and its impact on the commencement date for the limitation period in consumer credit disputes.
Key Takeaways for Consumers
This ruling is anticipated to impact approximately 26,000 active claims of a similar nature, making it a precedent-setting case. Consumers now have a stronger position when challenging PPI misselling, emphasising the duty of responsibility on the part of lenders to fully disclose commission structures. The decision highlights the Court’s commitment to ensuring fairness and transparency in consumer financial transactions.
