I am often on the look-out for any decisions which assist lawyers and money advisers on examples of unfair business practices in the arena of consumer credit.
A recent example of unfair commercial practice has been illustrated in a case in the Court of Appeal called Figurasin v Central Capital Ltd [2014] EWCA Civ 504. The case involved Mr & Mrs Figurasin taking out a loan for £25,000 in 2005.
The initial stage of the loan application was carried out over the phone. It was stated by the creditor that the monthly payments of the loan would be £393.68 per month over a 10 year term. It was also stated that this repayment would include the cost of Payment Protection Insurance (PPI). During the telephone conversation they were advised that the PPI premium of £8,750 would be refunded to them at the end of the 10 year term.
They were advised that the creditor would send a draft loan agreement to them for signing and also advised that they will be sending a Financial Industry Standards Association booklet and a key facts illustration.
Despite receiving and returning the draft agreement; by their own admission, Mr & Mrs Figurasin did not read the documents carefully as they relied on what was said to them over the phone by the creditor’s representative.
The loan agreement actually provided that the amount of the loan was £33,750 which included a premium of £8,750 for PPI. The monthly payments without the PPI were £291.61 which meant an additional £102.07 per month was being paid in respect of the PPI. Mr & Mrs Figurasin thought they were paying £393.68 in respect of a loan for £25,000. Had they known the PPI was optional they would not have taken it out. Accordingly, they took action against the creditor for providing misleading information (in the telephone call) and sought recovery of damages for breaching the Insurance Conduct of Business rules (ICOB) alleging that the communication in the initial telephone conversation was unfair, unclear and misleading.
The County Court found that there was a breach of ICOB and accordingly awarded damages of £13,000 inclusive of interest. The creditor appealed the decision to the Court of Appeal arguing that the initial phone call and the documents that followed should be treated as a single process and the fact that the documents were not read was something which should weigh against Mr & Mrs Figurasin. Had they done so the figures and amounts in respect of the loan and the PPI would have been clearer to them.
On the facts the Court of Appeal agreed with the decision of the lower Court and found that Mrs Figurasin was given misleading information in the initial phone call with the creditor which caused her and her husband not to read the documents. The ICOB rules are there to protect consumers from being misled and not to require any level of responsibility on consumers.
I think two important points come from this judgment;
1. In cases of alleged mis-selling of financial products it is always worth trying to obtain a copy of the “speakwith” document which provides the recording of any initial telephone conversations.
2. The cases are almost always decided on their own facts.
Perhaps it also shows that the Courts are moving away from the “You signed it so you must have known the terms” train of thought. Only time will tell.
Whilst this will be of course a binding precedent it will by no means cause the flood gates to open. What it does is provide another example of unfair commercial practice to add to the ever so slowly increasing “bank” of examples to assist in helping money advisers and lawyers alike to advise potential debtors and claimants in these cases.
By Liam Waine, Partner and head of the consumer team
I will be available at the Institute of Money Advisors (IMA) conference on May 12th and 13th to discuss consumer credit issues.
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