Black Horse Ltd v Speak & Anor

Payment protection insurance is included in the total charge for credit only where it is required by the creditor as a condition of making the credit agreement. A requirement may be imposed orally by the creditor’s representative, and written descriptions of the insurance as optional do not cure that requirement. A policy’s later cancellation right is irrelevant to whether it was required when the agreement was made.

Where joint borrowers authorise one borrower to provide information and answer questions for both, there is no universal duty to repeat a suitability questionnaire separately with the other borrower. The duty depends on the circumstances. The representative’s own conduct is relevant when assessing compliance with insurance conduct rules.

Black Horse Limited claimed £7,179.66 and costs under a regulated consumer credit agreement made with David and Caroline Speak. The agreement financed a £5,000 loan and a single-premium payment protection policy costing £2,012.39.

The defendants argued that the policy was compulsory, so its cost should have been included in the total charge for credit and excluded from the amount of credit. They also alleged misrepresentation, breach of ICOB rules and an unfair relationship under the Consumer Credit Act 1974.

The central issues were whether the policy had been required, whether the prescribed terms were misstated, whether the sale breached statutory or regulatory duties, and whether the relationship was unfair.

1. Claim and counterclaim. The Bank’s claim succeeded. Judgment was entered for £7,496.88 as at 17 August 2009, plus interest. The defendants’ counterclaim failed.
2. Requirement for PPI. On the evidence, the Bank’s representative did not require the defendants to take PPI as a condition of obtaining the loan, at either the lower or any other rate. The policy was therefore not within regulation 4(c)(i) of the Consumer Credit (Total Charge for Credit) Regulations 1980, and its cost did not have to be included in the total charge for credit.
3. Had the representative imposed such a requirement, an oral requirement would have been sufficient. The contractual description of PPI as optional, the Bank’s internal policy, and the right to cancel within 30 days would not have prevented regulation 4(c) from applying. The lower-rate loan would likewise have involved mandatory PPI if that rate were available only on condition that PPI was purchased.
4. Had PPI been required, the separate presentation of the loan and PPI figures would not have avoided the consequences of section 9(4) of the Consumer Credit Act 1974. In a single agreement, the total credit included both elements, and the amount of credit was misstated.
5. No misrepresentation or ICOB breach was established. The representative had explained that PPI was optional, had completed the demands and needs questionnaire with Mr Speak for both borrowers, and was entitled in the circumstances to rely on his authority to answer for Mrs Speak. There was no hard and fast rule requiring a separate repetition of the questionnaire with every joint borrower.
6. The unfair-relationship claim did not arise on the pleaded basis because the necessary findings of misrepresentation or ICOB breach had not been made. The mere inclusion of PPI, without more, was not said to create an unfair relationship.

First-instance decision. No prior appellate decision was stated in the judgment.