Skipton Building Society: Relationship was fair
The Court of Appeal yesterday closed off claimant solicitors’ hopes of reopening payment protection insurance (PPI) claims which they allege were undersettled.
Meanwhile, the Financial Conduct Authority (FCA) has delayed the deadline for motor finance providers to respond to complaints of mis-selling.
The appeal court was hearing second appeals in two cases, each of which it described as “based on unremarkable facts and is of modest value in its own right”, but were typical of “very many cases” arising out of PPI mis-selling.
In each, the policyholder made recurring periodical premium payments without knowing that most of the money represented commission and profit share for those responsible for introducing or selling the policies.
Through different claims management companies, the claimants sought repayment of everything they had paid but the defendants – Santander Cards UK and Skipton Building Society respectively – offered a smaller sum.
This was calculated by reference to rules and guidance issued by the FCA and offered in settlement of the claim.
After the offer was accepted and money paid, each claimant – represented by Manchester firm Consumer Rights Solicitors and London class action specialist Harcus Parker respectively – and brought a claim in the county court claiming more than had previously been paid, based on sections 140A and 140B of the Consumer Credit Act 1974 (CCA).
The defendants argued that there had been a bona fide settlement on terms that precluded further claims being made. That contention was upheld at first instance and on first appeal, and yesterday the Court of Appeal agreed.
Lord Justice Stuart-Smith, giving the ruling, noted that the FCA scheme was created as “a systemic form of alternative dispute resolution after extensive consultation and having taken into account a wide range of views, weighed them and come to a final ‘package’”.
A complainant dissatisfied by what it provided could either appeal to the Financial Ombudsman or begin litigation.
“Though it has built in flexibility, it does not pretend to replicate the more detailed, time-consuming and expensive procedures and approach of litigation. Those differences are an integral part of the reasoning behind the package.”
In the Skipton case, claimant Jason Harrop was informed about all this “in the clearest of terms”.
The judge said: “Quite apart from the extra layer of cost that it was likely to involve, I am far from persuaded that advice from qualified lawyers or any advice beyond what a regulated claims management company should be competent to give was needed or even desirable.
“The fact that Mr Harrop was advised by a claims management company (but not by solicitors) is not determinative on its own, but it is relevant to be taken into account when determining whether the settlement was fair and reasonable and what impact that should have on the overriding question whether the relationship between Mr Harrop and Skipton was unfair within the meaning of section 140A.
“It is material because it removes any real basis for asserting or speculating that Mr Harrop may not have understood what he was doing or that Skipton was using the compromise as a means of getting round the CCA.”
In all these circumstances, the court should be “very slow” to go behind the settlement and the earlier judges were “right to conclude that there were no real prospects that the court would conclude that the terms of Mr Harrop’s settlement were not fair and reasonable”.
Stuart-Smith LJ held similarly in the other case: the parties reached a bona fide settlement and the the claimant had access to paid specialist advice from the claims company.
He agreed with the lower courts that Santander has discharged the burden of showing that the relationship was fair.
Separately, Harcus Parker is working on another PPI claim for the estimated six million customers who it says have never been refunded or received “less than half of what we believe they are owed”.
It is planning to apply for a group litigation order – Katch Investment Group will indemnify claimants up to the end of the application for the order and thereafter Harcus Parker will obtain after-the-event insurance.
In the event of success, claimants will pay 35% of the damages, plus VAT if applicable, and a proportionate share of “certain disbursements”, such as any upfront insurance premium.
Meanwhile, in announcing a review in January, the FCA said it expected to report on its findings on motor finance complaints involving a discretionary commission arrangement (DCA) by September.
As part of that, it paused the usual eight-week deadline for motor finance firms to provide a final response to DCA complaints until 25 September.
This week it confirmed plans consulted on in July to push this back to 4 December 2025, to the frustration of solicitors with affected clients.
The FCA report now will be published in May 2025, by which time a judicial review brought by Barclays Partner Finance over the Financial Ombudsman Service’s decision to uphold a complaint relating to its use of a DCA should have been decided. The hearing is next month.
People who bought cars, vans or motorbikes on personal contract purchase or hire purchase between April 2007 and 28 January 2021 potentially have claims.
Lenders gave brokers and car dealers discretion to push the interest rates higher, and the more they did that, the more commission they would receive.
Customers were rarely told about these DCAs. Around 40% of car finance deals had such arrangements until they were banned in January 2021 and the FCA estimates the average overpayment at about £1,100.
We will be considering the consumer claims market at our new Claims Futures conference on 12 November in Manchester.
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